Accounting Chapter 11

Advances from customers are classified as a(n) a) current liability. b) expense. c) current asset. d) revenue

a) current liability.

If a liability is dependent on a future event, it is called a a) hypothetical liability. b) contingent liability. c )probabilistic liability. d) potential liability.

b) contingent liability.

A retail store does not segregate sales and the amount of sales tax on sales. If the sales tax rate is 5% and the register total amounted to $262,500, what is the amount of the sales taxes owed to the taxing agency? a) $13,125 b) $250,000 c) $12,500 d) $262,500

c) $12,500

Lulzbot.com sells 6,000 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 120 units for a total cost of $6,000. What amount should Lulzbot.com accrue on December 31 for estimated warranty costs? a) $9,000 b) $6,000 c) $3,000 d) $45,000

c) $3,000

A note payable is a) an obligation to provide a service. b) an oral agreement c) a written promise. d) a contingency that is reasonably likely to occur.

c) a written promise.

Current liabilities generally appear with notes payable and accounts payable first, then a) in order of maturity on the balance sheet. b) in increasing order of magnitude on the balance sheet. c) in decreasing order of magnitude on the balance sheet. d) after long-term debt on the balance sheet.

c) in decreasing order of magnitude on the balance sheet.

A contingent liability need only be disclosed in the financial statement notes when the likelihood of the contingency is a) remote. b) probable. c) reasonably possible. d) unlikely.

c) reasonably possible.

By January 31 following the end of a calendar year, an employer is required to provide each employee with a(n) a) federal unemployment tax form 940. b) state unemployment tax form. c) wage and tax statement form W-2. d) employee's withholding allowance certificate form W-4.

c) wage and tax statement form W-2.

Kenny Corsig, an employee of Fenwick Company, has gross earnings for the month of October of $3,000. FICA taxes are 7.65% of gross earnings, federal income taxes amount to $476 for the month, state income taxes are 2% of gross earnings, and authorizes voluntary deductions of $8 per month to the United Way. What is the net pay for Kenny? a) $2,235 b) $2,227 c) $2,295 d) $2,287

b) $2,227

Which of the following employees would likely receive a salary instead of wages? a) Manual laborer b) Sales manager c) Store clerk d) Factory employee

b) Sales manager

With an interest-bearing note, the amount of assets received upon issuance of the note is generally a) greater than the note's face value. b) equal to the note's face value. c) less than the note's face value. d) equal to the note's maturity value

b) equal to the note's face value.

Sales taxes collected by the retailer are recorded as a(n) a) revenue. b) liability. c) asset. d) expense

b) liability

The interest charged on a $50,000 note payable, at the rate of 6%, on a 60-day note would be a)$3,000. b)$1,667. c)$750. d) $500.

d) $500.

Most companies pay current liabilities a) by creating long-term liabilities. b) by issuing interest-bearing notes payable. c) by issuing stock. out of current assets d) out of current assets

d) out of current assets