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Exam 9: Reporting and Interpreting Liabilities

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Question 21

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Phipps Company borrowed $25,000 cash on October 1,2019,and signed a nine-month,8% interest-bearing note payable with interest payable at maturity.The amount of interest expense to be reported during 2020 is which of the following?

A) $1,000.
B) $300.
C) $500.
D) $750.

E) A) and C)
F) None of the above

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Question 22

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SRJ Corporation entered into the following transactions: • The accrual of interest expense on a six-month note payable. • Collected cash for services to be provided within the next six months. • The reclassification of short-term debt to long-term debt. - Which of the transactions for SRJ Corporation resulted in an increase in working capital?

A) The accrual of interest expense.
B) Collecting cash for services to be provided in the future.
C) The reclassification of short-term debt to long-term debt.
D) Both the reclassification of short-term debt to long-term debt and the collection of cash for future services.

E) None of the above
F) C) and D)

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Question 23

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The following data were provided by the detailed payroll records of Mountain Corporation for the last week of March 2019,which will not be paid until April 5,2019: FICA taxes at a 7.65% rate (no employee had reached the maximum). A.Prepare the March 31,2019 journal entry to record the payroll and the related employee deductions. B.Prepare the March 31,2019 journal entry to record the employer's FICA payroll tax expense. C.Calculate the total payroll-related liabilities at March 31,2019 using the results of requirements (A)and (B).

On April 1,2019,Wolf Company borrowed $5,000 on an 8% note payable.The maturity date of the note (and payment of all interest)is July 1,2020.The accounting period ends December 31.Assume no adjusting entries are made during the year. Prepare the journal entry for each of the following dates: A.April 1,2019. B.December 31,2019. C.July 1,2020.

The FICA (social security)tax is a matching tax with a portion paid by both the employer and the employee.

With regard to reporting contingent liabilities on a balance sheet,financial statements prepared under International Financial Reporting Standards (IFRS) will:

For the present value of a single amount,only one compounding period per year is permitted.

The following is a partial list of account balances for Coen,Inc.as of December 31,2019 Prepare the liabilities section of Coen Inc.'s classified balance sheet for December 31,2019.

An annuity is a series of consecutive and unequal payments over time.

Houston Company is involved in a lawsuit.In which of the following situations is only a note disclosure of the contingent liability reported within the financial statements?

Rae Company purchased a new vehicle by paying $10,000 cash on the purchase date and agreeing to pay $3,000 every three months during the next five years.The first payment is due three months after the purchase date.Rae's incremental borrowing rate is 12%.(FV of $1,PV of $1,FVA of $1,and PVA of $1) (Use the appropriate factor(s) from the tables provided. ) - The liability reported on the balance sheet as of the purchase date,after the initial $10,000 payment was made,is closest to:

Rusty Corporation purchased a rust-inhibiting machine by paying $50,000 cash on the purchase date and agreeing to pay $10,000 every three months during the next two years.The first payment is due three months after the purchase date.Rusty's incremental borrowing rate is 8%.(FV of $1,PV of $1,FVA of $1,and PVA of $1) (Use the appropriate factor(s) from the tables provided. ) -The liability reported on the balance sheet as of the purchase date,after the initial $50,000 payment was made,is closest to:

Operating leases are reported on the balance sheet at an amount equal to the present value of the future cash flows.

Thomas Company borrowed $30,000 on March 1,2019.Thomas signed a 2-year 6% interest-bearing note.What is the adjustment amount to accrue interest on December 31,2020?

The accounts payable turnover ratio is calculated by dividing accounts payable by cash payments to suppliers.

Phipps Company borrowed $25,000 cash on October 1,2019,and signed a nine-month,8% interest-bearing note payable with interest payable at maturity.Assuming that adjusting entries have not been made during the year,the amount of accrued interest payable to be reported on the December 31,2019 balance sheet is which of the following?

Which of the following describes an accrued liability?

Wages expense is an example of an accrued liability account.

Which of the following statements incorrectly describes the accounts payable turnover ratio?

When a liability is initially recorded,it is recorded at the future amount of all payments.