SB Ch.9 - ACC211

A contract in which an owner provides a user the right to use an asset in return for periodic cash payments over a period of time is called a(n) ______.

lease

During 2019, Barry Bees, Inc.'s Sales equal $30,000 and Cost of goods sold equals $10,000. Its December 31, 2018 Accounts payable was $800 and its December 31, 2019 Accounts payable is $1,200. Barry Bee's accounts payable turnover equals ______ times for the year ended December 31, 2019.

10

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal income tax $18,000 and State income tax $3,850. What is the net pay to employees?

70,000 Net pay = $70,000 = $100,000 - 6,700 - 1,450 - 18,000 - 3,850.

The journal entry to record the purchase of an asset in exchange for $100,000 due in 3 years at a market rate of interest of 12% compounded annually includes a debit to the asset in the amount of ______.

the present value of $100,000 discounted at 12% for 3 years

When a company leases an asset, the party that owns the asset is referred to as the ________ and the party pays for the right to use the asset is referred to as the ________

lessor;leasee

Which of the following would result in a deferred revenue?

sales of subscriptions sales of giftcards

Sally Company manufactures large kitchen appliances. For the first year of purchase, the company will repair any manufacturing defect free of charge. Sally apparently sells its appliances with a _______________

warranty

Which of the following is a guarantee that protects a customer from product defects for a specified period of time?

warranty

The current ratio and working capital are financial measures of ______.

liquidity

Issuing a note payable for cash results in a(n) ______.

increase in assets and and an increase in liabilities

Accruing a liability always involves ______ expenses and ______ liabilities.

increasing; increasing

Which of the following has the highest present value?

$1 annuity compounded annually over 3 years at 5% The present value factor given 3 years is highest for the $1 annuity at 5% with a present value factor of 2.7232, then the $1 annuity at 7% of 2.6243, then the $1 at 5% of 0.8638 and lastly the $1 at 7% of 0.8163.

Which of the following have the same present value given a 10% interest rate compounded annually?

$1 today $1.10 one year from today

On January 1, Year 1, Burrows, Inc. received $8,900 and agreed to pay $10,000 on January 1, Year 3. The market rate of interest is 6% compounded annually. Assuming Notes Payable includes the accrued interest through year-end December 31, Year 2, the journal entry to record the payment of this note on January 1, Year 3 includes a

$10,000 debit to Notes Payable $10,000 credit to Cash At the end of year 1: $534 (=$8,900 x 6%) is debited to Interest Expense and credited to Notes Payable, resulting in a $9,434 Notes Payable balance. At the end of year 2: $566 (=$9,434 x 6%) is debited to Interest Expense and credited to Notes Payable, resulting in a Notes Payable balance of $10,000 (=$9,434 + 566). On the next day, January 1, Year 3, $10,000 is debited to Notes Payable and credited to Cash.

On January 1, 2017, Burrows, Inc. received $16,834 and agreed to pay off the note and interest owed on January 1, 2019. The market rate of interest is 9% compounded annually. The payment made on January 1, 2019 equals a ______ credit to Cash

$20,000

The entry to record the purchase of equipment that requires a $10,000 payment in 2 years includes a ______. The market rate of interest is 9% compounded annually.

$8,417 credit to Notes Payable $8,417 debit to Equipment

Which of the following are long-term liabilities?

Bonds payable due in 20 years Notes payable due in 3 years

On November 1, 2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following?

Credit to Note payable for $100,000 Debit to Cash for $100,000

Which of the following are payroll deductions from an employee's gross earnings?

FICA tax Medicare Federal Income Tax

Which of the following may be classified as contingent liabilities?

Future litigation losses Product warranties Environmental problems

Which financial statements are needed in order to calculate the accounts payable turnover ratio?

Income Statement and Balance Sheet

What kind of account is deferred (or unearned) revenue?

Liability account

Many current liabilities have a direct relationship to the operating activities of a business. Match the operating activity on the statement of cash flows with the related current liability on the balance sheet.

Purchase of inventory - Accounts Payable Cash paid for employee compensation - Accrued Salaries Cash received in advance from customers - Deferred revenues Cash paid for income taxes - Accrued taxes payable

What are the key events that occur with any note payable?

Recording principal paid Accruing interest incurred, but not paid Recording interest paid

Bonds ______.

allow companies to raise more debt capital than a note payable because the bonds are issued to many creditors are sold in established markets making them liquid

Accruing a liability always involves recording both a(n)______ and a liability.

expense

A liability is first recorded at its cash equivalent amount, which ______ interest.

excludes

Acme Enterprises began the new year owing its suppliers $3,000 for merchandise purchased last year. Acme then sold half of this merchandise for $5,000 on account. Two weeks later, Acme paid its suppliers $1,000 and bought another $4,000 of merchandise on account. Acme now has an Accounts payable balance of ______.

$6000 Accounts payable balance = $3,000 - 1,000 + 4,000 = $6,000

Which of the following are examples of annuities?

Mortgage payments Car payments

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20; Medicare $8.70; Federal income tax $58; and State income tax $10. What is John's net pay?

Net pay = $600 - 37.20 - 8.70 - 58 - 10 = $486.10

Which of the following obligations are long-term?

Notes payable due in 2 years 10-year Leases 10-year bonds

Which of the following are long-term liabilities?

Private placement of debt due in 3 years Bonds payable Notes payable due in 3 years

Analysts say that a company has ______ if it has the ability to meet its current obligations.

liquidity

Many current liabilities on the balance sheet, such as Accounts payable, Accrued wages and Deferred revenue, have a direct relationship to _________ activities on the statement of cash flows

operating

True or false: Employers are required to withhold income taxes from employees' pay checks.

True ; Employers are required to withhold income taxes such as federal and state income taxes, and social security taxes.

XYZ borrowed $50,000 this year. Half of the loan will be repaid next year and the remainder will be paid the following year. How will the $50,000 be reported on its balance sheet at the end of this year?

Long-term debt of $25,000; Current portion of long-term debt of $25,000

The feature that distinguishes loss contingencies from other liabilities is the ______ that a loss will occur

likelihood

A bond's maturity date is the date ______.

on which the bond principal will be repaid in full

Today's Fashions has a debt that has been properly reported as long-term debt before this year. Part of this debt is due this year. If Today's Fashions continues to report the current position of the debt as a long-term liability, then ______.

the current ratio will be overstated