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