Question 1

Which of the following is an expense of the employer?

Accepted Answer

A)  Employee income taxes 
B)  Deductions for union membership 
C)  Payroll tax 
D)  Employee benefits 
A)  Employee income taxes 
B)  Deductions for union membership 
C)  Payroll tax 
D)  Employee benefits C

Question 2

Which of the following occurs when a company records accrued interest expense on a loan payable?

Accepted Answer

A)  Loan payable is credited. 
B)  Cash is debited. 
C)  Interest payable is credited. 
D)  Interest expense is credited. 
A)  Loan payable is credited. 
B)  Cash is debited. 
C)  Interest payable is credited. 
D)  Interest expense is credited. C

Question 3

Which of the following principles requires that warranty expense be recorded in the period that revenue is recorded?

Accepted Answer

A)  Consistency principle 
B)  Matching principle 
C)  Materiality concept 
D)  Profit recognition principle 
A)  Consistency principle 
B)  Matching principle 
C)  Materiality concept 
D)  Profit recognition principle B

Question 4

A company has been sued for product failures allegedly resulting in injuries to the individuals bringing the lawsuit.The company's lawyers believe it is more than remote,but less than probable,that the lawsuit will result in an actual liability.Which of the following actions should be taken by the company's management?

Accepted Answer

A)  Management should consider resigning. 
B)  The situation should be described in a note to the financial statements. 
C)  The liability should be estimated and recorded as an expense. 
D)  The possible liability should be ignored. 
A)  Management should consider resigning. 
B)  The situation should be described in a note to the financial statements. 
C)  The liability should be estimated and recorded as an expense. 
D)  The possible liability should be ignored.

Question 5

An accrued expense is an expense that has been incurred,but has not yet been paid.

Accepted Answer

A) True 
 B)False

Question 6

On 20 June 2016,Parker Services received $2 400 in advance from a customer for one month's service.The journal entry to record the receipt of cash would be which of the following?

Accepted Answer

A)  Debit Cash $2 400 and credit Service revenue $2 400. 
B)  Debit Cash $2 400 and credit Unearned service revenue $2 400. 
C)  Debit Unearned service revenue $2 400 and credit Service revenue $2 400. 
D)  Debit Unearned service revenue $2 400 and credit Cash $2 400. 
A)  Debit Cash $2 400 and credit Service revenue $2 400. 
B)  Debit Cash $2 400 and credit Unearned service revenue $2 400. 
C)  Debit Unearned service revenue $2 400 and credit Service revenue $2 400. 
D)  Debit Unearned service revenue $2 400 and credit Cash $2 400.

Question 7

Which of the following is an amount for products or services purchased on account?

Accepted Answer

A)  Unearned revenue 
B)  Accrued expense 
C)  Accounts payable 
D)  Estimated warranty payable 
A)  Unearned revenue 
B)  Accrued expense 
C)  Accounts payable 
D)  Estimated warranty payable

Question 8

A contingent liability that has a remote possibility of becoming an actual loss is included in a note to the financial statements.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is TRUE of a contingent liability?

Accepted Answer

A)  It is a liability resulting from a lawsuit settled in court. 
B)  It is an actual liability that depends on a past event. 
C)  It is an actual liability that is difficult to estimate. 
D)  It is a potential liability that depends on a future event. 
A)  It is a liability resulting from a lawsuit settled in court. 
B)  It is an actual liability that depends on a past event. 
C)  It is an actual liability that is difficult to estimate. 
D)  It is a potential liability that depends on a future event.

Question 10

Jumbo Sales offers warranties on all their electronic goods.Warranty expense is estimated at 3% of sales revenue.In 2016,Jumbo had $595,000 of sales.In the same year,Jumbo paid out $16,000 of warranty payments.Which of the following is the entry needed to record the estimated warranty expense?

Accepted Answer

A)  $$\begin{array} { | l | l | l | } 
\hline \text { Warranty expense } & \$ 16,000 & \
\hline \begin{array} { l } 
\text { Estimated warranty } \
\text { payable }
\end{array} & & 16,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | l | } 
\hline \text { Warranty expense } & \$ 17,850 & \
\hline \text { Sales revenue } & & 17,850 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Warranty expense } & \$ 17,850 & \
\hline \begin{array} { l } 
\text { Estimated warranty } \
\text { payable }
\end{array} & & 17,850 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | l | } 
\hline \text { Estimated warranty payable } & \$ 16,000 & \
\hline \text { Cash } & & 16,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | l | } 
\hline \text { Warranty expense } & \$ 16,000 & \
\hline \begin{array} { l } 
\text { Estimated warranty } \
\text { payable }
\end{array} & & 16,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | l | } 
\hline \text { Warranty expense } & \$ 17,850 & \
\hline \text { Sales revenue } & & 17,850 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Warranty expense } & \$ 17,850 & \
\hline \begin{array} { l } 
\text { Estimated warranty } \
\text { payable }
\end{array} & & 17,850 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | l | } 
\hline \text { Estimated warranty payable } & \$ 16,000 & \
\hline \text { Cash } & & 16,000 \
\hline
\end{array}$$

Question 11

Estimated warranty payable would be included in the liability section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a control procedure to prevent fictitious persons cashing pay cheques?

Accepted Answer

A)  Requiring photo IDs for employees picking up their pay cheques 
B)  Keeping computerised records of payroll data 
C)  Serial numbering of pay cheques 
D)  Having employees clock in and out of work 
A)  Requiring photo IDs for employees picking up their pay cheques 
B)  Keeping computerised records of payroll data 
C)  Serial numbering of pay cheques 
D)  Having employees clock in and out of work

Question 13

Synergy Appliances sells dishwashers with a four year warranty.In 2016,sales revenue for dishwashers is $97,000.The company estimates warranty expense at 4.5% of revenues.What is the 2016 warranty expense?

Accepted Answer

A)  $0 
B)  $3423.53 
C)  $1091.25 
D)  $4365 
A)  $0 
B)  $3423.53 
C)  $1091.25 
D)  $4365

Question 14

Estimated warranty payable would be included in the operating expense section of the income statement.

Accepted Answer

A) True 
 B)False

Question 15

Unearned revenue is an obligation to provide goods or services to the customer.

Accepted Answer

A) True 
 B)False

Question 16

Rocco worked 46 hours at his job during the first week of March 2016.He is paid $23.00 per hour and receives overtime at the rate of time-and-a-half for hours worked over 40.Rocco pays income taxes at 15% and 5.65% for superannuation and Medicare.All of his income is taxable.What is Rocco's net pay?

Accepted Answer

A)  $766.47 
B)  $957.95 
C)  $758.06 
D)  $894.27 
A)  $766.47 
B)  $957.95 
C)  $758.06 
D)  $894.27

Question 17

Which of the following correctly describes the unearned revenue account?

Accepted Answer

A)  The unearned revenue account represents revenue that has been earned, but not yet collected. 
B)  The unearned revenue account represents revenue that has been collected, but not yet earned. 
C)  The unearned revenue account represents revenue that has neither been earned nor collected. 
D)  The unearned revenue account represents revenue that has been earned and collected. 
A)  The unearned revenue account represents revenue that has been earned, but not yet collected. 
B)  The unearned revenue account represents revenue that has been collected, but not yet earned. 
C)  The unearned revenue account represents revenue that has neither been earned nor collected. 
D)  The unearned revenue account represents revenue that has been earned and collected.

Question 18

Warranties pose an accounting challenge because a company does not know which or how many products will have to be repaired.

Accepted Answer

A) True 
 B)False

Question 19

Bike World offers warranties on all their bikes.They estimate warranty expense at 5% of sales.At the beginning of 2016,the Estimated warranty payable account had a credit balance of $1700.During the year,Bike World had $301,000 of sales,and had to pay out $6000 in warranty payments.At the end of the year,what is the closing balance in the Estimated warranty payable accounts?

Accepted Answer

A)  $10,750 
B)  $13,350 
C)  $7700 
D)  $15,050 
A)  $10,750 
B)  $13,350 
C)  $7700 
D)  $15,050

Question 20

In which of the following periods should the estimated warranty liability be debited?

Accepted Answer

A)  The period when cash is paid to repair or replace the product 
B)  The period when the product is sold 
C)  The period when the product is shipped to the customer 
D)  The period when cash is collected for the sale of the product 
A)  The period when cash is paid to repair or replace the product 
B)  The period when the product is sold 
C)  The period when the product is shipped to the customer 
D)  The period when cash is collected for the sale of the product

Exam 11: Current Liabilities and Payroll

Which of the following is an expense of the employer?

Which of the following occurs when a company records accrued interest expense on a loan payable?

Which of the following principles requires that warranty expense be recorded in the period that revenue is recorded?

An accrued expense is an expense that has been incurred,but has not yet been paid.

On 20 June 2016,Parker Services received $2 400 in advance from a customer for one month's service.The journal entry to record the receipt of cash would be which of the following?

Which of the following is an amount for products or services purchased on account?

A contingent liability that has a remote possibility of becoming an actual loss is included in a note to the financial statements.

Which of the following is TRUE of a contingent liability?

Jumbo Sales offers warranties on all their electronic goods.Warranty expense is estimated at 3% of sales revenue.In 2016,Jumbo had $595,000 of sales.In the same year,Jumbo paid out $16,000 of warranty payments.Which of the following is the entry needed to record the estimated warranty expense?

Estimated warranty payable would be included in the liability section of the balance sheet.

Which of the following is a control procedure to prevent fictitious persons cashing pay cheques?

Synergy Appliances sells dishwashers with a four year warranty.In 2016,sales revenue for dishwashers is $97,000.The company estimates warranty expense at 4.5% of revenues.What is the 2016 warranty expense?

Estimated warranty payable would be included in the operating expense section of the income statement.

Unearned revenue is an obligation to provide goods or services to the customer.

Which of the following correctly describes the unearned revenue account?

Warranties pose an accounting challenge because a company does not know which or how many products will have to be repaired.

In which of the following periods should the estimated warranty liability be debited?

The Role of Accounting in Decision Making

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, plant and Equipment, and Intangibles

Non-Current Liabilities,debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Formation and Shareholders Equity

Companies: Capital Management and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

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