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Exam 9: Accounting for Current Liabilities and Payroll

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Question 1

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How is the carrying value of a discount note payable computed?

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Face amount of the n...

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Question 2

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Chenowith Company paid Jason Hewitt for work he performed as an independent contractor. The work had not been previously accrued.

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(D) (N) (D) (N) (I) (D) (D)
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How is the current ratio calculated, and what is its significance in the Analyze of financial statement information?

What factor distinguishes an employee from an independent contractor?

Indicate whether each of the following statements is true or false. _____ a) An eight month, 6% note for $20,000 will require the issuer to pay $1,200 in interest. _____ b) Interest expense is not considered an operating expense on the income statement. _____ c) Payment of interest is considered an operating activity on the statement of cash flows. _____ d) Payment of interest on a one-year note due on March 1 will include a reduction in liabilities. _____ e) The adjusting entry to recognize interest expense is an asset use transaction.

Gilson Company pays Matt Sawyer a salary of $2,000 per week. How much FICA tax must Gilson pay on Matt's behalf, including both the employee and employer portions?

Indicate whether each of the following statements is true or false. _____ a) The extension of a warranty on goods sold normally represents a legal liability to the seller. _____ b) The entry to recognize the warranty obligation increases the Warranties Payable account and the Warranties Expense account. _____ c) The entry to record the repairs provided to customers under the terms of product warranties increase Warranties Expense and decrease the Warranties Payable account. _____ d) Net income is not affected by the entry to record the completion of warranty work. _____ e) Total assets are not affected by the end-of-period entry to record the warranty obligation.

Choose the correct answer to complete the following: Discount notes....

Sales tax is reported as revenue when it is collected, and reported as an expense when it is paid.

Wilson Company issued a $33,000, 8% note payable, with a one year term on September 1, 2012. What amount of interest expense will be recognized on the income statement for 2012? 2013?

Receivables are normally reported on the balance sheet at net realizable value. In contrast, payables are carried at face value. Which accounting principle requires this treatment of payables?

What type of account is Discount on Notes Payable?

At the beginning of 2013, MacKenzie, Inc. had a balance in the Warranty Payable account of $5,600. During the year MacKenzie sold for $250,000 several products that carried a two-year warranty. MacKenzie estimated that warranty expense would be 6% of sales for the year. a) Prepare MacKenzie's year-end adjusting journal entry for warranty expense. b) If MacKenzie's incurred actual warranty cost is $11,500 during 2013, what is the balance in the Warranties Payable account after the adjusting entry is made?

The term used to describe the ability to generate short-term cash flows is:

Chenowith Company paid salary expense for employees who are subject to tax withholding. The salaries had not been previously accrued.

Creditors are primary users of financial statements. What ratio based on a classified balance sheet can be used by creditors to evaluate a company's liquidity? How is this ratio calculated?

Kirk Co. sells goods to customers with a three-year warranty. During 2012, Kirk sold $500,000 of goods. On December 31, 2012, Kirk made the appropriate year-end adjustment to record the warranty expense related to the goods sold during the year. During 2013, Kirk paid $400 cash to satisfy warranty claims. Show the effects of the 2013 payments to satisfy warranty claims.

After accruing all interest expense due as of April 1, 2013, Bowers Company made the cash payment for the full amount due (i.e., principal and interest) to Mid-Rivers Bank. Select the answer that shows how the cash payment will affect Bowers' financial statements.

On October 1, 2012, Kissimmee Co. issued a one-year discount note with a face value of $50,000 and interest of 8% to the Sunshine Bank and received cash in the amount of $46,000.

Payment of interest on a note payable is considered a financing activity on the statement of cash flows.