Exam 9: Accounting for Current Liabilities and Payroll

On October 1, Year 1, Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank. The note had an 8% discount rate and had a one-year term to maturity. On December 31, Year 1, Harrison should accrue interest expense in the amount of $1,920.

Joseph Company is preparing to repay a one-year note on May 1, Year 2. The first step in this process is to accrue eight months of interest expense.

Broward Company estimated its warranty obligations to customers at $6,250 for the current year. During the year, Broward paid $3,920 to settle warranty claims made by customers. Required: 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?

Seattle Company issued a $90,000 face value discount note payable to First Federal Bank on September 1, Year 1. The note had a 4% discount rate and a one-year term. What is the amount of interest expense appearing on the Year 1 income statement?

On August 1, Year 1, Denver & Company issued a $24,000 face value discount note to First Bank. The note had a 6% discount rate and a one-year term to maturity. Required:a)Compute the carrying value of the note at December 31, Year 1.

The following transactions apply to Baird Corporation.1)Issued common stock for $40,000 cash.2)Provided services to customers for $32,000 on account.3)Borrowed $30,000 on September 1 at 8% interest with a one-year term.4)Purchased land for $32,000 cash.5)Paid $22,000 for operating expenses.6)Collected $28,000 cash from customers in partial settlement of its accounts receivable.7)Recorded interest on the note payable at year end.8)Paid $4,000 dividends to stockholders. Required: a)Identify the effect on the statement of cash flows for each of the above transactions. Include the amount and the type of cash flow activity. Cash payments should be entered using parenthesis.b)Classify the above accounting events into one of four types of transactions (asset source, asset use, asset exchange, claims exchange).

On October 1, Year 1, Tankard Company borrowed $45,000 from the bank and issued a note for that amount. The note had a one-year term and an annual interest rate of 8%.. Perez Company borrowed money from its bank in July Year 1. The accrual of interest on the loan at the end of Year 1: a)reduces cash flows.b)involves recognition of interest expense.c)does not affect income for Year 1.d)involves recognition of a liability.e)records a cash payment for interest.

What factor distinguishes an employee from an independent contractor?

On September 1, Year 1, West Company borrowed $10,000 from Valley Bank. West agreed to pay interest annually at the rate of 6% per year. The note issued by West carried an 18-month term. West Company has a calendar year-end. What is the amount of interest expense that will be reported on West's income statement for Year 1?

The adjusting entry required to recognize warranty expense will cause

What accounting concept requires a company to accrue interest expense on a note payable?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.You do not need to enter amounts.Increase = I Decrease = D Not Affected = NAPing Company remitted the sales tax due (that is, paid cash to the tax authority).

Which of the following happens as a result of selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%?

Moreno Company began Year 1 with a balance of $300 in Sales Tax payable. During the year, the company recorded taxable sales of $92,500. The ending balance in Sales Tax payable was $445. Moreno's sales tax rate is 4%. Required: a)How much sales tax did Moreno collect during Year 1?b)How much sales tax did Moreno remit (pay to taxing authority)during Year 1?

Indicate whether each of the following statements is true or false. a)Operating cycles for most businesses are less than one year.b)If a business does not plan to use any of its current assets to repay a debt, then that debt is listed as long term even if it is due within a year.c)The current ratio is computed by dividing current assets by net income.d)The current ratio is a useful measure of a company's liquidity.e)Liquidity is the ability of a business to repay liabilities in the long run.

In December Year 1, Lucas Corporation sold merchandise for $10,000 cash. Lucas estimated that the warranty obligation relating to this sale is $700. On February 12, Year 2, Lucas paid cash of $550 to settle a related warranty claim by this customer.Which of the following reflects the effect of the year-end adjustment to record estimated warranty expense?

Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term. Based on this information alone, what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows?

During Year 1, Bradley Corporation issued a $20,000 face value discount note to Fidelity Bank. The note had a 6% discount rate and a one-year term to maturity. On December 31, Year 1, Bradley failed to make the year-end adjustment to accrue the related interest. Which of the following summarizes the effect of this error?

The following is a list of balance sheet accounts (in random order)and balances for Premium Office Supply Company. They have been updated as of December 31, Year 1. Required:Prepare a classified balance sheet for Premium Office Supply Company at December 31, Year 1.

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?