Chapter 13 Quizzes (All MC options)

Roxy Co., which has a taxable payroll of $600,000, is subject to FUTA tax of 6.2% and a state contribution rate of 5.4%. However, because of stable employment experience, the company's state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Roxy Co.? a. $16,800 b. $24,000 c. $70,200 d. $49,200

a. $16,800

A company has not declared a dividend on its cumulative preferred stock for the past three years. What is the required accounting treatment or disclosure in this situation? a. Disclose the amount of the dividends in arrears. b. No disclosure or recognition is required. c. Record a liability for cumulative amount of preferred stock dividends not declared. d. Record a liability for the current year's dividends only.

a. Disclose the amount of the dividends in arrears.

Why is the liability section of the balance sheet of primary importance to bankers? a. To assist in understanding the entity's liquidity. b. To better understand sources of repayment. c. To evaluate the entity's credit quality. d. To evaluate operating efficiency.

a. To assist in understanding the entity's liquidity.

Under IFRS, short-term obligations expected to be refinanced can be classified as noncurrent if the refinancing is completed: a. by the financial reporting date. b. by issue date of the financial statement. c. either by the financial statement date or before the date the financial statement is issued. d. after the maturity date of the obligation.

a. by the financial reporting date.

Darren Company becomes aware of a lawsuit after the date of the financial statements, but before they are issued. A loss and related liability should be reported in the financial statements if the amount can be reasonably estimated, an unfavorable outcome is highly probable, and a. the cause for action occurred during the accounting period covered by the financial statements. b. the Darren Company admits guilt. c. the court will decide the case within one year. d. the damages appear to be material.

a. the cause for action occurred during the accounting period covered by the financial statements.

On September 1, 2014, Halley Co. issued a note payable to Fidelity Bank in the amount of $1,800,000, bearing interest at 10%, and payable in three equal annual principal payments of $600,000. On this date, the bank's prime rate was 11%. The first payment for interest and principal was made on September 1, 2015. At December 31, 2015, Halley should record accrued interest payable of a. $60,000. b. $40,000. c. $66,000. d. $132,000.

b. $40,000.

Muggs Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Muggs $3 each. Muggs estimates that 45 percent of the coupons will be redeemed. Data for 2014 and 2015 are as follows: 2014 2015 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 The premium liability at December 31, 2015 is a. $45,000. b. $84,375. c. $39,375. d. $22,500.

b. $84,375.

Which of the following is the proper way to report a gain contingency? a. As deferred revenue. b. As a disclosure only. c. As an account receivable with additional disclosure explaining the nature of the contingency. d. As an accrued amount.

b. As a disclosure only.

Qualpoint provides its employees two weeks of paid vacation per year. As of December 31, 65 employees have earned two weeks of vacation time to be taken the following year. If the average weekly salary for these employees is $1,140, what is the required journal entry? a. Debit Salaries and Wages Expense for $74,100 and credit Salaries and Wages Payable for $74,100. b. Debit Salaries and Wages Expense for $148,200 and credit Salaries and Wages Payable for $148,200. c. No journal entry required. d. Debit Salaries and Wages Payable for $147,600 and credit Salaries and Wages Expense for $147,600.

b. Debit Salaries and Wages Expense for $148,200 and credit Salaries and Wages Payable for $148,200.

A company buys an oil rig for $3,000,000 on January 1, 2014. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $600,000 (present value at 10% is $231,330). 10% is an appropriate interest rate for this company. What expense should be recorded for 2014 as a result of these events? a. Depreciation expense of $360,000 b. Depreciation expense of $323,133 and interest expense of $23,133 c. Depreciation expense of $300,000 and interest expense of $23,133 d. Depreciation expense of $300,000 and interest expense of $60,000

b. Depreciation expense of $323,133 and interest expense of $23,133

Which of the following taxes does not represent a common employee payroll deduction a. Federal income taxes. b. State unemployment taxes. c. FICA taxes. d. State income taxes.

b. State unemployment taxes.

When is a contingent liability recorded? a. When the future events are probable to occur. b. When the future events are probable to occur and the amount can be reasonably estimated. c. When the future events will possibly occur and the amount can be reasonably estimated. d. When the amount can be reasonably estimated.

b. When the future events are probable to occur and the amount can be reasonably estimated.

Under IFRS, a provision is the same as: a. a contingent liability. b. an estimated liability. c. a contingent gain. d. None of the above.

b. an estimated liability.

The numerator of the acid-test ratio consists of a. cash inventory and marketable securities. b. cash, marketable securities, and net receivables. c. cash inventory and net receivables. d. total current assets.

b. cash, marketable securities, and net receivables.

Elmer Corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities? a. $1,800,000 b. $0 c. $1,000,000 d. $800,000

c. $1,000,000

Which of these is not included in an employer's payroll tax expense? a. State unemployment taxes b. F.I.C.A. (social security) taxes c. Federal income taxes d. Federal unemployment taxes

c. Federal income taxes

Which of the following is not a correct statement about sales taxes? a. If sales taxes are included in the sales account, the first step to find the amount of sales taxes is to divide sales by 1 plus the sales tax rate. b. Sales Taxes Payable is classified as a current liability. c. Sales taxes are an expense of the seller. d.Many companies record sales taxes in the sales account.

c. Sales taxes are an expense of the seller.

What is a discount as it relates to zero-interest-bearing notes payable? a. The discount represents the lender's costs to underwrite the note. b. The discount represents the credit quality of the borrower. c. The discount represents the cost of borrowing. d. The discount represents the allowance for uncollectible amounts.

c. The discount represents the cost of borrowing.

Which of the following should not be included in the current liabilities section of the balance sheet? a. Trade notes payable b. Short-term zero-interest-bearing notes payable c. The discount on short-term notes payable d. All of these are included

d. All of these are included

To record an asset retirement obligation (ARO), the cost associated with the ARO is a. included in a separate account. b. expensed. c. capitalized over the asset's useful life. d. included in the carrying amount of the related long-lived asset.

d. included in the carrying amount of the related long-lived asset.