Accounting Quiz 9

Madison Company issued an interest-bearing note payable with a face value of $25,800 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term. Based on this information alone, what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows? $2,064 $860 $25,800 $0

$0

On September 1, Year 1, West Company borrowed $56,000 from Valley Bank. West agreed to pay interest annually at the rate of 6% per year. The note issued by West carried an 18-month term. West Company has a calendar year-end. What is the amount of interest expense that will be reported on West's income statement for Year 1? $0 $1,120 $336 $840

$1,120

On September 1, Year 1, West Company borrowed $10,000 from Valley Bank. West agreed to pay interest annually at the rate of 6% per year. The note issued by West carried an 18-month term. West Company has a calendar year-end. What is the amount of interest expense that will be reported on West's income statement for Year 1? $-0- $150 $60 $200

$200

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000. What is the company's current ratio? 0.69 to 1 1.44 to 1 1.16 to 1 3.26 to 1

1.44 to 1

Which of the following describes the effect of remitting the sales tax to the tax authority? Decreases liabilities. A claims exchange transaction. Decreases stockholders' equity. All of these answer choices are correct.

Decreases liabilities.

Which of the following is not an item deducted from salary expense to arrive at net pay? FICA tax for Social Security FICA tax for Medicare Federal unemployment tax These answer choices are all deducted from salary expense to arrive at net pay

Federal unemployment tax

Which of the following items would most likely not be classified as a current asset? Office equipment Merchandise inventory Office supplies Prepaid rent

Office equipment

Under what condition should a pending lawsuit be recognized as a liability on a company's balance sheet? The amount can be reasonably estimated. The outcome is probable. The outcome is reasonably possible. The outcome is probable and can be reasonably estimated.

The outcome is probable and can be reasonably estimated.

All lawsuits in which a company has been named a defendant should be either disclosed in the company's notes to the financial statements, or recognized as a liability on its balance sheet.

false

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

false

Vogel Company purchased $8,000 of equipment by making a $500 down payment and issuing a note for the remainder. As a result of this event, assets increased by $8,000.

false

Employers must withhold unemployment taxes from employee salaries.

true

When calculating interest expense on a 6-month note, multiply the principal by the interest rate, and then multiply by (6 ÷ 12)

true

Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term. Based on this information alone, what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows? $1,920 $800 $24,000 $-0-

$-0-