Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

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) 
$\begin{array}{llr}
  \text {Interest Income  } &75\
 \text {  Cash} &&75\
\end{array}$ 
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) 
$\begin{array}{llr}
  \text {Interest Income  } &75\
 \text {  Cash} &&75\
\end{array}$ 
D) 
$\begin{array}{llr}
  \text {  Cash} &75\
 \text { Interest Receivable } &&75\
\end{array}$

Question 4

Payables turnover is measured in number of days.

Accepted Answer

A) True 
 B)False

Question 5

The federal and state unemployment tax rates are identical.

Accepted Answer

A) True 
 B)False

Question 6

Explain why the cost of employing someone is more than just the wage or salary paid to the employee.

Accepted Answer

The cost of employing an individual incl

Question 7

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 8

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

Question 9

The theoretical value of an asset is the present value of the expected benefits.

Accepted Answer

A) True 
 B)False

Question 10

Because failure to record a liability generally leads to failure to record an expense,it usually results in an overstatement of income.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Jim Janney is paid $6 per hour,plus double-time for hours worked on weekends.During the two-week period ending February 5,Janney worked 70 hours on weekdays and 8 hours on weekends.Social security taxes are 6.2 percent,Medicare taxes are 1.45 percent,$65 is withheld for federal taxes,$18 is withheld for state income taxes,and $24 is withheld for charities.In addition,Janney's employer must pay social security taxes of 6.2 percent,Medicare taxes of 1.45 percent,federal unemployment taxes of .8 percent,and state unemployment taxes of 5.4 percent.Calculate (a)Janney's gross earnings,(b)Janney's net pay,(c)the employer's payroll taxes expense,and (d)the total cost of employing Janney for the two-week period.Round all amounts to the nearest penny.

Accepted Answer

a.$516.00 [(70 @#LAT-DLM& $6)+ (8 @#LAT-DLM& $12)]

Question 13

A customer is injured using a company's product.The potential liability that may result is called a(n)

Accepted Answer

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

Question 14

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

Question 15

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 16

Which of the following does not represent a liability?

Accepted Answer

A)  An obligation for estimated income taxes payable 
B)  Interest that has accrued on a bank loan 
C)  An obligation to pay for goods purchased, payable one year after purchase 
D)  An obligation for future purchases of goods 
A)  An obligation for estimated income taxes payable 
B)  Interest that has accrued on a bank loan 
C)  An obligation to pay for goods purchased, payable one year after purchase 
D)  An obligation for future purchases of goods

Question 17

Which of the following is a tax borne by the employer but not the employee?

Accepted Answer

A)  State income tax 
B)  FUTA tax 
C)  Medicare tax 
D)  Social security tax 
A)  State income tax 
B)  FUTA tax 
C)  Medicare tax 
D)  Social security tax

Question 18

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 19

Which of the following is both an estimated liability and a contingent liability?

Accepted Answer

A)  Co signature on $500 loan 
B)  Current portion of long-term debt 
C)  Warranty liability 
D)  Liability for dividends 
A)  Co signature on $500 loan 
B)  Current portion of long-term debt 
C)  Warranty liability 
D)  Liability for dividends

Question 20

Under what circumstances is a contingent liability reflected in the accounting records as though an actual liability exists?

Accepted Answer

For a contingent liability to be reflect

Exam 8: Current Liabilities and Fair Value Accounting

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

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

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:

Payables turnover is measured in number of days.

The federal and state unemployment tax rates are identical.

Explain why the cost of employing someone is more than just the wage or salary paid to the employee.

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.

The theoretical value of an asset is the present value of the expected benefits.

Because failure to record a liability generally leads to failure to record an expense,it usually results in an overstatement of income.

Sales Tax Payable is an example of a(n)

A customer is injured using a company's product.The potential liability that may result is called a(n)

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

Which of the following does not represent a liability?

Which of the following is a tax borne by the employer but not the employee?

Which of the following is both an estimated liability and a contingent liability?

Under what circumstances is a contingent liability reflected in the accounting records as though an actual liability exists?

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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