Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

An employee has gross earnings of $600 and withholdings of $45.90 for social security and Medicare taxes and $60 for income taxes.The employer pays $45.90 for social security and Medicare taxes and $4.80 for FUTA.The total cost of this employee to the employer is

Accepted Answer

A)  $650.70. 
B)  $600.00. 
C)  $696.60. 
D)  $604.80. 
A)  $650.70. 
B)  $600.00. 
C)  $696.60. 
D)  $604.80.

Question 3

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 4

During July,Audio City sold 200 radios for $50 each.Each radio had cost Audio City $30 to purchase and carried a two-year warranty.If 5 percent typically need to be replaced over the warranty period and one actually is replaced during July,the entry to record the Product Warranty Expense is:

Accepted Answer

A) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &30\
 \text {  Estimated Product Warranty Liability} &&30\
\end{array}$ 
B) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &150\
 \text { Cash } &&150\
\end{array}$ 
C) 
$\begin{array}{llr}
  \text {Product Warranty Expense  } &300\
 \text { Estimated Product Warranty Liability } &&300\
\end{array}$ 
D) 
$\begin{array}{llr}
  \text {Estimated Product Warranty Liability  } &600\
 \text {Product Warranty Expense  } & &600\
\end{array}$ 
A) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &30\
 \text {  Estimated Product Warranty Liability} &&30\
\end{array}$ 
B) 
$\begin{array}{llr}
  \text { Product Warranty Expense } &150\
 \text { Cash } &&150\
\end{array}$ 
C) 
$\begin{array}{llr}
  \text {Product Warranty Expense  } &300\
 \text { Estimated Product Warranty Liability } &&300\
\end{array}$ 
D) 
$\begin{array}{llr}
  \text {Estimated Product Warranty Liability  } &600\
 \text {Product Warranty Expense  } & &600\
\end{array}$

Question 5

Use this information to answer the following question. $$\begin{array} { | c | c | c | } 
\hline \text { Periods } & \text { Future Value of } \$ 1 \text { at } 12 \text { Percent } & \text { Future Value of Ordinary Annuity of } \
& & 1 \text { at } 12 \text { percent } \
\hline 1 & 1.120 & 1.000 \
\hline 2 & 1.254 & 2.120 \
\hline 3 & 1.405 & 3.374 \
\hline
\end{array}$$ A deposit of $2,700 made at the end of each year for three years would grow to how much?

Accepted Answer

A)  $3,793.50 
B)  $9,109.80 
C)  $8,100.00 
D)  $9,072.00 
A)  $3,793.50 
B)  $9,109.80 
C)  $8,100.00 
D)  $9,072.00

Question 6

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 7

There is no limit to the amount of income subject to the Medicare tax.

Accepted Answer

A) True 
 B)False

Question 8

Payroll Taxes and Benefits Expense includes all of the following except

Accepted Answer

A)  federal income taxes. 
B)  social security taxes. 
C)  Medicare taxes. 
D)  unemployment taxes. 
A)  federal income taxes. 
B)  social security taxes. 
C)  Medicare taxes. 
D)  unemployment taxes.

Question 9

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 10

Wages are compensation of employees at a yearly or monthly rate.

Accepted Answer

A) True 
 B)False

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

Question 12

Compound interest is computed quarterly on $700 for seven years at 12 percent annual interest.The future value table is used by multiplying the $700 by which factor?

Accepted Answer

A)  28 periods at 3 percent 
B)  7 periods at 3 percent 
C)  7 periods at 12 percent 
D)  28 periods at 7 percent 
A)  28 periods at 3 percent 
B)  7 periods at 3 percent 
C)  7 periods at 12 percent 
D)  28 periods at 7 percent

Question 13

Which of the following typically would not be done to satisfy a current liability?

Accepted Answer

A)  Use long-term assets to satisfy the liability 
B)  Render a service to satisfy the liability 
C)  Use current assets to satisfy the liability 
D)  Take on another current liability to satisfy the liability 
A)  Use long-term assets to satisfy the liability 
B)  Render a service to satisfy the liability 
C)  Use current assets to satisfy the liability 
D)  Take on another current liability to satisfy the liability

Question 14

Potential vacation pay should be accounted for as a commitment.

Accepted Answer

A) True 
 B)False

Question 15

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.
$\begin{array}{lrlr}
\text { Gross payroll } & \$ 16,000 & \text { Federal income taxes withheld } & \$ 1,800 \
\text { Social security and Medicare rate } & 7.65 \% & \text { Federal unemployment tax rate } & .8 \%\
\text { State unemployment tax rate}&5.4\%
\end{array}$ Salaries Payable would be recorded for

Accepted Answer

A)  $12,976. 
B)  $10,760. 
C)  $14,200. 
D)  $11,984. 
A)  $12,976. 
B)  $10,760. 
C)  $14,200. 
D)  $11,984.

Question 16

A company purchases an asset on a deferred payment plan,ultimately paying $10,000.On the payment date,the company would

Accepted Answer

A)  credit Cash for less than $10,000. 
B)  debit Interest Expense for the imputed amount. 
C)  debit the asset account for $10,000. 
D)  debit Accounts Payable for $10,000. 
A)  credit Cash for less than $10,000. 
B)  debit Interest Expense for the imputed amount. 
C)  debit the asset account for $10,000. 
D)  debit Accounts Payable for $10,000.

Question 17

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 18

A liability is recognized when

Accepted Answer

A)  the exact due date is known. 
B)  it is paid for. 
C)  an obligation has arisen. 
D)  the exact amount of the liability is known. 
A)  the exact due date is known. 
B)  it is paid for. 
C)  an obligation has arisen. 
D)  the exact amount of the liability is known.

Question 19

Use this information to answer the following question. $$\begin{array} { | c | c | c | } 
\hline \text { Periods } & \text { Present Value of } \$ 1 \text { at } 7 \text { Percent } & \text { Present Value of Ordinary Annuty of } \
&& \$ 1 \text { at } 7 \text { Percent } \
1 & 0.935 & 0.935\
\hline 2 & 0.873 & 1.808\
\hline 3 & 0.816 & 2.624 \
\hline
\end{array}$$  If $100 is invested,how much will it grow to at the end of the three years?

Accepted Answer

A)  $100 $\times$ .935 $\times$ 3 
B)  $100 ÷ .816 
C)  ($100 ÷ 2.624) $\times$ 3 
D)  $100 $\times$ 2.624 
A)  $100 $\times$ .935 $\times$ 3 
B)  $100 ÷ .816 
C)  ($100 ÷ 2.624) $\times$ 3 
D)  $100 $\times$ 2.624

Question 20

To find the days' payable,

Accepted Answer

A)  divide 365 by the payables turnover. 
B)  multiply the payables turnover by 365. 
C)  divide the payables turnover by 365. 
D)  subtract 365 from the payables turnover. 
A)  divide 365 by the payables turnover. 
B)  multiply the payables turnover by 365. 
C)  divide the payables turnover by 365. 
D)  subtract 365 from the payables turnover.

Exam 8: Current Liabilities and Fair Value Accounting

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

An employee has gross earnings of $600 and withholdings of $45.90 for social security and Medicare taxes and $60 for income taxes.The employer pays $45.90 for social security and Medicare taxes and $4.80 for FUTA.The total cost of this employee to the employer is

During July,Audio City sold 200 radios for $50 each.Each radio had cost Audio City $30 to purchase and carried a two-year warranty.If 5 percent typically need to be replaced over the warranty period and one actually is replaced during July,the entry to record the Product Warranty Expense is:

Use this information to answer the following question. Periods Future Value of \ 1 at 12 Percent Future Value of Ordinary Annuity of 1 at 12 percent 1 1.120 1.000 2 1.254 2.120 3 1.405 3.374 A deposit of $2,700 made at the end of each year for three years would grow to how much?

Which of the following is an example of a commitment?

There is no limit to the amount of income subject to the Medicare tax.

Payroll Taxes and Benefits Expense includes all of the following except

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

Wages are compensation of employees at a yearly or monthly rate.

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:

Compound interest is computed quarterly on $700 for seven years at 12 percent annual interest.The future value table is used by multiplying the $700 by which factor?

Which of the following typically would not be done to satisfy a current liability?

Potential vacation pay should be accounted for as a commitment.

A company purchases an asset on a deferred payment plan,ultimately paying $10,000.On the payment date,the company would

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

A liability is recognized when

Use this information to answer the following question. Periods Present Value of \ 1 at 7 Percent Present Value of Ordinary Annuty of \ 1 at 7 Percent 1 0.935 0.935 2 0.873 1.808 3 0.816 2.624 If $100 is invested,how much will it grow to at the end of the three years?

To find the days' payable,

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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