Quiz 8

Schmidt Company borrows $10,000 from its bank and signs a 6-month note. Interest, which is due quarterly, is specified in the note as 6%. The interest rate stated in the loan agreement most likely applies to: a 3-month period a 6-month period an entire year

an entire year

A(n) __ liability is an existing uncertain situation that might result in a loss depending on the outcome of a future event.

contingent

A(n) __ __ is an existing uncertainty that might result in a gain.

contingent gain

The time it takes to produce revenue is referred to as the company's __ __.

operating cycle

Disclosure related to a contingent event is usually not required if the likelihood of payment is __.

remote

On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required March 1, 2019 at the maturity date includes which of the following entries? (Select all that apply): Debit interest expense $6,000 Debit interest expense $2,000 Debit interest payable $4,000 Debit interest expense $4,000 Credit interest expense $4,000 Credit cash $106,000

1.) Debit interest expense $2,000 2.) Debit interest payable $4,000 3.) Debit note payable $100,000 4.) Credit cash $106,000

Which of the following are current liabilities? (Select all that apply): Accounts receivable Wages payable Note payable due in 23 months Note payable due in 3 months Accounts payable

1.) Wages payable 2.) Note payable due in 3 months 3.) Accounts payable

On October 1, 2018, Logan Corporation signed a 6-month, 8% interest-bearing promissory note for $10,000. The journal entry required at December 31, 2018 would include which of the following entries? Debit interest expense $200 Debit interest expense $400 Credit cash $800 Credit interest payable $600

Debit interest expense $200

Which payroll tax is paid equally by the employee and the employer? Federal income tax SUTA FICA FUTA State income tax

FICA

Additional benefits such as health insurance, retirement benefits, or life insurance that are paid by the employer are called __ benefits.

employee

Choose the correct formular for calculating interest: maturity amount x rate per interest period x time to maturity face amount x rate per interest period face amount x annual interest rate x fraction of the year

face amount x annual interest rate x fraction of the year

Interest expense is recorded in the period when it is __.

incurred

A(n) __ is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events.

liability

The feature that distinguished loss contingencies from other liabilities is the __ that a loss will occur.

likelihood

A __ of __ is an informal agreement that permits a company to borrow up to a prearranged amount without having to follow formal loan procedures.

line, credit

Payroll withholdings are: the payments submitted for both the employee and employer to the government for taxes the items subtracted from an employee's gross pay to arrive at net pay the employer's portion of taxes paid for social security and Medicare.

the items subtracted from an employee's gross pay to arrive at net pay

Which of the following tends to be the source of the most commonly reported contingent liability? natural disasters warranties lawsuits

warranties

Which of the following is a guarantee that protects a customer from product defects for a specified period of time? contingency promissory note warranty sales allowance

warranty

Spencer Corp's attorney estimates that the company will ultimately have to pay between $250,000 and $500,000 relating to current litigation. Spencer should accrue a contingent liability and loss of: $500,000 $250,000 $375,000

$250,000

What are the two criteria used to determine whether a contingent liability is reported in the financial statements? the percentage of the loss of total income the ability to estimate the amount of the loss the payment date of the loss the likelihood of the loss

1.) the ability to estimate the amount of the loss 2.) the likelihood of the loss

Which of the following may be a proper balance sheet classification of contingent events? (Select all that apply): long-term liability accumulated other comprehensive income current liability retained earnings

1.) long-term liability 2.) current liability

John Smith works 40 hours for ABC Corp. for $15 an hour. Required payroll deductions are: Social Security $37,20, Medicare $8.70, federal income tax $58, and state income tax $10. Assuming that John gets paid in cash, ABC would record a journal entry that includes a _. (Select all that apply): debit to Wages Expense of $486.10 credit to Cash of $486.10 credit to FICA Payable of $45.90 credit to State and Federal Income Tax Payable of $68 debit to Wages Expense of $600

1.) credit to Cash of $486.10 2.) credit to FICA Payable of $45.90 3.) credit to State and Federal Income Tax Payable of $68 4.) debit to Wages Expense of $600

Abbott Corp's attorney estimates that the company will ultimately have to pay $400,000 related to current litigation. Abbot's journal entry should include a: (Select all that apply): debit to asset credit to contingent liability debit to loss credit to retained earnings debit to contingent liability

1.) credit to contingent liability 2.) debit to loss

What are the two classifications for liabilities? (Select all that apply): investing operating long-term current recurring

1.) long-term 2.) current

Which of the following are examples of fringe benefits provided by employers to their employees? (Select all that apply): FICA matching contributions payment for services provided by employee to employer payment of insurance premiums on employees behalf contributions to retirement and other savings accounts reduced or no-cost company-provided services

1.) payment of insurance premiums on employees behalf 2.) contributions to retirement and other savings accounts 3.) reduced or no-cost company provided services

Which of the following payroll-related taxes must the employer pay by law? (Select all that apply): contributions toward retirement funds union dues unemployment taxes FICA amounts

1.) unemployment taxes 2.) FICA amounts

Ming Corporation sells $100,000 goods on account to customers. Ming estimates that warranties will be 3% of sales. At the end of the year, Ming will require which of the following entries for warranties? Debit warranty expense $3,000; credit warranty liability $3,000 Debit warranty liability $3,000; credit warranty contingency $3,000 Debit warranty expense $3,000; credit warranty income $3,000 No journal entry is required.

Debit warranty expense $3,000; credit warranty liability $3,000

A(n) __ payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash.

accounts

Notes payable is classified as a liability that has which of the following effects? creates interest expense on the income statement creates deferred revenue on the income statement creates revenue on the income statement creates an asset on the balance sheet

creates interest expense on the income statement

Rhodes borrowed $5,000 by signing a 5-year note with an interest rate of 8%. On the date the note is signed, Rhosed should: debit notes payable $5,000 debit notes receivable $5,000 credit notes payable $5,000 credit notes expense $5,000

credit notes payable $5,000

When a company purchases items from a supplier that it does not immediately for with cash, the journal entry required includes a: credit to accounts payable debit to accounts payable

credit to accounts payable

A liability is a present responsibility to sacrifice __ in the future due to a transaction or other event that happened in the __.

1.) assets 2.) past

Correctly math the salary-related costs with the payee. Employee Employer State and federal income tax State and federal unemployment tax

Employee: state and federal income tax Employer: state and federal unemployment tax