Short question on fundamental accounting.
1. Current liabilities are obligations that will be paid:
a. With cash.
b. Within one year.
c. Within one year or the operating cycle, whichever is shorter.
d. Within one year or the operating cycle, whichever is longer.
e. Both (a) and (b).
2. Upscale Department Stores records all sales at amounts that include a 5% sales tax. During November, total recorded sales were $735,000. The portion of these sales that should be recorded as a tax liability is:
a. $0
b. $35,000
c. $36,750
d. $70,000
3. The account Discount on Notes Payable:
a. Usually has a credit balance and is added to the Notes Payable account on the balance sheet.
b. Is used only when a note has a stated interest rate.
c. Contains future interest expense that will be incurred over the life of a note.
d. Contains an amount to be amortized over the life of a note by a transfer to Interest Revenue.
e. Is classified as a current asset.
4. On November 1, Tango, Inc., purchased a machine for $12.000 and issued inpayment a one-year note payable for $13.200. On December 31, the company's fiscal year-end, the proper entry would be:
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a
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Interest Expense
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200
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Discount on Notes Payable
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200
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b
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Machinery
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200
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Interest Expense
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200
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c
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Discount on Notes Payable
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200
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Interest expense
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200
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d
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Notes Payable
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200
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Discount on Notes Payable
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200
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5. Sales taxes payable:
a. Is an estimated liability.
b. Is a contingent liability.
c. Is a current liability for retailers.
d. Is a business expense.
e. Is a long-term liability.
6. Unearned revenue is initially recognized with a:
a. Credit to unearned revenue.
b. Credit to revenue.
c. Debit to revenue payable.
d. Debit to revenue.
e. Debit to unearned revenue.
7. On December 1, 20X4, a company issued a $100,000, 12%, 6 month note payable to a bank to borrow $100,000 needed for operating activities. On December 31, 20X4 the following adjusting entry was made by the company:
Interest Expense 1,000
Interest Payable 1,000
The maturity value of the note will be:
a. $100,000
b. $106,000
c. $112,000
d. Some other amount.
8. Friday Company is being sued for $200,000. Company attorneys have concluded that the chance of losing the case is remote and there is only a 10% chance the plaintiff will be successful. In the financial statements prepared at the end of the current year Friday should:
a. Accrue $200,000 as a liability.
b. Do NOT accrue $200,000 as a liability but disclose the circumstances of the case in footnotes.
c. Do NOT accrue $200,000 nor footnote the circumstances of the case in footnotes.
d. Accrue $20,000 as a liability.
9. Greg Seller earns $30,000 as a salesperson for Green Valley Company. Assume that the Combined PICA rate is 7.5% on a base of $45,000, that $4,000 was withheld for federal and state income taxes, and the combined FUTA/SUTA rate is 6% of the first $7,000 paid to an employee. The total cost of keeping Greg on the payroll is:
a. $30,000
b. $32,250
c. $32,670
d. $36,670
e. None of the above.
10. Dyson Company began operations on January 1 and had sales during the year of $1,500,000. The company estimates that warranty obligations will amount to 1% of sales. Prior to year-end, $9,500 had been expended to repair items covered under warranty agreements. What amounts should Dyson disclose in the financial statements with regard to its warranty experience?
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Income Statement
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Balance Sheet
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a.
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$15,000
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$5,500
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b.
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$9,500
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$5,500
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c.
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$9,500
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$15,000
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d.
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$15,000
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$9,500
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e.
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None of the above.
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