Chapter 10 accounting

Ann Ellis's regular rate of pay is $12 per hour with one and one-half times her regular rate for any hours which exceed 40 hours per week. She worked 48 hours last week. Therefore, her gross wages were

$624.

From a liquidity standpoint, it is more desirable for a company to have current

Assets exceed current liabilities

The amount of sales tax collected by a retail store when making sales is

a current liability.

All of the following are reported as current liabilities except

bonds payable

The interest charged on a $50,000 note payable, at the rate of 6%, on a 2-month note would be

$500

Kelly Rice has a large consulting practice. New clients are required to pay one-half of the consulting fees up front. The balance is paid at the conclusion of the consultation. How does Rice account for the cash received at the end of the engagement?

Prepaid Consulting Fees Earned Consulting Revenue

Jim's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Jim's Pharmacy make to show the March remittance?

Sales Taxes Payable 600 Cash 600

Ed's Bookstore has collected $750 in sales taxes during April. If sales taxes must be remitted to the state government monthly, what entry will Ed's Bookstore make to show the April remittance?

Sales Taxes Payable 750 Cash 750

A note payable is in the form of

a written promissory note

Interest expense on an interest-bearing note is

accrued over the life of the note.

Advances from customers are classified as a(n)

current liability.

Unearned Rental Revenue is

reported as a current liability.

Warranty expenses are reported on the income statement as

selling expenses.

Which one of the following payroll taxes does not result in a payroll tax expense for the employer?

Federal income tax

Shaw Company sells 2,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 40 units for a total cost of $2,000. What amount will be reported on Shaw Company's balance sheet as Estimated Warranty Liability on December 31, 2010?

$1,000

The interest charged on a $100,000 note payable, at the rate of 6%, on a 60-day note would be

$1,000

The interest charged on a $50,000 note payable, at the rate of 8%, on a 3-month note would be

$1,000.

The interest charged on a $100,000 note payable, at the rate of 8%, on a 90-day note would be

$2,000.

Shaw Company sells 2,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 40 units for a total cost of $2,000. What amount should Shaw Company accrue on December 31 for estimated warranty costs?

$3,000

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $4,770. If the sales tax is 6%, the amount to be credited to the account Sales is:

$4,500.

Assuming a FICA tax rate of 8% on the first $100,000 in wages, and a federal income tax rate of 20% on all wages, what would be an employee's net pay for the year if he earned $110,000 for the year?

$80,000

A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $189,000, what is the amount of the sales taxes owed to the taxing agency?

$9,000

Most companies involved in interstate commerce are required to compute overtime at

1.5 times the worker's regular hourly wage.

Which of the following items would not be identified if a contingent liability were disclosed in a financial statement footnote?

A numerical probability of the expected loss

The entry to record the proceeds upon issuing an interest-bearing note is

Cash Notes Payable

Pickett Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 60,000 subscriptions in January at $15 each. What entry is made in January to record the sale of the subscriptions?

Cash Unearned Subscription Revenue

A cash register tape shows cash sales of $1,500 and sales taxes of $90. The journal entry to record this information is

Cash 1,590 Sales 1,500 Sales Taxes Payable 90

A cash register tape shows cash sales of $1,500 and sales taxes of $120. The journal entry to record this information is

Cash 1,620 Sales Tax Payable 120 Sales 1,500

Admire County Bank agrees to lend Givens Brick Company $200,000 on January 1. Givens Brick Company signs a $200,000, 8%, 9-month note. What is the adjusting entry required if Givens Brick Company prepares financial statements on June 30?

Cash 200,000 Notes Payable 200,000

If a bank agrees to lend Givens Brick Company $200,000 on January 1. Givens Brick Company signs a $200,000, 8%, 9-month note. The entry made by Givens Brick Company on January 1 to record the proceeds and issuance of the note is

Cash 200,000 Notes Payable 200,000

On January 1, 2010, Donahue Company, a calendar-year company, issued $400,000 of notes payable, of which $100,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2010, is

Current Liabilities, $100,000; Long-term Debt, $300,000.

The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is

Notes Payable Interest Payable Cash

Admire County Bank agrees to lend Givens Brick Company $200,000 on January 1. Givens Brick Company signs a $200,000, 8%, 9-month note. What entry will Givens Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

Notes Payable 200,000 Interest Payable 12,000

On October 1, Steve's Carpet Service borrows $250,000 from First National Bank on a 3-month, $250,000, 8% note. The entry by Steve's Carpet Service to record payment of the note and accrued interest on January 1 is

Notes Payable 250,000 Interest Payable 5,000 Cash 255,000

Which of the following is shown first under current liabilities by many companies as a matter of custom?

Notes payable and accounts payable

The journal entry to record the payroll for a period will include a credit to Wages and Salaries Payable for the gross

amount less all payroll deductions.

The current portion of long-term debt should

be reclassified as a current liability.

On October 1, 2010, Pennington Company issued a $40,000, 10%, nine-month interest-bearing note. Assuming interest was accrued in June 30, 2011, the entry to record the payment of the note on July 1, 2011, will include a:

debit to Interest Payable of $3,000.

Current maturities of long-term debt

can be properly classified during balance sheet preparation, with no adjusting entry required.

If a liability is dependent on a future event, it is called a

contingent liability.

Lincoln Company sells 600 units of a product that has a one-year warranty on parts. The average cost of honoring one warranty contract is $50. During the year 30 contracts are honored at a cost of $1,500. It is estimated that 60 contracts will be honored in the following year. The adjusting entry at the end of the current year will include a

credit to Estimated Warranty Liability for $3,000.

A company receives $132, of which $12 is for sales tax. The journal entry to record the sale would include a

credit to Sales Tax Payable for $12.

Sales taxes collected by a retailer are recorded by

crediting Sales Taxes Payable.

The current ratio is

current assets divided by current liabilities.

Working capital is

current assets minus current liabilities.

Sales taxes collected by a retailer are reported as

current liabilities.

When an interest-bearing note matures, the balance in the Notes Payable account is

less than the total amount repaid by the borrower.

On October 1, 2010, Pennington Company issued a $40,000, 10%, nine-month interest-bearing note. If the Pennington Company is preparing financial statements at December 31, 2010, the adjusting entry for accrued interest will include a:

debit to Interest Expense of $1,000

A company receives $174, of which $14 is for sales tax. The journal entry to record the sale would include a

debit to Sales for $174.

A contingency that is remote

does not need to be disclosed.

The amount of income taxes withheld from employees is dependent on each of the following except the .

employee's net pay.

With an interest-bearing note, the amount of assets received upon issuance of the note is generally .

equal to the note's face value

The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's

face value

Employee payroll deductions include each of the following except

federal unemployment taxes.

The total compensation earned by an employee is called

gross earnings

Disclosure of a contingent liability is usually made

in a note to the financial statements.

Current liabilities generally appear

in decreasing order of magnitude on the balance sheet.

The accounting for warranty cost is based on the matching principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

in the period in which the product was sold.

As interest is recorded on an interest-bearing note, the Interest Expense account is

increased; the Interest Payable account is increased.

Sales taxes collected by the retailer are recorded as a(n)

liability.

FICA taxes do not provide workers with

life insurance.

Liabilities are classified on the balance sheet as current or?

long term

The accounting for warranty costs is based on the

matching principle.

what following is usually not an accrued liability?

notes payable

Sales taxes collected by a retailer are expenses

of the customers.

In most companies, current liabilities are paid within

one year out of current assets

Most companies pay current liabilities

out of current assets

A contingent liability need only be disclosed in the financial statement notes when the likelihood of the contingency is

reasonably possible.

The relationship of current assets to current liabilities is used in evaluating a company's .

short-term debt paying ability

If a contingent liability is reasonably estimable and it is reasonably possible that the contingency will occur, the contingent liability

should be disclosed in the notes accompanying the financial statements.

The relationship between current liabilities and current assets is

useful in evaluating a company's liquidity

A current liability is a debt that can reasonably be expected to be paid

within one year