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Exam 9: Accounting for Current Liabilities and Payroll

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Question 41

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Receivables are normally reported on the balance sheet at net realizable value.In contrast,payables are carried at face value.Which accounting principle requires this treatment of payables?

A) Materiality concept.
B) Monetary unit assumption.
C) Going concern assumption.
D) Matching concept.

E) B) and D)
F) A) and B)

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Question 42

Multiple Choice

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What type of account is Discount on Notes Payable?

A) Contra liability.
B) Liability.
C) Contra asset.
D) Expense.

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

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Question 43

Multiple Choice

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The following information is taken from the balance sheet of Atlanta Company: Atlanta Company's current ratio is:

Choose the correct answer to complete the following: Discount notes....

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Allen Co.purchased a $30,000 machine by making a $5,000 cash down payment and issuing a $25,000 note payable for the remaining balance.

The amortization of the discount on a note payable has what effect on a company's financial statements?

During Year 1,Bradley Corporation borrowed $20,000 from Fidelity Bank by signing a one-year,6% discount note.On December 31,Year 2 Bradley failed to make the adjusting entry to accrue the related interest.This error will cause:

Monthly remittance of sales tax:

If a company is located in an area where floods or earthquakes are deemed to be possible,the company should record a contingent liability.

A classified balance sheet is one that distinguishes between operating and non-operating assets.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -On December 31,2016,Bates Co.paid $60,000 to the Municipal Bank to pay off the face value of a discount note that Bates had issued a year before.Show the effects of the payment and recognition of 2016 interest on the note.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Charles Company paid salary expense for employees who are subject to tax withholding.The salaries had not been previously accrued.

Broward Company estimated that its warranty expense would be $6,250 for the current year.During the year Broward paid $3,920 to repair merchandise that was returned by customers. a)What is the amount of warranty expense for the current year? b)If this is the first year of operations,what is the amount of warranty liability that will be shown on the balance sheet at the end of the year?

Wiggins Company issued a $66,000,8% note payable,with a one year term on September 1,2015.What amount of interest expense will be recognized on the income statement for 2015? 2016?

Use the following to answer questions Seattle Company issued a $90,000 face value discount note payable to the First Federal Bank on September 1,2016.The note carried a one-year term and a 4% discount rate. -The amount of interest expense appearing on the 2016 income statement would be:

Indicate whether each of the following statements is true or false. _____ a)The amount of warranty expense is an estimate that is based on the amount of merchandise sold. _____ b)A warranty obligation only occurs if a buyer purchases an extended warranty. _____ c)When a warranty claim is made,the seller's equity decreases. _____ d)When a warranty claim is settled,the seller's liabilities increase. _____ e)Product warranties usually represent legal liabilities that must be reported in the financial statements.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -On December 31,2016,Colefax Co.recognized accrued interest expense in the amount of $1,500.The interest expense was related to a discount note Colefax had issued earlier.

Use the following to answer questions The Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1,2016.The note carried a 5% discount rate and a one-year term to maturity. -After accruing all interest expense due as of April 1,2016,Baltimore Company made the cash payment for the full amount due (i.e. ,principal and interest)to Bank of the Chesapeake.Select the answer that shows how the cash payment will affect Baltimore's financial statements.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Sierra Mining is the defendant in a $3 million lawsuit involving damage to the environment.Sierra's attorneys have advised the company that the outcome of the lawsuit is reasonably possible,but not probable.

Which of the following is not an item deducted from salary expense to arrive at net pay?