Question 1

The costs associated with coupons and rebates are usually reflected in contra-revenue accounts.

Accepted Answer

A) True 
 B)False

Question 2

A liability for dividends exists only when the board of directors declares them.

Accepted Answer

A) True 
 B)False

Question 3

Prepare journal entries without explanations for the following transactions involving notes payable for Willson Company,whose fiscal year ends September 30.
 Sept. 10 Received cash for a 60 -day, 12 percent, $ \$ 10,000 $ note payable. Interest is in addition to the face value.
30 Made end-of-year adjusting entry to accue interest expense for the note.

Nov. 9 Paid amount due on the note plus interest.

Accepted Answer

The answer of Prepare journal entries without explanations for the...

Question 4

Commercial paper normally is issued by companies with poor credit ratings.

Accepted Answer

A) True 
 B)False

Question 5

All liabilities involve an obligation of one sort or another.

Accepted Answer

A) True 
 B)False

Question 6

Decision makers rely on the future values,rather than on the present values,of future cash flows.

Accepted Answer

A) True 
 B)False

Question 7

Use this information to answer the following question. Baker Company has the following information for the pay period of January 1-15,2010.Payment occurs on January 20.
$\begin{array}{lrlr}
\text { Gross payroll } & \$ 16,000 & \text { Federal income taxes withheld } & \$ 1,800 \
\text { Social security and Medicare rate } & 7.65 \% & \text { Federal unemployment tax rate } & .8 \%\
\
\text { State unemployment tax rate}&5.4 \%
\end{array}$

The entry on January 20 would be a debit to

Accepted Answer

A)  Salaries Payable and a credit to Cash. 
B)  Salaries Payable and a credit to Salaries Expense. 
C)  Salaries Expense and a credit to Cash. 
D)  Salaries Expense and a credit to Salaries Payable. 
A)  Salaries Payable and a credit to Cash. 
B)  Salaries Payable and a credit to Salaries Expense. 
C)  Salaries Expense and a credit to Cash. 
D)  Salaries Expense and a credit to Salaries Payable.

Question 8

Which of the following statements is true regarding the time value of money?

Accepted Answer

A)  Compound interest will produce equal amounts of interest each period on a fixed deposit. 
B)  Earning simple interest is more beneficial than earning compound interest. 
C)  When making a purchase, it is better to make payment as soon as possible. 
D)  It is better to receive $1 now than a year from now. 
A)  Compound interest will produce equal amounts of interest each period on a fixed deposit. 
B)  Earning simple interest is more beneficial than earning compound interest. 
C)  When making a purchase, it is better to make payment as soon as possible. 
D)  It is better to receive $1 now than a year from now.

Question 9

Sales Tax Payable is an example of a(n)

Accepted Answer

A)  estimated liability. 
B)  contingent liability. 
C)  trade liability. 
D)  definitely determinable liability. 
A)  estimated liability. 
B)  contingent liability. 
C)  trade liability. 
D)  definitely determinable liability.

Question 10

Seacrest Company purchased a machine on January 2,2010.Under the terms of the purchase agreement,the company is required to make 14 quarterly installment payments of $29,000 each,beginning April 1,2010.Assuming that the interest rate is 16 percent compounded quarterly,determine the purchase price of the machine.Use future value and/or present value tables in calculating your answer.

Accepted Answer

Purchase price = $29

Question 11

Use this information to answer the following question. $\begin{array}{|l|l|l|}
\hline\text { Periods } & \text { Future Value of } \$ 1 \text { at } 12 \text { Percent } & \text { Future Value of Ordinary Annuity of } \
&&\$ 1 \text { at } 12 \text { Percent }\ 
\hline 1 & 1.120 & 1.000 \
\hline 2 & 1.254 & 2.120 \
\hline 3 & 1.405 & 3.374 \
\hline
\end{array}$ A single deposit of $2,000 made at the beginning of period 1 would grow to how much at the end of three years?

Accepted Answer

A)  $2,240.00 
B)  $2,810.00 
C)  $2,508.00 
D)  $6,748.00 
A)  $2,240.00 
B)  $2,810.00 
C)  $2,508.00 
D)  $6,748.00

Question 12

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 journal entry to record the monthly payroll on November 30 would include a

Accepted Answer

A)  debit to Salaries Expense for $12,000. 
B)  debit to Salaries Payable for $12,000. 
C)  credit to Salaries Payable for $12,000. 
D)  debit to Salaries Expense for $8,500. 
A)  debit to Salaries Expense for $12,000. 
B)  debit to Salaries Payable for $12,000. 
C)  credit to Salaries Payable for $12,000. 
D)  debit to Salaries Expense for $8,500.

Question 13

Hi-Tech Company produces widgets that cost $60 each and have a 5 percent failure rate.If 500 widgets are sold,the entry to record the estimated product warranty expense would be

Accepted Answer

A)  
$\begin{array}{llr}
  \text {Product Warranty Expense  } &300\
 \text { Estimated Product Warranty Liability } &&300\
\end{array}$ 
B)  
$\begin{array}{llr}
  \text { Product Warranty Expense } &1,500\
 \text { Estimated Product Warranty Liability } &&1,500\
\end{array}$ 
C)  
$\begin{array}{llr}
  \text { Product Warranty Expense } &150\
 \text {Cash  } &&150\
\end{array}$ 
D)  
$\begin{array}{llr}
  \text { Estimated Product Warranty Liability } &75\
 \text {  Cash} &&75\
\end{array}$ 
A)  
$\begin{array}{llr}
  \text {Product Warranty Expense  } &300\
 \text { Estimated Product Warranty Liability } &&300\
\end{array}$ 
B)  
$\begin{array}{llr}
  \text { Product Warranty Expense } &1,500\
 \text { Estimated Product Warranty Liability } &&1,500\
\end{array}$ 
C)  
$\begin{array}{llr}
  \text { Product Warranty Expense } &150\
 \text {Cash  } &&150\
\end{array}$ 
D)  
$\begin{array}{llr}
  \text { Estimated Product Warranty Liability } &75\
 \text {  Cash} &&75\
\end{array}$

Question 14

A contingent liability eventually becomes either a true liability or no liability at all.

Accepted Answer

A) True 
 B)False

Question 15

When a business sells an item and collects a state sales tax on it,a current liability to the state arises.

Accepted Answer

A) True 
 B)False

Question 16

A company places $10,000 into a money market account for four months.The account is expected to pay 9 percent annual interest,compounded monthly.After one month,the entry to record interest earned is:

Accepted Answer

A)  
$\begin{array}{llr}
  \text { Short-Term Investments } &75\
 \text {  Interest Income} &&75\
\end{array}$ 
B)  
$\begin{array}{l}
\text { Cash }&75 \
\text { Interest Income }&&75
\end{array}$ 
C)  
$\begin{array}{l}
\text { Interest Income }&75\
\text { Cash }&&75
\end{array}$ 
D)  
$\begin{array}{llr}
  \text {  Cash} &75\
 \text {  Interest Receivable} &&75\
\end{array}$ 
A)  
$\begin{array}{llr}
  \text { Short-Term Investments } &75\
 \text {  Interest Income} &&75\
\end{array}$ 
B)  
$\begin{array}{l}
\text { Cash }&75 \
\text { Interest Income }&&75
\end{array}$ 
C)  
$\begin{array}{l}
\text { Interest Income }&75\
\text { Cash }&&75
\end{array}$ 
D)  
$\begin{array}{llr}
  \text {  Cash} &75\
 \text {  Interest Receivable} &&75\
\end{array}$

Question 17

Match between columns
                        Premises:  The amount paid for a business in excess of its fair market value
 A registered symbol or name to identify a product or service
 An exclusive right for 20 years to produce a particular product
 A contract restricting the rights of others to operate in a specific industry
 A right to occupy land or buildings under a long-term rental contract
 An exclusive right to sell literary, artistic, or musical works and computer software
 Capitalized costs associated with computer programs developed for sale, lease, or internal use
 A right to an exclusive territory or market
 A planned search for a new product, as well as pure research
 Access to the names of subscribers or patrons

Accepted Answer

The Answer of Leasehold and Trademark and Copyright and Patent is...

Question 18

First City Bank computes interest semiannually.If the interest rate is currently 6 percent per annum,the amount deposited today should be multiplied by which future value factor to calculate the amount that will accumulate by the end of 10 years?

Accepted Answer

A)  20 periods at 12 percent 
B)  20 periods at 3 percent 
C)  10 periods at 6 percent 
D)  10 periods at 3 percent 
A)  20 periods at 12 percent 
B)  20 periods at 3 percent 
C)  10 periods at 6 percent 
D)  10 periods at 3 percent

Question 19

Use this information to answer the following question. $$\begin{array} { | c | c | c | } 
\hline \text { Periods } & \text { Present Value af } \$ 1 \text { at } 7 \text { Percent } & \text { Present Value af Ordinary Annuity of } \
&&\text { \$1 at } 7 \text { Percent } \
1 & 0.935 & 0.935 \
\hline 2 & 0.873 & 1.808 \
\hline 3 & 0.816 & 2.624 \
\hline
\end{array}$$ What amount must be deposited today to grow to $450 in three years?

Accepted Answer

A)  $331.00 
B)  $367.20 
C)  $171.49 
D)  $420.75 
A)  $331.00 
B)  $367.20 
C)  $171.49 
D)  $420.75

Question 20

Which of the following most likely is an example of an accrued liability?

Accepted Answer

A)  Salaries payable 
B)  Accounts payable 
C)  Current portion of long-term debt 
D)  Sales tax payable 
A)  Salaries payable 
B)  Accounts payable 
C)  Current portion of long-term debt 
D)  Sales tax payable

Exam 8: Current Liabilities and Fair Value Accounting

The costs associated with coupons and rebates are usually reflected in contra-revenue accounts.

A liability for dividends exists only when the board of directors declares them.

Commercial paper normally is issued by companies with poor credit ratings.

All liabilities involve an obligation of one sort or another.

Decision makers rely on the future values,rather than on the present values,of future cash flows.

Which of the following statements is true regarding the time value of money?

Sales Tax Payable is an example of a(n)

Hi-Tech Company produces widgets that cost $60 each and have a 5 percent failure rate.If 500 widgets are sold,the entry to record the estimated product warranty expense would be

A contingent liability eventually becomes either a true liability or no liability at all.

When a business sells an item and collects a state sales tax on it,a current liability to the state arises.

A company places $10,000 into a money market account for four months.The account is expected to pay 9 percent annual interest,compounded monthly.After one month,the entry to record interest earned is:

First City Bank computes interest semiannually.If the interest rate is currently 6 percent per annum,the amount deposited today should be multiplied by which future value factor to calculate the amount that will accumulate by the end of 10 years?

Use this information to answer the following question. Periods Present Value af \ 1 at 7 Percent Present Value af Ordinary Annuity of \1 at 7 Percent 1 0.935 0.935 2 0.873 1.808 3 0.816 2.624 What amount must be deposited today to grow to $450 in three years?

Which of the following most likely is an example of an accrued liability?

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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