Question 1

Product warranties are an expense of the period in which the product must be repaired or replaced.

Accepted Answer

A) True 
 B)False

Question 2

A contingent liability is recorded in the accounting records

Accepted Answer

A)  if the contingency has not been described already in the notes to the financial statements. 
B)  if it possibly will become an actual liability and the exact amount is known. 
C)  under no circumstances. 
D)  if it probably will become an actual liability and the amount can be reasonably estimated. 
A)  if the contingency has not been described already in the notes to the financial statements. 
B)  if it possibly will become an actual liability and the exact amount is known. 
C)  under no circumstances. 
D)  if it probably will become an actual liability and the amount can be reasonably estimated.

Question 3

Days' payable is the shortest in which of the following industries?

Accepted Answer

A)  Grocery stores 
B)  Computers 
C)  Machinery 
D)  Auto and home supply 
A)  Grocery stores 
B)  Computers 
C)  Machinery 
D)  Auto and home supply

Question 4

In a deferred payment arrangement,interest is charged only if it is stated.

Accepted Answer

A) True 
 B)False

Question 5

Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?

Accepted Answer

A)  Matching 
B)  Consistency 
C)  Historical cost 
D)  Full disclosure 
A)  Matching 
B)  Consistency 
C)  Historical cost 
D)  Full disclosure

Question 6

A business accepts a 12 percent,$19,000 note due in three years.Assuming simple interest,how much will the business receive when the note falls due?

Accepted Answer

A)  $21,280 
B)  $25,840 
C)  $23,560 
D)  $19,000 
A)  $21,280 
B)  $25,840 
C)  $23,560 
D)  $19,000

Question 7

During May,Photo Mart sold 150 instant cameras for $100 each.Each camera had cost Photo Mart $69 to purchase and carried a one-year warranty.If 4 percent typically need to be replaced over the warranty period and two actually are replaced during May,the entry to record the Product Warranty Expense for the month is:

Accepted Answer

A) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &
138\
 \text { Estimated Product Warranty Liability } &&
138\
\end{array}$ 
B) 
$\begin{array}{l}
\text { Product Warranty Expense }&276\
\text { Cash }&&276
\end{array}$ 
C) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &552\
 \text {  Cash} &&552\
\end{array}$ 
D) 
$\begin{array} { l r } \text { Product Warranty Expense } & 414 \
 \text { Estimated Product Warranty Liability}&&414
\end{array}$ 
A) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &
138\
 \text { Estimated Product Warranty Liability } &&
138\
\end{array}$ 
B) 
$\begin{array}{l}
\text { Product Warranty Expense }&276\
\text { Cash }&&276
\end{array}$ 
C) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &552\
 \text {  Cash} &&552\
\end{array}$ 
D) 
$\begin{array} { l r } \text { Product Warranty Expense } & 414 \
 \text { Estimated Product Warranty Liability}&&414
\end{array}$

Question 8

Darla Katz earns an hourly wage of $12,with time-and-a-half pay for hours worked over 40 per week.During the most recent week,she worked 46 hours,her federal tax withholding totaled $62,her state tax withholding totaled $18,and $3 was withheld for union dues.Assuming a 6.2 percent social security tax rate and a 1.45 percent Medicare tax rate,prepare the entry without explanation in the journal provided to record Katz's wages and related liabilities.Round to the nearest penny.

Accepted Answer

The answer of Darla Katz earns an hourly wage of...

Question 9

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 amount of liabilities relating to payroll,other than Salaries Payable,is

Accepted Answer

A)  $4,178. 
B)  $3,748. 
C)  $3,628. 
D)  $4,298. 
A)  $4,178. 
B)  $3,748. 
C)  $3,628. 
D)  $4,298.

Question 10

A company receives $100,of which $4 is for sales tax and $6 is for excise tax.The journal entry to record the sale is:

Accepted Answer

A)  
$\begin{array} { l c } 
\text { Cash } & 90 \
\text { Sales } && 90 
\end{array}$ 
B) 
$$\begin{array} { l c c } 
\text { Excise Tax expense } & 6 & \
\text { Sales Tax expense } & 4 & \
\text { Cash } & 90 & \
\quad \text { Sales } & & 100
\end{array}$$ 
C)  
$\begin{array}{ll}
\text { Sales } & 100 \
\text { Cash } & & 100
\end{array}$ 
D) 
$$\begin{array} { l r } 
\text { Cash } &  { 100 } \
\quad\quad\quad\text { Sales Tax Payable } && 4 \
\quad\quad\quad\text { Excise tax payable } && 6 \
\quad\quad\quad\text { Sales } && 90
\end{array}$$ 
A)  
$\begin{array} { l c } 
\text { Cash } & 90 \
\text { Sales } && 90 
\end{array}$ 
B) 
$$\begin{array} { l c c } 
\text { Excise Tax expense } & 6 & \
\text { Sales Tax expense } & 4 & \
\text { Cash } & 90 & \
\quad \text { Sales } & & 100
\end{array}$$ 
C)  
$\begin{array}{ll}
\text { Sales } & 100 \
\text { Cash } & & 100
\end{array}$ 
D) 
$$\begin{array} { l r } 
\text { Cash } &  { 100 } \
\quad\quad\quad\text { Sales Tax Payable } && 4 \
\quad\quad\quad\text { Excise tax payable } && 6 \
\quad\quad\quad\text { Sales } && 90
\end{array}$$

Question 11

A company enters into a contract to purchase a certain quantity of goods from another company during the following month.At this point,would a liability exist? Explain why or why not.

Accepted Answer

A liability would not exist be

Question 12

Which of the following is an example of a commitment?

Accepted Answer

A)  Lease 
B)  Note payable 
C)  Revenue received in advance 
D)  Dividend payable 
A)  Lease 
B)  Note payable 
C)  Revenue received in advance 
D)  Dividend payable

Question 13

The current portion of long-term debt is classified as a current liability only if it is due within the next year and is to be paid from current assets.

Accepted Answer

A) True 
 B)False

Question 14

On December 1,Boston Pizza borrowed $40,000 from the bank,issuing a 90-day,15 percent promissory note.Interest is in addition to the face value.In the journal provided,prepare Boston Pizza's December 1 entry,December 31 adjusting entry without explanation for accrued interest,and March 1 entry at maturity.Round to the nearest whole dollar.

Accepted Answer

The answer of On December 1,Boston Pizza borrowed $40,000 from...

Question 15

Assume that a company received $1,200 in advance for one year membership fee in the fitness center.The entry that would be made to record the recognition of revenue at the end of first month is:

Accepted Answer

A)  
$\begin{array}{llr}
  \text {Revenue  } &1,200\
 \text {Cash  } &&1,200\
\end{array}$ 
B)  
$\begin{array}{llr}
  \text {Cash  } &100\
 \text {  Revenue} &&100\ 
\end{array}$ 
C)  
$\begin{array}{lll}
\text { Unearned revenue } &100\
\text { Revenue }&&100
\end{array}$ 
D)  
$\begin{array}{lll}
\text { Revenue } &100\
\text { Unearned revenue }&&100 
\end{array}$ 
A)  
$\begin{array}{llr}
  \text {Revenue  } &1,200\
 \text {Cash  } &&1,200\
\end{array}$ 
B)  
$\begin{array}{llr}
  \text {Cash  } &100\
 \text {  Revenue} &&100\ 
\end{array}$ 
C)  
$\begin{array}{lll}
\text { Unearned revenue } &100\
\text { Revenue }&&100
\end{array}$ 
D)  
$\begin{array}{lll}
\text { Revenue } &100\
\text { Unearned revenue }&&100 
\end{array}$

Question 16

A company sells merchandise on a deferred payment plan,ultimately receiving $5,000 on the account receivable.On the payment date,the company would

Accepted Answer

A)  credit Accounts Receivable for less than $5,000. 
B)  debit Interest Income for the imputed amount. 
C)  credit Sales for less than $5,000. 
D)  debit the asset account for $5,000. 
A)  credit Accounts Receivable for less than $5,000. 
B)  debit Interest Income for the imputed amount. 
C)  credit Sales for less than $5,000. 
D)  debit the asset account for $5,000.

Question 17

The federal and state unemployment tax rates are identical.

Accepted Answer

A) True 
 B)False

Question 18

The entry that includes a debit to Payroll Taxes and Benefits Expense would also include credits to Social Security Tax Payable and Medicare Tax Payable.

Accepted Answer

A) True 
 B)False

Question 19

A contingent liability is recognized when any likelihood of loss exists and the amount can be reasonably estimated.

Accepted Answer

A) True 
 B)False

Question 20

Working capital equals current assets plus current liabilities.

Accepted Answer

A) True 
 B)False

Exam 8: Current Liabilities and Fair Value Accounting

Product warranties are an expense of the period in which the product must be repaired or replaced.

A contingent liability is recorded in the accounting records

Days' payable is the shortest in which of the following industries?

In a deferred payment arrangement,interest is charged only if it is stated.

Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?

A business accepts a 12 percent,$19,000 note due in three years.Assuming simple interest,how much will the business receive when the note falls due?

A company receives $100,of which $4 is for sales tax and $6 is for excise tax.The journal entry to record the sale is:

A company enters into a contract to purchase a certain quantity of goods from another company during the following month.At this point,would a liability exist? Explain why or why not.

Which of the following is an example of a commitment?

The current portion of long-term debt is classified as a current liability only if it is due within the next year and is to be paid from current assets.

Assume that a company received $1,200 in advance for one year membership fee in the fitness center.The entry that would be made to record the recognition of revenue at the end of first month is:

A company sells merchandise on a deferred payment plan,ultimately receiving $5,000 on the account receivable.On the payment date,the company would

The federal and state unemployment tax rates are identical.

The entry that includes a debit to Payroll Taxes and Benefits Expense would also include credits to Social Security Tax Payable and Medicare Tax Payable.

A contingent liability is recognized when any likelihood of loss exists and the amount can be reasonably estimated.

Working capital equals current assets plus current liabilities.

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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