Question 1

A contingent liability cannot be disclosed in a note to the financial statements unless it can be estimated.

Accepted Answer

A) True 
 B)False

Question 2

You have a goal of having $100,000 five years from today.The return on the investment is expected to be 8% and will be compounded semiannually.The amount that needs to be invested today is closest to:

Accepted Answer

A)  $67,556.
B)  $56,420.
C)  $71,195.
D)  $35,034.E) None of the above
F) A) and D)

Question 3

Working capital decreases when accrued wages expense is recorded at year-end.

Accepted Answer

A) True 
 B)False

Question 4

SRJ Corporation entered into the following transactions: • The accrual of interest expense on a six-month note payable.
• Collected cash for services to be provided within the next six months.
• The reclassification of short-term debt to long-term debt.
-
Which of the following statements is correct with respect to determining the net cash flow from operating activities on a statement of cash flows?

Accepted Answer

A)  The increase in interest payable for the accrual of interest expense is added to net income.
B)  Collecting cash for services to be provided in the future is subtracted from net income.
C)  The reclassification of short-term debt to long-term debt is subtracted from net income.
D)  Collecting cash for services to be provided in the future does not require an adjustment to net income.E) All of the above
F) B) and C)

Question 5

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. 
-The amount of interest expense for the year ended December 31,2019 is:

Accepted Answer

A)  $6,000.
B)  $4,500.
C)  $4,000.
D)  $1,500.E) B) and D)
F) B) and C)

Question 6

Which of the following is used to determine whether the lessor maintains effective control of the leased asset?

Accepted Answer

A)  Is the lease term greater than 90% of the asset's estimated life?
B)  Does the sum of the payments equal or exceed substantially all of the fair value of the underlying asset?
C)  Does the lease provide for an opportunity for the lessor to re-purchase the leased asset during the lease term at fair market value?
D)  Does the lease transfer ownership of the leased asset to the lessee by the end of the lease term?E) A) and D)
F) All of the above

Question 7

Which of the following statements is correct?

Accepted Answer

A)  Current liabilities are initially recorded at the amount of their principal plus interest.
B)  Current liabilities are those liabilities due within the shorter of one year or one operating cycle.
C)  Liquidity refers to the ability to pay all debts within one year.
D)  Current liabilities affect working capital and the cash flows from operating activities.E) A) and B)
F) A) and C)

Question 8

When a company receives cash before products or services are provided the following results:

Accepted Answer

A)  Assets and stockholders' equity increase.
B)  Assets and revenue increase.
C)  Liabilities and revenues increase.
D)  Liabilities and assets increase.E) None of the above
F) A) and B)

Question 9

Purchasing inventory on account increases the accounts payable turnover ratio.

Accepted Answer

A) True 
 B)False

Question 10

Sharp Company borrowed $500,000 on a 6% one-year,interest-bearing note dated November 1,2019 with interest payable at maturity.The annual accounting period ends on December 31.Assume that adjusting entries are only made at December 31,the company's fiscal year-end.
Prepare journal entries for each of the following dates:
A.November 1,2019.
B.December 31,2019.
C.October 31,2020.

Accepted Answer

The answer of Sharp Company borrowed $500,000 on a 6%...

Question 11

The accrual of interest results in an increase liabilities and a decrease in cash.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following results in a decrease in working capital?

Accepted Answer

A)  Supplies purchased with cash.
B)  Purchase of a truck in exchange for factory machinery.
C)  Acquisition of land in exchange for stock.
D)  Purchase of equipment with cash.E) A) and B)
F) All of the above

Question 13

Border Company purchased a truck that cost $17,000.The company signed a $17,000 note payable that specified four equal annual payments (at each year-end),each of which includes a payment on the principal and interest on the unpaid balance at 10% per annum.
A.Calculate the amount of each equal payment (round your answer to the nearest whole dollar amount).
B.Prepare the journal entry to record the purchase of the truck.
C.Prepare the journal entry to record the first annual payment on the note (assume no interest has been accrued during the year).
D.Will the interest paid with the first annual payment be more than,or less than,the interest paid with the second annual payment? Explain your answer.

Accepted Answer

A.$17,000 ÷ 3.1699 (present value of an ...

Question 14

Working capital increases when a company accrues sales revenue at year-end.

Accepted Answer

A) True 
 B)False

Question 15

Smith Corporation entered into the following transactions: • Purchased inventory on account.
• Collected an account receivable.
• Purchased equipment using cash.
-
Which of the following statements about Smith's transactions is correct?

Accepted Answer

A)  The inventory purchase on account increased working capital.
B)  Collecting an account receivable increases working capital.
C)  The equipment purchase decreases working capital.
D)  The inventory purchase on account decreases working capital.E) A) and B)
F) B) and C)

Question 16

Working capital is a measure of short-run liquidity and is measured by dividing current assets by current liabilities.

Accepted Answer

A) True 
 B)False

Question 17

If income tax expense reported on the income statement is $45,000 for 2019,and the tax return for 2019 (the first year) shows an income tax liability of $42,000,the deferred income tax on the balance sheet at the end of 2019 will be which of the following? Assume a 21% tax rate.

Accepted Answer

A)  A $3,000 liability.
B)  A $3,000 asset.
C)  A $7,500 liability.
D)  A $7,500 asset.E) B) and C)
F) A) and D)

Question 18

Which of the following correctly describes the accounting for leases?

Accepted Answer

A)  There are eight criteria used to establish whether the lessor maintains effective control of the leased asset.
B)  A lease asset and a lease liability are initially recognized for both a capital lease and an operating lease.
C)  If none of the criteria used to establish whether the lessor maintains effective control of the leased asset are met,then the lease is classified as a capital lease.
D)  The amount recorded as a lease asset and a lease liability is the sum of the required future lease payments.E) None of the above
F) A) and D)

Question 19

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. 
-Assume that the appropriate adjusting entry was made on December 31,2019 and that no adjusting entries have been made during 2020.Which of the following would be the required journal entry to pay the entire amount due on March 31,2020?

Accepted Answer

A)   
B)   
C)   
D)   E) None of the above
F) B) and D)

Question 20

A company's income statement reported net income of $80,000 during 2019.The income tax return excluded a revenue item of $6,000 (reported on the income statement) because under the tax laws the $6,000 would not be reported for tax purposes until 2020.Which of the following statements is incorrect assuming a 21% tax rate?

Accepted Answer

A)  Income tax expense on the income statement exceeds the tax liability to the IRS.
B)  The $6,000 of revenue creates a deferred tax liability.
C)  A $1,260 deferred tax liability is reported as of December 31,2019.
D)  Income tax expense on the income statement is $15,540.E) All of the above
F) B) and C)

Exam 9: Reporting and Interpreting Liabilities

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. -The amount of interest expense for the year ended December 31,2019 is:

Correct Answer
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Correct Answer
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A.$17,000 ÷ 3.1699 (present value of an ...
View Answer

Which of the following correctly describes the accounting for leases?

Correct Answer
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Working capital increases when a company accrues sales revenue at year-end.

Correct Answer
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Correct Answer
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The accrual of interest results in an increase liabilities and a decrease in cash.

Correct Answer
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If income tax expense reported on the income statement is $45,000 for 2019,and the tax return for 2019 (the first year) shows an income tax liability of $42,000,the deferred income tax on the balance sheet at the end of 2019 will be which of the following? Assume a 21% tax rate.

Correct Answer
verified

Correct Answer
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Working capital decreases when accrued wages expense is recorded at year-end.

Correct Answer
verified

You have a goal of having $100,000 five years from today.The return on the investment is expected to be 8% and will be compounded semiannually.The amount that needs to be invested today is closest to:

Correct Answer
verified

Purchasing inventory on account increases the accounts payable turnover ratio.

Correct Answer
verified

A contingent liability cannot be disclosed in a note to the financial statements unless it can be estimated.

Correct Answer
verified

Smith Corporation entered into the following transactions: • Purchased inventory on account. • Collected an account receivable. • Purchased equipment using cash. - Which of the following statements about Smith's transactions is correct?

Correct Answer
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Working capital is a measure of short-run liquidity and is measured by dividing current assets by current liabilities.

Correct Answer
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When a company receives cash before products or services are provided the following results:

Correct Answer
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Which of the following results in a decrease in working capital?

Correct Answer
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Correct Answer
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Which of the following is used to determine whether the lessor maintains effective control of the leased asset?

Correct Answer
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Correct Answer
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Which of the following statements is correct?

Correct Answer
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Exam 9: Reporting and Interpreting Liabilities

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. -The amount of interest expense for the year ended December 31,2019 is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA.$17,000 ÷ 3.1699 (present value of an ...View AnswerShow Answer

Which of the following correctly describes the accounting for leases?

Correct AnswerverifiedShow Answer

Working capital increases when a company accrues sales revenue at year-end.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The accrual of interest results in an increase liabilities and a decrease in cash.

Correct AnswerverifiedShow Answer

If income tax expense reported on the income statement is $45,000 for 2019,and the tax return for 2019 (the first year) shows an income tax liability of $42,000,the deferred income tax on the balance sheet at the end of 2019 will be which of the following? Assume a 21% tax rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Working capital decreases when accrued wages expense is recorded at year-end.

Correct AnswerverifiedShow Answer

You have a goal of having $100,000 five years from today.The return on the investment is expected to be 8% and will be compounded semiannually.The amount that needs to be invested today is closest to:

Correct AnswerverifiedShow Answer

Purchasing inventory on account increases the accounts payable turnover ratio.

Correct AnswerverifiedShow Answer

A contingent liability cannot be disclosed in a note to the financial statements unless it can be estimated.

Correct AnswerverifiedShow Answer

Smith Corporation entered into the following transactions: • Purchased inventory on account. • Collected an account receivable. • Purchased equipment using cash. - Which of the following statements about Smith's transactions is correct?

Correct AnswerverifiedShow Answer

Working capital is a measure of short-run liquidity and is measured by dividing current assets by current liabilities.

Correct AnswerverifiedShow Answer

When a company receives cash before products or services are provided the following results:

Correct AnswerverifiedShow Answer

Which of the following results in a decrease in working capital?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is used to determine whether the lessor maintains effective control of the leased asset?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
A.$17,000 ÷ 3.1699 (present value of an ...
View Answer

Correct Answer
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