Question 1

A company receives $180 for a sale,of which $10 is for sales tax.The journal entry to record the sale is:

Accepted Answer

A)  
$\begin{array}{lr}
\text { Sales Tax expense } & 10 \
\text { Cash } & 170 \
\text { Sales } &&180
\end{array}$ 
B)  
$$\begin{array} { l c } 
\text { Cash } & 170 \
\quad \text { Sales } && 170
\end{array}$$ 
C)  
$$\begin{array} { l c } 
\text { Cash } & 180 \
\quad \text { Sales } &&180
\end{array} $$ 
D)  
$\begin{array}{l}
\text { Cash } &180\
\text { Sales Tax Payable }&&10 \
\text { Sales }&&170
\end{array}$ 
A)  
$\begin{array}{lr}
\text { Sales Tax expense } & 10 \
\text { Cash } & 170 \
\text { Sales } &&180
\end{array}$ 
B)  
$$\begin{array} { l c } 
\text { Cash } & 170 \
\quad \text { Sales } && 170
\end{array}$$ 
C)  
$$\begin{array} { l c } 
\text { Cash } & 180 \
\quad \text { Sales } &&180
\end{array} $$ 
D)  
$\begin{array}{l}
\text { Cash } &180\
\text { Sales Tax Payable }&&10 \
\text { Sales }&&170
\end{array}$

Question 2

A contingent liability is not entered into the accounting records under any circumstances.

Accepted Answer

A) True 
 B)False

Question 3

Current liabilities are classified as either definitely determinable liabilities or contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 4

An asset purchased according to a deferred payment plan should be recorded based on the total cash paid.

Accepted Answer

A) True 
 B)False

Question 5

Use this information to answer the following question. $$\begin{array} { | c | c | c | } 
\hline \text { Periods } & \text { Future Value af } 11 \text { at } 12 \text { Percent } & \text { Future Value af Ordinary Annuity of } \
& & \text { \$1 at } 12 \text { Percent } \
\hline 1 & 1.120 & 1.000 \
\hline 2 & 1.254 & 2.120 \
\hline 3 & 1.405 & 3.374 \
\hline
\end{array}$$ If an accumulation of $6,000 is desired at the end of three years,what amount must be deposited at the end of each of the three years?

Accepted Answer

A)  $1,778.30 
B)  $20,244.00 
C)  $4,270.46 
D)  $8,430.00 
A)  $1,778.30 
B)  $20,244.00 
C)  $4,270.46 
D)  $8,430.00

Question 6

Social security and Medicare taxes are borne entirely by the employer.

Accepted Answer

A) True 
 B)False

Question 7

Use this information to answer the following question. The following totals for the month of November were taken from the payroll register of Levine Company:
$\begin{array}{llr}
  \text {Salaries expense  } &\$12,000\
 \text { Social security and Medicare taxes withheld } &550\
 \text {  Income taxes withheld} &2,500\
 \text { Medical insurance deductions } &250\
 \text {  Life insurance deductions} &200\
 \text { Salaries subiect to federal and state unemployment taxes of 6.2 percent } &4,000\
\end{array}$

The entry to record the accrual of employer's payroll taxes would include a debit to Payroll Taxes and Benefits Expense for

Accepted Answer

A)  $1,248. 
B)  $550. 
C)  $798. 
D)  $248. 
A)  $1,248. 
B)  $550. 
C)  $798. 
D)  $248.

Question 8

Accrued liabilities often arise as a result of the passage of time.

Accepted Answer

A) True 
 B)False

Question 9

Use this information to answer the following question. The transactions below pertain to Broyer Company,whose fiscal year ends September 30.
Sept. 10 Received cash for a 90-day, 12 percent, $ \$ 25,000 $ note payable. Interest is in addition to the face value.
30 Made end-of-year adjusting entry to accrue interest expense.
 The September 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Accepted Answer

A) 
$\begin{array}{llr}
  \text {Interest Expense  } &164\
 \text {Cash  } &&164\
\end{array}$ 
B)  
$\begin{array}{llr}
  \text {Cash} &164\
 \text {  Interest Expense  } &&164\
\end{array}$ 
C)  
$\begin{array}{lll}
\text { Interest Expense } & 164 \
\text { Interest Payable } & & 164
\end{array}$ 
D) 
$\begin{array}{ll}
\text { Interest Expense } & 164 \
\text { Notes Payable } &&164
\end{array}$ 
A) 
$\begin{array}{llr}
  \text {Interest Expense  } &164\
 \text {Cash  } &&164\
\end{array}$ 
B)  
$\begin{array}{llr}
  \text {Cash} &164\
 \text {  Interest Expense  } &&164\
\end{array}$ 
C)  
$\begin{array}{lll}
\text { Interest Expense } & 164 \
\text { Interest Payable } & & 164
\end{array}$ 
D) 
$\begin{array}{ll}
\text { Interest Expense } & 164 \
\text { Notes Payable } &&164
\end{array}$

Question 10

Which of the following most likely is a definitely determinable liability during interim periods?

Accepted Answer

A)  Estimated property tax payable 
B)  Accrued interest payable 
C)  Estimated product warranty liability 
D)  Estimated income taxes payable 
A)  Estimated property tax payable 
B)  Accrued interest payable 
C)  Estimated product warranty liability 
D)  Estimated income taxes payable

Question 11

Meggie's Fitness center received $720 from a customer in advance for one year membership in the fitness center.The entry that would be made to record the fee receipt is:

Accepted Answer

A)  
$\begin{array}{l}
\text { Unearned revenue } &720\
\text { Cash }&&720
\end{array}$ 
B)  
$\begin{array}{ll}
\text { Cash } & 720 \
\text { Unearned revenue }&&720
\end{array}$ 
C)  
$\begin{array}{l}
\text { Unearned revenue } &720\
\text { Revenue }&&720
\end{array}$ 
D)  
$\begin{array}{lll}
\text { Revenue }& 720 \
\text { Unearned revenue } && 720  \
\end{array}$ 
A)  
$\begin{array}{l}
\text { Unearned revenue } &720\
\text { Cash }&&720
\end{array}$ 
B)  
$\begin{array}{ll}
\text { Cash } & 720 \
\text { Unearned revenue }&&720
\end{array}$ 
C)  
$\begin{array}{l}
\text { Unearned revenue } &720\
\text { Revenue }&&720
\end{array}$ 
D)  
$\begin{array}{lll}
\text { Revenue }& 720 \
\text { Unearned revenue } && 720  \
\end{array}$

Question 12

The payables turnover is measured

Accepted Answer

A)  in days. 
B)  as a percentage. 
C)  in dollars. 
D)  in times. 
A)  in days. 
B)  as a percentage. 
C)  in dollars. 
D)  in times.

Question 13

On January 2,2010,Lester Company,a calendar-year company,issued $40,000 of notes payable,of which $10,000 is due on January 2 for each of the next four years.The proper balance sheet presentation on December 31,2010,is

Accepted Answer

A)  Current Liabilities, $40,000. 
B)  Current Liabilities, $10,000; Long-Term Liabilities, $30,000. 
C)  Long-Term Liabilities, $40,000. 
D)  Current Liabilities, $30,000; Long-Term Liabilities, $10,000. 
A)  Current Liabilities, $40,000. 
B)  Current Liabilities, $10,000; Long-Term Liabilities, $30,000. 
C)  Long-Term Liabilities, $40,000. 
D)  Current Liabilities, $30,000; Long-Term Liabilities, $10,000.

Question 14

Only the unused portion of a line of credit is recognized as a liability.

Accepted Answer

A) True 
 B)False

Question 15

If the net present value of a proposed investment is negative,it means that the investment should not be made.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following most likely is an estimated liability?

Accepted Answer

A)  Liability for vacation pay 
B)  Payroll liabilities 
C)  Unearned revenues 
D)  Current portion of long-term debt 
A)  Liability for vacation pay 
B)  Payroll liabilities 
C)  Unearned revenues 
D)  Current portion of long-term debt

Question 17

The days' payable shows how long,on average,a company takes to pay its accounts payable.

Accepted Answer

A) True 
 B)False

Question 18

What would be the adjusting entry for a note payable whose interest is not included in the face amount of the note?

Accepted Answer

A)  Debit Interest Receivable and credit Interest Income. 
B)  Debit Interest Expense and credit Cash. 
C)  Debit Interest Expense and credit Interest Payable. 
D)  Debit Cash and credit Notes Payable. 
A)  Debit Interest Receivable and credit Interest Income. 
B)  Debit Interest Expense and credit Cash. 
C)  Debit Interest Expense and credit Interest Payable. 
D)  Debit Cash and credit Notes Payable.

Question 19

If product X cost $50 and had a 4 percent failure rate,the entry to record the estimated product warranty expense in a month when 1,000 units are sold would be

Accepted Answer

A)  
$\begin{array} { l r } \text { Product Warranty Expense } & 2,000\
\text { Estimated Product Warranty Liability }&&2,000 \end{array}$ 
B)  
$\begin{array}{llr}
  \text { Product Warranty Expense } &200\
 \text {  Estimated Product Warranty Liability} &&200\
\end{array}$ 
C)  
$\begin{array}{llr}
  \text {Product Warranty Expense  } &20\
 \text { Cash } &&20\
\end{array}$ 
D)  
$\begin{array}{llr}
  \text {Estimated Product Warranty Liability   } &50\
 \text {  Cash} &&50\
\end{array}$ 
A)  
$\begin{array} { l r } \text { Product Warranty Expense } & 2,000\
\text { Estimated Product Warranty Liability }&&2,000 \end{array}$ 
B)  
$\begin{array}{llr}
  \text { Product Warranty Expense } &200\
 \text {  Estimated Product Warranty Liability} &&200\
\end{array}$ 
C)  
$\begin{array}{llr}
  \text {Product Warranty Expense  } &20\
 \text { Cash } &&20\
\end{array}$ 
D)  
$\begin{array}{llr}
  \text {Estimated Product Warranty Liability   } &50\
 \text {  Cash} &&50\
\end{array}$

Question 20

Packett Company allows each employee two weeks' paid vacation after the employee has worked at the company for one year.On the basis of past experience,management estimates that 80 percent of employees will qualify for vacation pay this year.Assume that the March payroll is $300,000.Compute the vacation pay expense for the month assuming 50 working weeks a year.Show your computation.

Accepted Answer

$9,600 ($3

Exam 8: Current Liabilities and Fair Value Accounting

A company receives $180 for a sale,of which $10 is for sales tax.The journal entry to record the sale is:

A contingent liability is not entered into the accounting records under any circumstances.

Current liabilities are classified as either definitely determinable liabilities or contingent liabilities.

An asset purchased according to a deferred payment plan should be recorded based on the total cash paid.

Social security and Medicare taxes are borne entirely by the employer.

Accrued liabilities often arise as a result of the passage of time.

Which of the following most likely is a definitely determinable liability during interim periods?

Meggie's Fitness center received $720 from a customer in advance for one year membership in the fitness center.The entry that would be made to record the fee receipt is:

The payables turnover is measured

On January 2,2010,Lester Company,a calendar-year company,issued $40,000 of notes payable,of which $10,000 is due on January 2 for each of the next four years.The proper balance sheet presentation on December 31,2010,is

Only the unused portion of a line of credit is recognized as a liability.

If the net present value of a proposed investment is negative,it means that the investment should not be made.

Which of the following most likely is an estimated liability?

The days' payable shows how long,on average,a company takes to pay its accounts payable.

What would be the adjusting entry for a note payable whose interest is not included in the face amount of the note?

If product X cost $50 and had a 4 percent failure rate,the entry to record the estimated product warranty expense in a month when 1,000 units are sold would be

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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