Test 3

In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now. a. one; two b. one; one c. two; two d. one; ten

a

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. The company should report the following adjusting entry at December 31, 20X1: a. Debit interest expense and credit interest payable, $4,000. b. Debit interest expense and credit cash, $4,000. c. Debit interest expense and credit interest payable, $12,000. d. Debit interest expense and credit cash, $12,000

a

Which of the following statements regarding liabilities is true? a. Liabilities are always payable in cash. b. Liabilities are all reported as current in the balance sheet. c. Liabilities result from future transactions. d. Liabilities represent probable future sacrifices of benefits

a

Which of the following is not a current liability? a. Notes payable due in six months. b. Current portion of long-term debt. c. An unused line of credit. d. Deferred revenue to be earned in nine months.

c

Which of the following is paid by both the employee and the employer? A. FICA taxes. B. Federal unemployment taxes. C. State unemployment taxes. D. Personal income taxes.

A

Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should First State Bank record? A. Debit Cash, $5,000; Credit Notes Receivable, $5,000. B. Debit Notes Receivable, $5,000; Credit Cash, $5,000. C. Debit Cash, $5,000; Credit Notes Payable, $5,000. D. Debit Notes Payable, $5,000; Credit Cash, $5,000.

B

Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record? A. Debit Cash, $5,000; Credit Notes Receivable, $5,000. B. Debit Notes Receivable, $5,000; Credit Cash, $5,000. C. Debit Cash, $5,000; Credit Notes Payable, $5,000. D. Debit Notes Payable, $5,000; Credit Cash, $5,000.

C

Interest expense is recorded in the period in which: A. The interest is paid. B. The interest is incurred. C. The interest is paid or incurred. D. The interest is paid and incurred.

D

If Executive Airways borrows $10 million on April 1, 20X1, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 20X1? a. $300,000 b. $450,000 c. $150,000 d. $600,000

b

Which of the following is not a characteristic of a liability? a. It represents a probable, future sacrifice of economic benefits. b. It must be payable in cash. c. It arises from present obligations to other entities. d. It results from past transactions or events.

b

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. What is the amount of interest expense to report in 20X2? a. $0 b. $12,000 c. $8,000 d. $24,000

d

Which of the following represents a characteristic of a liability? a. A probable future sacrifice of economic benefits. b. Arising from present obligations to other entities. c. Resulting from past transactions or events. d. All of these are characteristics of a liability.

d