chapter 11 smartbook

Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense for one year is? -$750 -$15,000 -$1,500 -$150

$1,500

Damien Co. has $10,000 of unearned revenues on its balance sheet. Damien expects that it will earn $8,000 of these revenues in the upcoming twelve months. How much will be recorded in Long-Term Liabilities? -$2,000 -$10,000 -$8,000 -$18,000

$2,000

Winn Co. signs a 60 day note payable for a $15,000 copy machine with an interest rate of 8%. Winn will record total interest expense of -$15,000 -$1,200 -$15,200 -$200

$200

On December 1, Hansen Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen will record an adjusting entry by debiting interest expense in the amount of ______. -$4,500 -$6,000 -$1,500 -$500

$500

Victor's Vacuum Sales Co. sells high quality vacuums and provides a one-year warranty on all new sales. Based on history, Victor anticipates that 3% of vacuums will be returned at a cost of $30 per vacuum. During the month, Victor sold 100 vacuums for a total of $35,000. At the end of the month, Victor will record ______ in Warranty Expense. -$0 -$1,050 -$3 -$90

$90

Jorge Lopez worked 40 hours this week and earned $1,000 in total compensation. Federal and state taxes and other withholdings totaled $350. Jorge's gross pay totals $_____.

1,000

Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio. -7.5 -0.13 -10 -0.10

10

On November 1, Wright Co. borrowed $20,000 cash from Third Bank by signing a 90-day, 6% interest-bearing note. On December 31, Wright recorded an adjusting entry to interest expense of $200. On January 30, the due date of the note, Wright will record the payment with a debit to Interest Expense in the amount of $_____.

100

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest note. On April 8, Lee Co. will pay National Bank a total of $101,500. Principal on the note totals $_____.

100,000

On July 1, Scene Co. borrowed $15,000 cash from First Bank by signing a 30-day, 5% interest-bearing note. Scene will record this entry with a credit to Notes Payable in the amount of $_____.

15,000

Trighton's Trailer Co. sells trailers and provides a one-year warranty on all new trailer sales. Based on history, Trighton anticipates that 2% of trailers will be returned and will have a warranty cost of $100 per trailer. During the month, Victor sold 300 trailers for a total of $255,000. At the end of the month, Trighton will record $______ in warranty expense.

600

Jorge Lopez worked 40 hours this week and earned $1,000. Federal and state taxes, and other withholdings totaled $350. Jorge's net pay totals $_____.

650

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? -Wages Payable -Accounts Receivable -Accounts Payable -Unearned Fees

Accounts Payable

On December 31, Lazo Co. offers a bonus to its employees of $100,000 to be paid in January of the following year. The December 31 journal entry will require a credit to the ______ account in the amount of ______. -Cash; $100,000 -Salaries and Wages Expense; $100,000 -Bonus Payable; $100,000 -Bonus Expense; $100,000

Bonus Payable; $100,000

On March 1, Young Co. borrowed $1,000 cash from Superior Bank by signing a 120-day, 6% interest-bearing note. On June 29, Young pays the amount due in full. This entry would be recorded by Young with a credit to ______ in the amount of ______. -Notes Payable $1,000 -Cash; $1,060 -Notes Payable; $1,020 -Cash; $1,000 -Cash; $1,020 -Notes Payable; $1,060

Cash; $1,020

Zilo Co. has accrued employee salary expense of $1,000 which includes employee withholdings that total $300. On payday, Zilo will record the payment with which of the following entries? -Credit to Cash for $1,000. -Credit to Cash for $1,300. -Credit to Cash for $700. -Debit to Salaries Expense for $1,000. -Debit to Salaries Payable for $700.

Credit to Cash for $700. Debit to Salaries Payable for $700.

Perez Co. sells automotive supplies and warranties them for a three-month period. Perez sold $10,000 of supplies during the month and anticipates that warranty repairs for these sales will total $250. The adjusting entry that Perez will make to record the warranty expense will include which of the following? -Debit to Estimated Warranty Liability -Credit to Cash -Credit to Estimated Warranty Liability -Credit to Warranty Expense -Debit to Warranty Expense -Debit to Cash

Credit to Estimated Warranty Liability Debit to Warranty Expense

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? -Credit to Accounts Payable -Credit to Notes Payable -Credit to Cash -Debit to Notes Payable -Debit to Accounts Payable -Debit to Cash

Credit to Notes Payable Debit to Accounts Payable

John Grey owns Grey's Snow Plowing. In October, he collects $12,000 cash for 6 commercial accounts for which he will provide snowplowing for the next three months. John recorded the cash collection as an unearned revenue. To record the adjusting entry in November, when $4,000 has been earned, Grey will enter which of the following entries? -Credit to Unearned Plowing Revenue -Debit to Plowing Revenue Earned -Credit to Plowing Revenue Earned -Credit to Cash -Debit to Cash -Debit to Unearned Plowing Revenue

Credit to Plowing Revenue Earned Debit to Unearned Plowing Revenue

Fortiz Co. receives $85 for the sale of merchandise with a sales price of $80 and sales tax of $5. The entry to record the $5 sales tax would require which of the following? -Credit to Sales Tax Expense -Debit to Sales Tax Revenue -Debit to Sales Tax Expense -Debit to Sales Tax Payable -Credit to Sales Tax Revenue -Credit to Sales Tax Payable

Credit to Sales Tax Payable

Patel Paving collected $1,000 cash in advance from a customer to provide paving services next month. The entry to record this cash receipt would include the following entries? -Debit to Unearned Paving Fees -Credit to Cash -Debit to Paving Fees Earned -Credit to Unearned Paving Fees -Credit to Paving Fees Earned -Debit to Cash

Credit to Unearned Paving Fees Debit to Cash

John Grey owns Grey's Snow Plowing. In October, Grey's collects $12,000 cash for 6 commercial accounts for which he will provide snowplowing for the entire season. To record this transaction, Grey will enter which of the following entries? -Credit to Cash -Credit to Plowing Revenue -Debit to Plowing Revenue -Debit to Cash -Debit to Unearned Plowing Revenue -Credit to Unearned Plowing Revenue

Debit to Cash Credit to Unearned Plowing Revenue

Lyon Co. collected $1,200 in sales tax from customers during the month of March. In April, Lyon sent the $1,200 sales tax to the state government. The entry to record payment to the state would include which of the following? -Debit to Sales Tax Payable -Credit to Sales Tax Payable -Debit to Cash -Debit to Sales Tax Expense -Credit to Sales Tax Expense -Credit to Cash

Debit to Sales Tax Payable Credit to Cash

Vance Co. allows employees to take a two week vacation each year. To account for the two weeks off each year, Dante will record an adjusting entry to which of the following accounts? -Debit to Vacation Benefits Expense. -Credit to Salaries and Wages Payable. -Debit to Salaries and Wages Expense. -Credit to Cash. -Credit to Vacation Benefits Payable. -Debit to Cash.

Debit to Vacation Benefits Expense. Credit to Vacation Benefits Payable.

Theo Co. has two full-time employees who are provided health insurance at Theo's expense. At the end of the period, the cost of the insurance totals $1,400. The entry that Theo will make to accrue these costs include a debit to the ______ account. -Employee Benefits Payable -Salaries and Wages Expense -Employee Benefits Expense -Salaries and Wages Payable

Employee Benefits Expense

Camelot Co. expects that bonuses for the year will be $100,000. The 12/31 entry will require a debit to the ______ account in the amount of ______. -Cash; $100,000 -Salaries and Wages Expense; $100,000 -Bonus Payable; $100,000 -Employee Bonus Expense; $100,000

Employee Bonus Expense; $100,000

Handy Holly Co. provides a variety of household repairs and warranties her work for a six-month period. Holly provided $13,000 of service fees during the month and anticipates that warranty repairs for these sales will total $400. The entry that Holly will make to record the estimated warranty expense will include a credit which account? -Estimated Warranty Liability -Warranty Expense -No journal entry is necessary until the repair is performed. -Repair Parts and Labor Expense

Estimated Warranty Liability

Perez Co. sells lawn mowers and warranties them for one year. Perez made an adjusting entry at the end of last year to record the warranty expense. In February of the current year, a customer needed a $50 repair to a lawn mover. The entry to record the repair includes a debit to ______. -Parts Inventory -Cash -Estimated Warranty Liability -Warranty Expense

Estimated Warranty Liability

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 -Miscellaneous Repairs Expense -Customer Satisfaction

Estimated Warranty Liability

Leo Calvin is required to have ______ taxes withheld from his pay in order to cover the cost of future retirement, disability, survivorship and medical benefits. -WICA -FUTA -SUTA -FICA

FICA

The Federal Insurance Contributions Act provides retirement, disability, survivorship, and medical benefits to qualified workers. Laws require employers to withhold ______ taxes from employees' pay to cover costs of the system. -AAA -WICA -SUTA -FICA

FICA

Federal government taxes implemented on employers in order to provide unemployment benefits to qualified workers are known as (use acronym) _____.

FUTA

The federal government requires that employers are taxed on employee wages to provide unemployment benefits to qualified workers. These taxes are known as: -SICA -FICA -FUTA -SUTA

FUTA

Anchor Co. has accrued payroll expense of $1,300 which includes employee withholdings of $400. On payday, Anchor will record the distribution of paychecks with a credit to_____ in the amount of $_____.

Field 1: Cash Field 2: 900

Harvey Co. has current period employee salary expenses of $800. Employee withholdings total $300. The entry to accrue current period payroll will include a credit to Salaries _____ in the amount of $_____.

Field 1: Payable Field 2: 500

A liability created by buying goods or services on credit is typically recorded to _____ _____.

Field 1: accounts Field 2: payable

Which of the following situations is not a contingent liability? -Possible legal claim against a company -Future natural disaster -Debt guarantee of owner -Probable legal claim against a company

Future natural disaster

______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes. -Payroll deductions -Hourly rate -Net pay -Gross pay

Gross pay

On November 1, Lance Co. borrows $90,000 cash from First Bank by signing a 90-day, 5% interest-bearing note. On December 31, Lance will record an adjusting entry by crediting ______ in the amount of ______. -Interest Expense; $750 -Interest Payable; $750 -Interest Expense; $1,125 -Interest Payable; $1,125 -Cash; $1,125 -Cash; $750

Interest Payable; $750

Which of the following items are considered employee benefits? -Medical insurance -Employee withholdings -State unemployment taxes -Pension plans

Medical insurance Pension plans

FICA tax includes both Social Security tax and ______. -Medicare tax -State unemployment tax -Federal tax -Federal unemployment tax

Medicare tax

Which of the following items is not a payroll deduction? -Net pay -Employee income tax -Federal income tax -FICA taxes

Net pay

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 Receivable -Accounts Payable -Accounts Receivable -Notes Payable -Cash

Notes Payable

On June 1, Button Co. borrowed $1,000 cash from National Bank by signing a 120-day, 6% interest-bearing note. Button will record this transaction with a credit to ______ in the amount of ______. -Cash; $1,020 -Notes Payable; $1,000 -Cash; $1,000 -Notes Payable; $1,060 -Notes Payable; $1,020 -Cash; $1,060

Notes Payable; $1,000

On January 1, Avers Co. borrowed $10,000 by extending their past-due account payable with a a 60-day, 8% interest-bearing note. On March 1, the due date, Avers pays the amount due in full. This entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash) __ in the amount of __. -Cash; $10,800 -Cash; $10,133 -Notes Payable; $10,000 -Notes Payable; $10,133 -Notes Receivable; $10,133 -Cash; $10,000

Notes Payable; $10,000

On January 1, Avers Co. borrowed $10,000 cash from Main St. Bank by signing a 60-day, 8% interest-bearing note. On March 1, Avers pays the amount due in full. The March 1 entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash) ______ in the amount of ______. -Cash; $10,000 -Cash; $10,133 -Notes Payable; $10,133 -Notes Payable; $10,000 -Cash; $10,800 -Notes Payable; $10,800

Notes Payable; $10,000

The journal entry to record employer tax accruals includes a debit to: -FUTA Payable -Salaries Expense -SUTA Payable -Payroll Tax Expense

Payroll Tax Expense

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as (use acronym) _____.

SUTA

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as: -FUTA -SUTA -SICA -FICA

SUTA

Damen's Co. sells merchandise with a list price of $500 and collects sales tax of $50. The sales tax would be recorded with a credit to which account? -Sales Tax Expense -Sales Tax Payable -Prepaid Sales Tax -Sales Tax Revenue

Sales Tax Payable

Stalz Co. collected $2,500 in sales tax from customers during the month of February. In March, Stallon sends the $2,500 to the state government. The payment to the state would be recorded with a debit to which account? -Sales Tax Expense -Sales Tax Revenue -Prepaid Sales Tax -Sales Tax Payable

Sales Tax Payable

Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account? -Prepaid sales tax -Sales tax revenue -Sales tax expense -Sales tax payable

Sales tax payable

Which of the following is a true statement concerning the employer FICA taxes: -The employer must pay FICA tax in an amount greater than the amount paid by the employee. -The employer must pay FICA tax in an amount less than the amount paid by the employee. -The employer must pay FICA tax in an amount equal to that paid by the employee. -Employers do not have to pay FICA taxes.

The employer must pay FICA tax in an amount equal to that paid by the employee.

A liability can be recorded, even if there is uncertainty of when to pay, how much to pay, or whom to pay. -True -False

True

A company sells 12-month popular magazine subscriptions. During the month of May, the company sells $12,000 in magazines, which will start in June. The adjusting entry to record the $1,000 of subscriptions earned in June will include a debit to which account? -Cash -Unearned Subscription Revenue -Subscription Revenue Earned

Unearned Subscription Revenue

A company sells 12-month subscriptions to popular magazines. During the month of May, the company sells $10,000 in magazines, which will start in June. The journal entry to record the sales not yet earned will include a credit to which account? -Subscription Revenue -Cash -Prepaid Subscription Expense -Unearned Subscription Revenue

Unearned Subscription Revenue

Which of the following liabilities could be a multi-period known liability? -Unearned Subscription Revenues -Notes Payable -Wages Payable -Accounts Payable

Unearned Subscription Revenues Notes Payable

Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer? -State taxes -FICA -Federal taxes -Unemployment -Insurance premiums

Unemployment

Abby Co. allows each employee two weeks of paid time off during each calendar year. Since employees are working for 50 weeks, rather than 52 weeks, Abby must accrue the paid time off during the 50 weeks that the employees work. The year-end adjusting entry is recorded as a credit to the ______ account. -Vacation Benefits Payable -Employee Wages Payable -Employee Taxes Payable

Vacation Benefits Payable

Dante Co. allows employees to take two weeks vacation during each year. To account for the two weeks off each year, Dante will accrue the Vacation Benefits with a credit to the ______ account. -Vacation Benefits Expense -Wages and Salaries Expense -Wages and Salaries Payable -Vacation Benefits Payable -Cash

Vacation Benefits Payable

Which of the following items would be considered a current liability? -Wages payable -Notes payable, due in 14 months -Notes payable, due in 3 months -Accounts payable, terms n/30

Wages payable Notes payable, due in 3 months Accounts payable, terms n/30

Employee ______ are perks that are provided in addition to salaries and wages, such as all or part of medical, dental, life and disability insurance. -benefits -taxes -withholdings

benefits

A ______ is when an employer provides employees with a percentage of the company's net income earned during the year. -warranty plan -vacation benefit plan -benefit plan -bonus plan

bonus plan

Angela Bennett is an employee of Marks Co. This past year, Angela received 1% of Marks net income, in addition to her annual salary. This added benefit is called a: -vacation plan -warranty plan -bonus plan -benefit plan

bonus plan

Teva Co. has current period employee salary expense of $2,000. Employee withholdings total $850. To accrue the current period payroll, Salaries Payable will be (debited/credited) ______ in the amount of ______. -debited; $1,150 -credited; $1,150 -credited; $2,850 -debited; $2,850

credited; $1,150

A (long-term/current) ____ liability is a liability due within one year or the company's operating cycle, whichever is longer.

current

Amounts withheld from employee's earnings for employee income tax is considered a ______ by the employer until the government is paid. -long-term liability -long-term asset -current asset -current liability

current liability

On December 1, Hansen Co. borrowed $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen recorded an adjusting entry to record interest expense of $500. On March 1, the due date of the note, Hansen will record interest expense as a (debit/credit) ______ in the amount of ______. -credit; $1,000 -credit $1,500 -debit; $500 -credit; $500 -debit; $1,500 -debit; $1,000

debit; $1,000

On December 1, Hansen Co. borrowed $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen recorded an adjusting entry to record interest expense of $500. On March 1, the due date of the note, Hansen will record interest expense as a (debit/credit) ______ in the amount of ______. -credit; $500 -debit; $500 -credit; $1,000 -debit; $1,500 -debit; $1,000 -credit $1,500

debit; $1,000

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; $600 -credit; $75 -credit; $600 -debit; $75

debit; $75

Employee income tax depends on: -employer's income -employee's income -number of employer withholding allowances -number of employee withholding allowances

employee's income number of employee withholding allowances

Unemployment taxes are examples of (employee/employer) _____required taxes.

employer

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

estimated

A(n) ______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated. -uncertain -estimated -multi-period -unreal

estimated

Employee benefits that are paid by the employer are recorded in the Employee Benefit ______ account.

expense

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest note. On April 8, Lee Co. will pay National Bank a total of $101,500. The difference between the amount paid back to National Bank of $101,500 and the amount borrowed of $100,000 (or $1,500) represents _____ expense.

interest

_____ is the difference between the amount borrowed and the amount repaid.

interest

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

known

A(n) (asset/liability/revenue) _____ is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

liability

Bina Consulting Co. collected $500 from a customer in advance to provide consulting fees for the next two months. The $500 would be recorded with a debit to Cash and a credit to the Unearned Revenues, which is a(n) (asset/liability/equity) _____ account.

liability

Bryne Co. sells merchandise and collects a 5% state sales tax. The tax is recorded on Bryne's general ledger as a(n) ______ account. -revenue -asset -expense -liability

liability

When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account and a(n) ______ account. -liability -dividend -expense -revenue

liability

Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? -long-term assets -current assets -long-term liabilities -current liabilities

long-term liabilities current liabilities

Obligations due after one year or one operating cycle, whichever is longer, are considered to be: -operating assets. -operating liabilities. -short-term assets. -long-term assets. -long-term liabilities. -short-term liabilities.

long-term liabilities.

Ace Company borrowed $10,000 from Fair Rates Bank by signing a two-year note payable. Ace's operating cycle is 14 months. This note would be considered a ______ on the balance sheet. -long-term asset -short-term liability -short-term equity -short-term asset -long-term equity -long-term liability

long-term liability

Unearned subscription revenues that extends over multiple periods is an example of a ______ known liability. -current-period -multi-period -long-term

multi-period

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

net, take-home, or take home

A potential legal claim is recorded -only if payment for damages is probable and the amount can be reasonably estimated. -only if the claim cannot be reasonably estimated but is reasonably possible. -only if payment for damages is reasonably possible and the amount is reasonable. -only if the claim can be reasonably estimated.

only if payment for damages is probable and the amount can be reasonably estimated.

Employer taxes, such as SUTA, are recorded with a debit to Employer Tax Expense and a credit to SUTA (expense/payable) _____ until payments are submitted to the state.

payable

Amounts withheld from an employee's gross pay are called: -wages payable -bonus deductions -net pay -payroll deductions

payroll deductions

Which of the following represent reasonably possible contingent liabilities? -accounts payable -potential legal claims -debt guarantees -warranties

potential legal claims debt guarantees

The (principal/maturity) _____ 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 ______. -long-term account payable -long-term note payable -short-term account payable -long-term note receivable -short-term note payable -short-term note receivable

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) Blank______ on her balance sheet. -prepaid expense -long-term note payable -account payable -short-term note payable

short-term note payable

Examples of employee voluntary deductions may include all of the following except: -medical premiums. -unemployment taxes. -charitable giving. -pension contributions.

unemployment taxes.

Paid absences offered to employees are called (pension/vacation) _____ benefits.

vacation

Employers often withhold amounts from employees' earnings which arise from employee requests, contracts, unions, or other agreements. These withholdings are called employee ______ and include items such as medical premiums. -income taxes -voluntary deductions -FICA taxes -unemployment taxes

voluntary deductions

A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except: -warranties. -notes payable. -payroll obligations. -accounts payable. -unearned revenues.

warranties

A (repair/warranty) _____ is a seller's obligation to replace or fix a product (or service) that fails to perform as expected within a specified period.

warranty

When recording a liability, a company may not know: -why to pay. -whom to pay. -how much to pay. -when to pay.

whom to pay. how much to pay. when to pay.