Ch. 9

Which of the following represent reasonably possible contingent liabilities?

potential legal claims debt guarantees

The ___________, of a note is the amount that the signer of a note agrees to pay back when it matures, not including interest.

principal

A written promise to pay a specified amount on a stated future date within one year or the company's operating cycle, whichever is longer, is considered a __________.

short-term note payable

Cadie Construction Co. signed a note promising to pay a cement supplier $1,000 60-days from now. As a result of this transaction, Cadie would record a(n) ________ on her balance sheet.

short-term note payable

Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense is

1500

Spot Co. purchases office supplies from Sally Supplies, Inc.. Spot does not pay cash for the purchase, and now owes the amount to Sally. This transaction would typically be recorded in which account in Spot's books?

Accounts Payable

On March 1, Young Co. borrowed $1,000 by extending their past-due account payable with a 120-day, 6% interest-bearing note. On June 29, the due date, Young pays the amount due in full. This entry would be recorded by Young with a credit to _____ in the amount of ______.

Cash; $1,020

A ________ is a probable future payment of assets or services that ta company is presently obligated to make as a result of past transactions or events.

Liability

Bushra Co. replaced a $1,000 account payable balance to Elin Co. with a 120-day, $1,000 note bearing 8% annual interest. Bushra's entry to record this transaction would include a credit to which account?

Notes Recievable

Which of the following contingent liabilities would require a company to record a note to the financial statements?

The liability is possible and is estimated to be $35,000. The liability is possible and cannot be reasonably estimated. The liability is probable and cannot be reasonably estimated.

A liability created by buying goods or services on credit is typically recorded to __________ ____________

accounts payable

Niwa Co. replaced a $3,000 account payable balance to Fiona Co. with a 60-day, $3,000 note bearing 5% annual interest. Niwa's entry to record this transaction would include which of the following entries?

Debit to Accounts Payable Credit to Notes Payable

Simar Sales Co. sells and installs kitchen appliances. Simar guarantees parts and labor for one year after installation. Simar would record potential claims in a(n) _______ account.

Estimated Warranty Liability

Bushra Co. replaced a $1,000 account payable balance to Elin Co. with a 120-day, $1,000 note bearing 8% annual interest. Bushra's entry to record this transaction would include a credit to which account?

Notes Payable

When a company guarantees the payment of debt owed by a supplier, customer or another company, the guarantor usually discloses the guarantee as a _______ liability.

contingent

On June 1, Sawyer Co. borrowed $5,000 by extending their past-due account payable with a 45-day, 12% interest-bearing note. On July 16, the due date, Sawyer pays the amount due in full. Sawyer would record this payment with a (debit/credit) _______ to Interest Expense in the amount of _______.

debit; $75

A known obligation of an uncertain amount that can be reasonably estimated is called a(n) ______ liability.

estimated

A measurable obligation arising from agreements, contracts or laws is called a ______ liability

known

Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals _____ pay.

net, or take-home

Employee income tax depends on:

number of employee withholding allowances employee's income

The ratio of income before interest expense (and any income taxes) divided by interest expense reflects the risk of a company not being able to pay fixed expenses if sales decline is called the ____________ ratio.

times interest earned