Week 5

A company's employees earn $5,000 per day, work 5 days per week (Monday through Friday), and get paid each Friday. If the previous payday was January 26 and the accounting period ends on January 31, what is the ending balance in the wages payable account? $ 9,000 $10,000 $15,000 $25,000

$15,000--$5,000 × 3 days = $15,000

Which of the following statements regarding accounts payable is false? Accounting for accounts payable is really just the flip side of accounts receivable. Accounts payable arise when a business purchases goods or services on credit. Accounts payable arise when a business promises to purchase goods or services in the future. Accounts payable seldom require the payment of interest.

Accounts payable arise when a business promises to purchase goods or services in the future.

An example of a current liability is a note payable that is due in 2 years. True False

False

Which of the following statements regarding liabilities is true? Liabilities must be legally enforceable to a known recipient. Liabilities arise from past activities that require some future sacrifice of economic benefits. The accounting principles followed in the U.S. require that current liabilities be listed in order of decreasing amounts on the balance sheet. The accounting principles followed in the U.S. differ substantially from those of other countries, especially with respect to current liabilities.

Liabilities arise from past activities that require some future sacrifice of economic benefits.

An example of a current liability is a note payable that is due in 8 months. True False

True

An example of a current liability is the current maturity of a long-term debt. True False

True

A long-term lease liability would appear on the balance sheet as stockholder's equity. long-term liability. current asset. long-term asset.

long-term liability.

Which of the following is not classified as a current liability account? accounts payable note payable, due in 2 years salaries and wages payable income taxes payable

note payable, due in 2 years

Long-term debt generally includes obligations that will be satisfied within one year. accounts payable, because they are interest-bearing. obligations that extend beyond one year. accrued expenses.

obligations that extend beyond one year.

A current liability includes obligations which must be repaid within one year. within one year or within the operating cycle, whichever is shorter. within one year or within the operating cycle, whichever is longer. by the end of the operating cycle.

within one year or within the operating cycle, whichever is longer.

Employers withhold taxes from their employees' gross pay and later pay these amounts withheld to the taxing authority. True False

True

Long-term debt generally refers to obligations that extend beyond one year. True False

True

Sales taxes collected from customers should be recorded in a liability account until the cash is passed along to the taxing authority. True False

True

The proceeds from advance ticket sales for a concert to be held next month should be recorded as a current liability. True False

True

When accrual basis accounting matches an expense to a period before it is actually paid, an adjusting entry is necessary to record the accrued expense and corresponding liability. True False

True

A landlord records the collection of a tenant's security deposit as a(n) prepaid expense. liability. contingent liability. contra liability.

liability.

The payment of Accounts Payable results in a(n) decrease in both liabilities and assets. decrease in liabilities and increase in assets. decrease in liabilities and increase in stockholders' equity. increase in liabilities and decrease in stockholders' equity.

decrease in both liabilities and assets.