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Exam 8: Current Liabilities

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Question 51

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On December 1,2015,Old World Deli signed a $300,000,5%,six-month note payable with the amount borrowed plus accrued interest due six months later on June 1,2016.Old World Deli records the appropriate adjusting entry for the note on December 31,2015.What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1,2016?

A) $300,000.
B) $301,250.
C) $306,250.
D) $307,500.

E) A) and C)
F) B) and C)

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Question 52

Multiple Choice

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On November 1,2015,New Morning Bakery signed a $200,000,6%,six-month note payable with the amount borrowed plus accrued interest due six months later on May 1,2016.New Morning Bakery should record which of the following adjusting entries at December 31,2015?

A) Debit Interest Expense and credit Interest Payable,$2,000.
B) Debit Interest Expense and credit Cash,$2,000.
C) Debit Interest Expense and credit Interest Payable,$6,000.
D) Debit Interest Expense and credit Cash,$6,000.

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

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Question 53

Multiple Choice

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Which of the following is not a current liability?

Mike Smith is a college football coach making a base salary of $960,000 a year ($80,000 per month).Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the FICA base amount is $113,700,compute how much will be withheld during the year for Coach Smith's Social Security and Medicare.Through what month will Social Security be withheld? What additional amount will the employer need to contribute?

Suppose you buy lunch for $8.39 that includes a 5% sales tax.How much did the restaurant charge you for the lunch (excluding any tax) and how much do they owe for sales tax?

Which of the following is not withheld from an employee's salary?

If the likelihood of loss is remote,disclosure usually is not required.

The Pita Pit borrowed $100,000 on November 1,2015,and signed a six-month note bearing interest at 12%.Principal and interest are payable in full at maturity on May 1,2016.In connection with this note,The Pita Pit should report interest expense at December 31,2015,in the amount of:

Which of the following is not a characteristic of a liability?

On November 1,2015,The Bagel Factory signed a $100,000,6%,six-month note payable with the amount borrowed plus accrued interest due six months later on May 1,2016.The Bagel Factory records the appropriate adjusting entry for the note on December 31,2015.In recording the payment of the note plus accrued interest at maturity on May 1,2016,The Bagel Factory would

Working capital is

A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit without having to follow formal loan procedures and paperwork.

Assuming a current ratio of 1.2 and an acid-test ratio of 0.80,how will the purchase of inventory with cash affect each ratio?

The current portion of long-term debt should be

A gain contingency is an existing uncertain situation that might result in a gain,which often is the flip side of loss contingencies.

Name as many items as you can that are withheld from employee payroll checks.Which employee deductions are required by law and which are voluntary? Name as many items as you can that are employer payroll costs in addition to the employee's salary.Which employer costs are required by law and which are voluntary?

Which of the following is not an employer payroll cost?

Universal Travel,Inc.borrowed $500,000 on November 1,2015,and signed a twelve-month note bearing interest at 6%.Principal and interest are payable in full at maturity on October 31,2016.In connection with this note,Universal Travel,Inc.should report interest payable at December 31,2015,in the amount of:

Reeves Co.filed suit against Higgins,Inc. ,seeking damages for copyright violations.Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000,with all amounts in the range considered equally likely.How should Higgins report this litigation?

Sales taxes collected by a company on behalf of the state and local government are recorded by: