Accounting #15 ch 9 (Exam #5)

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 (2nd transaction so 30 days from dec 31 to jan 30, 20,000 *30/360 *.06)

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 (this is two transaction the first is 200 from nov 1 to dec 31 which is 60 days. now we need the 2nd transaction from dec 31 to jan 30 which is 30 days. 20,000 *.06 *30/360)

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

100,000

Select all that apply When recording a liability, a company may not know: (Check all that apply.) Multiple select question. a. when to pay. b. whom to pay. c. how much to pay. d. why to pay.

a,b,c

Select all that apply On December 1, Campbell Co. borrowed $10,000 cash from Second Bank by signing a 90-day, 6% interest-bearing note. On December 31, Campbell accrued interest expense of $50. Campbell does not use reversing entries. On March 1, the due date of the note, Campbell will record the payment with debit entries to which of the following accounts? (Check all that apply.) Multiple select question. a. Interest Expense for $100 b. Cash for $10,150 c. Notes Payable for $10,000 d. Interest Payable for $50

a,c,d (bc this extends over 2 periods you have to include interest payable for amount on 1st transaction. the interest expense for this transaction is 60 days (90-30) 10,000 *60/360 *.06)

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

a.

A liability created by buying goods or services on credit is typically recorded to _____________ _______________

accounts 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. Multiple choice question. a. account payable b. short-term note payable c. prepaid expense d. long-term note payable

b

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? Multiple choice question. a. Prepaid Sales Tax b. Sales Tax Payable c. Sales Tax Expense d. Sales Tax Revenue

b.

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 _______. Multiple choice question. a. Cash; $10,133 b. Notes Payable; $10,000 c. Cash; $10,800 d. Cash; $10,000 e. Notes Payable; $10,133 f. Notes Payable; $10,800

b.

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 ______. Multiple choice question. a. $1,500 b. $500 c. $6,000 d. $4,500

b. (it is 30 days so 100,000 * .06 * 30/360)

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. Multiple choice question. a. short-term liability b. long-term equity c. long-term liability d. long-term asset e. short-term equity f. short-term asset

c.

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 _______. Multiple choice question. a. Notes Payable; $10,800 b. Cash; $10,800 c. Notes Payable; $10,000 d. Cash; $10,133 e. Notes Payable; $10,133 f/ Cash; $10,000

c.

On June 1, Sawyer Co. borrowed $5,000 cash from Crystal Bank by signing a 45-day, 12% interest-bearing note. On July 16, Sawyer pays the amount due in full. Sawyer would record this payment with a (debit/credit) _______ to Interest Expense in the amount of _______. Multiple choice question. a. credit; $600 b. debit; $600 c. debit; $75 d. credit; $75

c.

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

c.

A ____________ liability is a liability due to be paid or settled within one year or the company's operating cycle, whichever is longer.

current

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 _______. Multiple choice question. a. credit; $75 b. credit; $600 c. debit; $600 d. debit; $75

d. (5,000 *.12 * 45/360)

A known liability arises from a situation with little uncertainty, with set agreements, contracts, or laws. These liabilities are measurable. Known liabilities would include all of the following items, except: Multiple choice question. a. accounts payable. b. unearned fees. c. notes payable. d/. payroll obligations. e. warranties.

e.

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing 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 __________ 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

Fill in the blank question. 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

KRS Co. sells merchandise for $120 and collects sales tax of $12. KRS would record the $12 sales tax with a credit to the Sales Tax __________ account.

payble

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

principal

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

true

Select all that apply Which of the following items would be considered a current liability? (Check all that apply.) Multiple select question. a. Accounts payable, terms n/30 b Notes payable, due in 3 months c. Wages payable d. Notes payable, due in 14 months

a,b,c

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. Multiple choice question. a. liability b. revenue c expense d. dividend

a.

On December 1, 20xx, Wayne Co. borrows $25,000 cash from Secure Bank by signing a 120-day, 6% interest-bearing note. Wayne will record interest expense of _____ on December 31. Multiple choice question. a. $125 b. $1,500 c. $500 d. $375

a. (bc it is 30 days from dec 1 to dec 31 so 25,000 * .06 * 30/360)

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

Tire Co. collected $2,000 in sales tax during the month of October. The entry that shows the remittance of this sales tax to the state government in November would include a credit to the ________ account.

cash

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? Multiple choice question. a. Accounts Payable b. Accounts Receivable c. Cash d. Notes Payable e. Notes Receivable

d

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? Multiple choice question. a. Debit to Sales Tax Expense b. Debit to Sales Tax Revenue c. Credit to Sales Tax Expense d. Credit to Sales Tax Payable e. Debit to Sales Tax Payable f/Credit to Sales Tax Revenue

d

Select all that apply 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? (Check all that apply.) Multiple select question. a. Debit to Plowing Revenue b. Debit to Unearned Plowing Revenue c. Credit to Plowing Revenue d. Credit to Unearned Plowing Revenue e. Credit to Cash f.Debit to Cash

f,d

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 __________. Multiple choice question. a. short-term note receivable b. long-term account payable c. long-term note payable d. short-term account payable e. long-term note receivable f. short-term note payable

f.

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 ______. Multiple choice question. a. debit; $500 b. debit; $1,500 c. credit; $500 d. debit; $1,000 e. credit; $1,000 f. credit $1,500

d ( it is now 60 days (90-30) so 100,000 *60/360 * .06)

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 ______. Multiple choice question. a. credit; $1,000 b. debit; $500 c. debit; $1,500 d. credit $1,500 e. credit; $500 f. debit; $1,000

f. ( this is the second transaction so 60 days, 100,000 *.06 * 60/360).

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? Multiple choice question. a. Unearned Subscription Revenue b. Subscription Revenue c. Prepaid Subscription Expense d. Cash

a

Select all that apply 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? (Check all that apply.) Multiple select question. a. Debit to Cash b. Credit to Cash c. Debit to Accounts Payable d. Debit to Notes Payable e. Credit to Notes Payable f. Credit to Accounts Payable

c,e (bc this is just to record the amount we dont do anything with interest expense yet)

Select all that apply 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? (Check all that apply.) Multiple select question. a. Credit to Paving Fees Earned b. Debit to Paving Fees Earned c. Debit to Cash d. Debit to Unearned Paving Fees e. Credit to Cash f. Credit to Unearned Paving Fees

c,f

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? Multiple choice question. a. Subscription Revenue Earned b. Cash c. Unearned Subscription Revenue

c.

Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account? Multiple choice question. a. Sales tax revenue b. Prepaid sales tax c. Sales tax payable d. Sales tax expense

c.

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 ______. Multiple choice question. a. Cash; $750 b Interest Expense; $750 c, Interest Payable; $750 d, Cash; $1,125 e. Interest Payable; $1,125 f. Interest Expense; $1,125

c. Reason: Interest payable is credited. Interest expense is debited. The computation of interest is $750 from November 1 to December 31 which is 60 days. $90,000 x .05 x (60/360)=$750.

Select all that apply Mary's Magazine Sales sells popular magazine subscriptions. During January, Mary collected $1,200 from various customers to provide magazines over the next 12 months. At the end of February, Mary would make an adjusting entry to record one month of magazines subscriptions earned. This transaction would include which of the following entries? (Check all that apply.) Multiple select question. a. Credit to Unearned Subscriptions b. Credit to Subscriptions Earned c. Debit to Cash d. Debit to Unearned Subscriptions e. Debit to Subscriptions Earned f. Credit to Cash

d,b

Obligations due after one year or one operating cycle, whichever is longer, are considered to be: Multiple choice question. a. long-term assets b≥ short-term liabilities c. operating assets d. long-term liabilities e. short-term assets f. operating liabilities

d.

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 ______. Multiple choice question. a. Notes Payable; $1,060 b. Notes Payable; $1,020 c. Cash; $1,020 d. Notes Payable; $1,000 e Cash; $1,060 f. Cash; $1,000

d.

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? Multiple choice question. a. Wages Payable b. Unearned Fees c. Accounts Receivable d. Accounts Payable

d.

On January 1, KC Co. borrowed $10,000 cash from Lake St. Bank by signing a 90-day, 8% interest-bearing note. How much interest will result from this note? Multiple choice question. a. $80 b. $800 c. $8,000 d. $200

d. (10,000 *.08* 90/360)

Select all that apply 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? (Check all that apply.) Multiple select question. a. Debit to Cash b. Credit to Plowing Revenue Earned c., Debit to Plowing Revenue Earned d. Credit to Cash e. Debit to Unearned Plowing Revenue f. Credit to Unearned Plowing Revenue

e,b

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 ______. Multiple choice question. a. Notes Payable $1,000 b Notes Payable; $1,060 c. Cash; $1,060 d. Cash; $1,000 e. Notes Payable; $1,020 f. Cash; $1,020

f. (Interest is computed for 120 days. $1,000 x .06 x (120/360) = $20. Cash will be credited for $1,000 + 20. Notes payable will be debited for $1,000.)