Result in overstated total liabilities and owner’s equity 8

What type of investment does she hold?
July 30, 2019
. determine the difference between the monthly payments on a $120,000 home at 61∕2% and at 8% for 25 years
July 30, 2019

Result in overstated total liabilities and owner’s equity 8

Face value of a note payable plus total interest is called:

 

face value

 

principal

 

maturity value

 

proceeds

 

2

Hatmaker Company signs a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest cent) will the company owe using a 360-day year?

 

$ 38.84

 

$354.38

 

$ 39.38

 

$315.00

 

3

Bingo Corp signed a promissory note of $1,000 for one of its vendors in exchange for supplies. $100 cash payment is due upon signing the note and the term is that the balance and interest are due in 90 days at 12% (assume 360 days). Bingo will record the note in the book at the inception of the term as

 

Debit Accounts Receivable $1, 000; Credit Cash $100 and credit Notes Receivable $900

 

Debit Accounts Payable $1, 000; Credit Cash $100 and credit Notes Payable $900

 

Debit Supplies $1, 000; Credit Cash $100 and credit Notes Payable $900

 

None of the above

 

4

Archie’s had sales of $6,758.  The state sales tax rate is 7%.  All sales are cash.  What amount will be credited to Sales revenue?

 

$7,231.06

 

$6,758.00

 

$473.06

 

$458.00

 

5

A major difference between accounts payable and notes payable is that

 

Accounts payable are classified as current assets but notes payable are not

 

Notes payable are more formal than accounts payable

 

Notes payable are long-term assets but accounts payable are current assets

 

Notes payable charge interest but accounts payable do not

 

6

On June 20, 2013, ABC Services received $2,400 in advance from a customer for one month’s service.  The journal entry to record the receipt of cash would be which of the following?

 

Debit Cash $2,400 and credit Service revenue $2,400

 

Debit Unearned service revenue $2,400 and credit Service revenue $2,400

 

Debit Cash $2,400 and credit Unearned service revenue $2,400

 

Debit Unearned service revenue $2,400 and credit Cash $2,400

7

Carter Company records sales on account of $950,500. The company operates in a state that imposes a 5% sales tax.  Which of the following would be the amount of the Sales tax payable to the state?

 

$45,000

 

$50,500

 

$47,525

 

$55,000

 

8

Accounts payable is a(n)

 

Contingent liability

 

Estimated liability

 

Accrued liability

 

Known liability

 

1

All the following are true about an installment note for a borrower except

 

Installment notes are a series of payments to a lender

 

Installment notes are recorded by including a credit to cash

 

Installment notes are recorded by including a credit to notes payable

 

Installment notes are recorded by including a debit to cash

 

2

Accounts payable are

 

Amounts owed to suppliers for products and/or services purchased on credit

 

Paid within 30 days

 

Estimated liabilities

 

Long-term liabilities

4

The face amount of a promissory note is called the:

 

time of the note

 

discount of the note

 

principal of the note

 

interest rate of the note

 

6

The entry to accrue interest at year-end on a note payable would be

 

debit Interest Expense, credit Cash

 

debit Interest Expense, credit Notes Payable

 

debit Interest Expense, credit Interest Payable

8

On June 20, 2013, ABC Services received $2,400 in advance from a customer for one month’s service. The journal entry to record the receipt of cash would be which of the following?

 

Debit Cash $2,400 and credit Service revenue $2,400

 

Debit Cash $2,400 and credit Unearned service revenue $2,400

 

Debit Unearned service revenue $2,400 and credit Cash $2,400

 

Debit Unearned service revenue $2,400 and credit Service revenue $2,400

 

Lenient Auto signed a $45,000 8% 30-year installment note on November 1, 2013. The note requires semiannual payments of $750 plus interest on May 1 and November 1 of each year. How will Lenient Auto classify this loan on its December 31, 2013 Balance Sheet?

 

Current Portion of Long-term debt, $0; Long-term debt, $45,000

 

Current Portion of Long-term debt, $45,000; Long-term debt, $0

 

Current Portion of Long-term debt, $750; Long-term debt, $44,250

 

Current Portion of Long-term debt, $1,500; Long-term debt, $43,500

 

4

Bingo Corp signed a promissory note of $1,000 for one of its vendors in exchange for supplies. $100 cash payment is due upon signing the note and the term is that the balance and interest are due in 90 days at 12% (assume 360 days and that interest payable has been recorded). Bingo will record the transaction at the end of the term as

 

Debit Accounts Receivable $900; Credit Cash $900

 

Debit Notes Payable $900, Debit Interest payable $27; Credit Cash $927

 

Debit Accounts Payable $900, Debit Interest expense $27; Credit Cash $927

 

None of the above

5

The cost of borrowing money or the return on lending money is called

 

Notes payable

 

Interest

 

Liabilities

 

None of the above

 

A short-term note payable

 

Is a contingent liability

 

Is an estimated liability

 

Is a written promise to pay a specified amount on a definite future date within one year or the company’s operating cycle, whichever is longer

 

Is not a liability until the due date

8

Archie’s had sales of $6,758.  The state sales tax rate is 7%.  All sales are cash.  What amount will be debited to Cash?

 

$7,231.06

 

$866.06

 

$473.06

 

$6,758.00

 

When a company issues a promissory note, the entry will include a credit to Note Payable for the

 

face value of the note

 

face value of the note minus interest to pay

 

face value of the note plus interest to pay

 

maturity value of the note

 

We R Kids purchased playground equipment for 12,000 on credit and issued a 120-day note bearing interest at 9 percent a year as evidence of the debt. To record this transaction, the accountant would

 

Debit equipment for $12,000, debit Interest Expense for $360, and credit Notes Payable for $12,360

 

Debit equipment for $12,360, credit Interest Expense for $360, and credit Notes Payable for $12,000

 

Debit equipment for $12,000 and credit Notes Payable for $12,000

 

Debit equipment for $12,000 and credit Accounts Payable for $12,000

 

Vacation benefits are an example of:

 

accounts to be created

 

estimated liabilities, contingent liabilities

 

a pension plan

 

a reconciliation of petty cash

 

 

2

The matching principle requires businesses to record Warranty Expense: (choose 2)

 

incurred when the company makes a sale

 

with its accounts payable

 

in the same period the company records revenue related to said warranty

 

with a check number

 

P

3

Warranty obligations are estimated  based on: (choose 2)

 

historical experience of anticipated product defects

 

the customer’s age and gender

 

material and labors estimates for repair

 

the suppliers

 

 

4

Contingent liabilities are: (choose 2)

 

set values used for the matching principle

 

potential liabilities that may not actually occur in the future

 

accrued when they are likely to occur & can be reasonably estimated

 

the same thing as estimated liabilities

 

 

 

5

Two examples of an “estimated liability” are: (choose 2)

 

Supplier information

 

Employee benefits

 

Income taxes

 

Account to be debited

 

5

The obligation a company has to the purchaser of its product or service is: (choose 2)

 

to keep records of competing products or services

 

an estimate of obligation

 

its names of suppliers

 

a warranty liability

7

Accounting for liabilities is important for a company to remain in compliance with: (choose 2)

 

GAAP

 

IRR

 

JIT

 

IFRS

 

8

An estimated liability is:

 

accrued overtime

 

a known obligation of uncertain amount that can be estimated, an obligation with no set value that will be determined in the future

 

the same as a payroll

 

the estimation of a business’ liability

7

A co-signed  ‘note Payable’  is an example of a (an):

 

account to be credited

 

form of financial statement

 

assets

 

estimated current liability

 

8

Two types of classification of  “Contingent Liability” are: (choose 2)

 

“Unreasonable”

 

“Unlikely”

 

“Probably”

 

“Remote”

 

1

Good management of current liabilities can do which of the following?

 

Helps deplete the cash fund

 

Helps increase a company’s debt

 

Helps improve cash flow

 

Helps maintain good supplier relations

 

2

Which current liability is generally listed first on the balance sheet?

 

Notes payable

 

Accounts payable

 

Current portions of long-term debt

 

Accrued payables

 

3

Which of the following statements is true about liabilities?

 

They must involve an outflow of cash

 

They must be certain

 

They may have to be estimated

 

They must be for a specific amount

 

4

Which of the following is associated with cash received in advance for services to be performed in the future?

 

Estimated warranty payable

 

Unearned revenue

 

Accounts payable

 

Accrued expense

 

5

Which of the following statements is false about liabilities?

 

They can be classified as either current or long-term

 

They are recorded when paid

 

They are generally valued at the amount of money needed to pay the debt or reported at the fair market value of the goods or services to be delivered

 

Disclosures in the notes to the financial statements are required for most liabilities

 

6

Unearned revenue is initially recognized with a:

 

Credit to revenue

 

Credit to unearned revenue

 

Debit to unearned revenue

 

Debit to revenue payable

 

7

Which of the following would be included in the journal entry to record the payment of accrued sales tax?

 

A debit to Sales tax expense

 

A debit to Sales tax payable

 

A credit to Sales tax payable

 

A credit to Sales tax expense

 

8

Payroll liabilities include taxes paid to the federal, state, or local government what else might qualify for a current liability related to payroll?

 

FICA (Federal Insurance Contribution Act) contributions or Social Security

 

Health insurance

 

Retirement benefits

 

Unemployment insurance

 

9

Sales revenue for a sporting goods store amounted to $215,000 for the current period.  All sales are on account and are subject to a sales tax of 7%.  Which of the following would be included in the journal entry to record these sales?

 

A debit to Sales tax payable for $15,050

 

A credit to Accounts receivable for $215,000

 

A debit to Accounts receivable for $230,050

 

A debit to Sales revenue for $215,000

 

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10

Notes payable is:

 

A business expense

 

A current liability

 

An estimated liability

 

A contingent liability

 

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11

Amounts received in advance from customers for future products or services are called

 

Income

 

Assets

 

Liabilities

 

Revenues

 

12

Which of the following is true regarding the treatment of accounts payable, sales tax payable, and unearned revenues?

 

Both GAAP and IFRS treat these accounts as known liabilities

 

IFRS treats them as known liabilities, while GAAP treats these accounts as contingent liabilities

 

Both GAAP and IFRS treat these accounts as estimated liabilities

 

GAAP treats them as estimated liabilities, while IFRS treats these accounts as contingent liabilities

 

2

Which of the following correctly describes Interest payable?

 

Interest payable is shown on the balance sheet as a current liability.

 

Interest payable is shown on the income statement as an operating expense.

 

Interest payable is shown on the balance sheet as a long-term liability.

 

Interest payable is shown on the balance sheet as a current asset.

 

 

3

Which of the following is true for a liability to exist?

 

An obligation to pay cash in the future must exist.

 

The identity of the party must be known.

 

The exact amount must be known.

 

A past transaction or event must have occurred.

 

 

4

Obligations due to be paid within one year or within the company’s operating cycle, whichever is longer, are:

 

Current liabilities

 

Operating cycle liabilities

 

Revenues

 

Bills

 

8

Which of the following correctly describes the unearned revenue account?

 

The unearned revenue account represents revenue that has been earned and collected.

 

The unearned revenue account represents revenue that has been earned, but not yet collected.

 

The unearned revenue account represents revenue that has been collected, but not yet earned.

 

The unearned revenue account represents revenue that has neither been earned nor collected.

 

9

Which of the following is a liability created when a company receives cash for services to be provided in the future?

 

Service revenue

 

Unearned revenue

 

Accrued liability

 

Estimated warranty payable

 

11

Accounts payable is:

 

A contingent liability

 

An estimated liability

 

A current liability

 

A business expense

 

 

12

Which of the following is not an example of a certainly determinable liability?

 

Sales tax payable

 

Income taxes payable

 

Unearned revenues

 

Payroll taxes payable

2

Which of the following is a characteristic of a current liability?

 

A current liability is a liability that is due within 30 days

 

A current liability is a liability that is due in longer than a one-year period, or one operating cycle

 

A current liability is a liability that is due within one year or one operating cycle, whichever is longer

 

A current liability is a liability that is due within 10 days

 

1

Employers are required to ____________  in Medicare tax as the employee.

 

withhold 25%

 

withhold 50%

 

contribute double the amount

 

contribute the same percentage

 

 

2

Payroll liabilities are based on:

 

the amount earned before any deductions, the employee’s gross earnings

 

the same thing as estimated liabilities

 

set values used for the matching principle

 

t-accounts that are simplified

 

 

3

Medicare tax is:

 

a care tax

 

an employee withholding, an employer expense

 

a use tax

 

a voluntary deduction

 

 

4

An employees’ gross earnings minus all withholdings is called:

 

Complete pay

 

Take home amount, net pay

 

Benefits

 

An Accrual account

 

 

5

__________ Accounts are set up to track liability or employee payroll.  (choose 2)

 

Contingent

 

Liability

 

Accrual

 

Payroll

 

2

Payroll is the process of:

 

Paying employees

 

Creating accounts

 

Organizing accounts payable

 

Forming a pension plan

 

4

_______ is referred to as FICA.

 

Life insurance

 

Social Security tax

 

Federal tax

 

Income tax

 

7

Employees are responsible for paying a social security tax of _____%, which is withheld from their wages.

 

5

 

3.5

 

1.45

 

6.2

 

 

8

Employers are required to withhold federal income tax from an employees’ gross paycheck based on: (choose 2)

 

IRS regulations

 

employees’ number of dependents

 

marital status

 

age

 

1

The federal government requires employers to pay an unemployment  tax (of ): (choose 2)

 

With a maximum of 5.4% subtracted from the federal rate

 

$7,000

 

$5,400

 

6.0 %

 

2

Who pays Social Security and Medicare taxes? (choose 2)

 

Corporate

 

Headquarters

 

Employees

 

Employers

 

 

3

When an employer chooses to match or contribute to retirement accounts, these moneys are: (choose 2)

 

Considered liabilities

 

Recorded as benefits

 

Reduced accordingly after being paid

 

Deducted from an accrual account

 

 

4

Employers are required to pay payroll taxes per the: (choose 2)

 

State Unemployment Tax Act

 

Securities and Exchange Commission

 

International Finance Standards Board

 

Federal Unemployment Tax Act

 

 

5

Employers with reserves in the unemployment fund will: (choose 2)

 

Pay less than those with small or no reserve

 

Contribute to an employees’ earnings

 

Pay lower tax rates

 

Be more likely to allow unemployment cases

 

3

Employer’s contribution of social security is based on ___________ of an employees’ wages. (choose 2)

 

The first $50,000

 

The first $113,700

 

The first $100,000

 

6.2%

 

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4

Paid sick days and holidays are:

 

Required

 

Implied

 

Benefits

 

Taken out of retirement planning

6

Unemployment tax rates are determined:

 

By the state

 

By The federal Reserve

 

Based on Social Security earnings

 

By corporate offices

1

Which of the following is an amount for products or services purchased on account?

 

Unearned revenue

 

Estimated warranty payable

 

Accrued expense

 

Accounts payable

8

Employers are required to make provisions for: (choose 2)

 

FICA

 

Medicare

 

Sick days

 

Holiday planning

4

The employer’s portion of SS and Medicare taxes are recorded as _________________ until the amounts are remitted.

 

benefits

 

accrued accounts

 

receivables

 

a current liability

6

A $20,000, 3-month, 8% note payable was issued on November 1, 2015.  What is the amount of accrued interest on December 31, 2015?

 

$133

 

$267

 

$200

 

$800

4

Best in Town Fence had sales on account of $7,200 which were subject to state sales tax of 7%. The entry to record the sales would be to

 

Debit Accounts receivable, $7,704; credit Sales revenue, $7,200; credit Sales tax payable, $504

 

Debit Accounts receivable, $7,200; debit Sales tax payable, $504; credit Sales revenue, $7,704

 

Debit Accounts receivable, $7,200; credit Sales revenue, $7,200

 

Debit Accounts receivable, $7,704; credit Sale revenue, $7,704

11

ABC Company signed a 5-year note payable for $80,000 at 9% annual interest.  What is the interest expense for December 31, 2012 if the note was signed on May 1, 2012?

 

$2,400

 

$7,200

 

$36,000

 

$4,800

7

Failure to record a liability can

 

Result in understated net income

 

Result in overstated net income

 

Have no effect on net income

 

Result in overstated total liabilities and owner’s equity

8

Sales taxes payable is

 

A current liability

 

A business expense

 

An estimated liability

 

 

A contingent liability

 
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