Question 1

Businesses do not accrue contingent gains but do report actual gains.

Accepted Answer

A) True 
 B)False  True

Question 2

A contingent liability is an actual liability that is estimated when things go wrong.

Accepted Answer

A) True 
 B)False  False

Question 3

Notes payable normally require the borrower to pay interest.

Accepted Answer

A) True 
 B)False  True

Question 4

Goods and services taxes add an extra cost to the value of inventory.

Accepted Answer

A) True 
 B)False

Question 5

Sales for the current year amount to $900,000. The company estimates warranty expense to be 5% of sales. The journal entry to accrue the estimated warranty expense includes a debit to estimated warranty payable for $45,000.

Accepted Answer

A) True 
 B)False

Question 6

Franconia Sales offers warranties on all their electronic goods. Warranty expense is estimated at 2% of sales revenue. In 2019, Franconia had $500,000 of sales. In the same year, Franconia paid out $7,500 of warranty payments. Which of the following is the entry needed to record the estimated warranty expense?

Accepted Answer

A)  $\begin{array} { | c | r | r | } 
\hline \text { Estimated warranty payable } & 7,500 & \
\hline \text { Cash } & & 7,500 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | r | r | } 
\hline \text { Warranty expense } & 7,500 & \
\hline \text { Estimated warranty payable } & & 7,500 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | r | r | } 
\hline \text { Warranty expense } & 10,000 & \
\hline \text { Estimated warranty payable } & & 10,000 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | r | } 
\hline \text { Warranty expense } & 10,000 & \
\hline \text { Sales revenue } & & 10,000 \
\hline
\end{array}$ 
A)  $\begin{array} { | c | r | r | } 
\hline \text { Estimated warranty payable } & 7,500 & \
\hline \text { Cash } & & 7,500 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | r | r | } 
\hline \text { Warranty expense } & 7,500 & \
\hline \text { Estimated warranty payable } & & 7,500 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | r | r | } 
\hline \text { Warranty expense } & 10,000 & \
\hline \text { Estimated warranty payable } & & 10,000 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | r | } 
\hline \text { Warranty expense } & 10,000 & \
\hline \text { Sales revenue } & & 10,000 \
\hline
\end{array}$

Question 7

All of the following are unearned revenues except:

Accepted Answer

A) deferred revenues. 
B) accrued revenues. 
C) revenues collected in advance. 
D) customer prepayments. 
A) deferred revenues. 
B) accrued revenues. 
C) revenues collected in advance. 
D) customer prepayments.

Question 8

The entry to accrue sales tax expense includes a:

Accepted Answer

A) debit to Sales Tax Expense. 
B) credit to Sales Tax Payable. 
C) debit to Sales Tax Payable. 
D) There is no accrual of sales tax expense. 
A) debit to Sales Tax Expense. 
B) credit to Sales Tax Payable. 
C) debit to Sales Tax Payable. 
D) There is no accrual of sales tax expense.

Question 9

BCB Corporation has made 11 monthly payments totaling $160,000 for its estimated annual income tax. At year end, income tax expense for BCB Corporation amounts to $185,000. The adjusting entry will involve a:

Accepted Answer

A) debit to Income Tax Payable for $25,000. 
B) debit to Income Tax Expense for $185,000. 
C) debit to Income Tax Expense for $25,000. 
D) credit to Income Tax Payable for $185,000. 
A) debit to Income Tax Payable for $25,000. 
B) debit to Income Tax Expense for $185,000. 
C) debit to Income Tax Expense for $25,000. 
D) credit to Income Tax Payable for $185,000.

Question 10

The failure to record an accrued liability causes a company to overstate its net income.

Accepted Answer

A) True 
 B)False

Question 11

Camrey Company issued a five-year, interest-bearing note payable for $50,000 on January 1, 2019. Each January Camrey is required to pay $10,000 principal on the note. What is the amount that will be reported on the long-term portion of long-term notes payable on the December 31, 2021 balance sheet?

Accepted Answer

A) $10,000 
B) $40,000 
C) $30,000 
D) $20,000 
A) $10,000 
B) $40,000 
C) $30,000 
D) $20,000

Question 12

Secured operating lines of credit normally have lower rates of interest than unsecured operating lines of credit.

Accepted Answer

A) True 
 B)False

Question 13

The entry to accrue interest on a note payable would include a:

Accepted Answer

A) debit to Note Payable. 
B) credit to Interest Receivable. 
C) credit to Interest Revenue. 
D) debit to Interest Expense. 
A) debit to Note Payable. 
B) credit to Interest Receivable. 
C) credit to Interest Revenue. 
D) debit to Interest Expense.

Question 14

When a company issues a short-term note payable:

Accepted Answer

A) the note payable account is credited. 
B) the note payable is debited. 
C) the interest expense is credited. 
D) the interest expense account is debited. 
A) the note payable account is credited. 
B) the note payable is debited. 
C) the interest expense is credited. 
D) the interest expense account is debited.

Question 15

Accrued interest on a note payable should be credited to interest payable.

Accepted Answer

A) True 
 B)False

Question 16

The Federal Government collects all the PST and GST for the country and then passes on the collection of the PST to the individual provincial governments.

Accepted Answer

A) True 
 B)False

Question 17

A $45,000, 10%, 90-day note payable comes to maturity. The amount to be paid at maturity including interest is $43,890.41.

Accepted Answer

A) True 
 B)False

Question 18

Table 11-13
Arc Digital starts the year with balances in its Estimated warranty payable account and Warranty expense account as shown below. During the year, there were $190,000 of sales and $3,200 of warranty repair payments. Arc Digital estimates warranty expense at 1.5% of sales.  
-Refer to Table 11-13. At the end of the year, what was the balance in the estimated warranty payable account?

Accepted Answer

A) $2,850 debit 
B) $1,050 credit 
C) $3,200 debit 
D) $1,420 debit 
A) $2,850 debit 
B) $1,050 credit 
C) $3,200 debit 
D) $1,420 debit

Question 19

Failure to record accrued interest on a note payable causes a company to:

Accepted Answer

A) overstate interest income. 
B) understate interest expense. 
C) understate retained earnings. 
D) overstate interest expense and understate retained earnings. 
A) overstate interest income. 
B) understate interest expense. 
C) understate retained earnings. 
D) overstate interest expense and understate retained earnings.

Question 20

Accruing warranty expense is prescribed by the:

Accepted Answer

A) recognition criteria for revenues. 
B) matching objective. 
C) full-disclosure principle. 
D) going-concern assumption. 
A) recognition criteria for revenues. 
B) matching objective. 
C) full-disclosure principle. 
D) going-concern assumption.

Businesses do not accrue contingent gains but do report actual gains.

A contingent liability is an actual liability that is estimated when things go wrong.

Notes payable normally require the borrower to pay interest.

Goods and services taxes add an extra cost to the value of inventory.

Sales for the current year amount to $900,000. The company estimates warranty expense to be 5% of sales. The journal entry to accrue the estimated warranty expense includes a debit to estimated warranty payable for $45,000.

All of the following are unearned revenues except:

The entry to accrue sales tax expense includes a:

BCB Corporation has made 11 monthly payments totaling $160,000 for its estimated annual income tax. At year end, income tax expense for BCB Corporation amounts to $185,000. The adjusting entry will involve a:

The failure to record an accrued liability causes a company to overstate its net income.

Camrey Company issued a five-year, interest-bearing note payable for $50,000 on January 1, 2019. Each January Camrey is required to pay $10,000 principal on the note. What is the amount that will be reported on the long-term portion of long-term notes payable on the December 31, 2021 balance sheet?

Secured operating lines of credit normally have lower rates of interest than unsecured operating lines of credit.

The entry to accrue interest on a note payable would include a:

When a company issues a short-term note payable:

Accrued interest on a note payable should be credited to interest payable.

The Federal Government collects all the PST and GST for the country and then passes on the collection of the PST to the individual provincial governments.

A $45,000, 10%, 90-day note payable comes to maturity. The amount to be paid at maturity including interest is $43,890.41.

Failure to record accrued interest on a note payable causes a company to:

Accruing warranty expense is prescribed by the:

Accounting and the Business Environment

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Filters

Exam 11: Current Liabilities and Payroll

Businesses do not accrue contingent gains but do report actual gains.

A contingent liability is an actual liability that is estimated when things go wrong.

Notes payable normally require the borrower to pay interest.

Goods and services taxes add an extra cost to the value of inventory.

Sales for the current year amount to $900,000. The company estimates warranty expense to be 5% of sales. The journal entry to accrue the estimated warranty expense includes a debit to estimated warranty payable for $45,000.

All of the following are unearned revenues except:

The entry to accrue sales tax expense includes a:

BCB Corporation has made 11 monthly payments totaling $160,000 for its estimated annual income tax. At year end, income tax expense for BCB Corporation amounts to $185,000. The adjusting entry will involve a:

The failure to record an accrued liability causes a company to overstate its net income.

Camrey Company issued a five-year, interest-bearing note payable for $50,000 on January 1, 2019. Each January Camrey is required to pay $10,000 principal on the note. What is the amount that will be reported on the long-term portion of long-term notes payable on the December 31, 2021 balance sheet?

Secured operating lines of credit normally have lower rates of interest than unsecured operating lines of credit.

The entry to accrue interest on a note payable would include a:

When a company issues a short-term note payable:

Accrued interest on a note payable should be credited to interest payable.

The Federal Government collects all the PST and GST for the country and then passes on the collection of the PST to the individual provincial governments.

A $45,000, 10%, 90-day note payable comes to maturity. The amount to be paid at maturity including interest is $43,890.41.

Failure to record accrued interest on a note payable causes a company to:

Accruing warranty expense is prescribed by the:

Accounting and the Business Environment

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Filters