Accounting Chapters 9-10

On December 1, 2010, Wayne Co. borrows $25,000 cash from Secure Bank by signing a 120-day, 6% interest-bearing note. Wayne will record interest expense of _____ on December 31.

$125

Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio.

10

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On April 8, Lee Co. will pay National Bank a total of $101,500. Principal on the note totals $__________

100,000

Jorge Lopez worked 40 hours this week and earned $1,000 gross salary. Federal and state taxes and other withholdings totaled $350. Jorge's gross pay totals $__________

1000

On July 1, Scene Co. borrowed $15,000 cash from First Bank by signing a 30-day, 5% interest-bearing note. Scene will record this entry with a credit to Notes Payable in the amount of $__________

15000

Damien Co. has $10,000 of unearned revenues on its balance sheet. Damien expects that it will earn $8,000 of these revenues in the upcoming twelve months. How much will be recorded in Long-Term Liabilities?

2,000

Jared's Co. has total assets of $60,000 and total liabilities of $40,000. Its debt-to-equity ratio is ____.

2.0 Reason:Assets=liabilities+equity. $60 assets = $40 liabilities + equity. Equity= ($60 - 40) = $20. $40/$20=2.0

On December 1, Hansen Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen will record an adjusting entry by debiting interest expense in the amount of ______.

500

On June 1, Grey Co. borrows $15,000 cash from National Bank by signing a 120-day, 10% interest-bearing note. Grey will record interest during the year totaling $__________. Using a 360 day year, round your final answer to the nearest whole dollar.

500

Jorge Lopez worked 40 hours this week and earned $1,000. Federal and state taxes, and other withholdings totaled $350. Jorge's net pay totals $__________

650

times interest earned ratio

= Income Before Interest Expense and Income Taxes (EBIT) / Interest Expense

Spot Co. purchases office supplies from Sally Supplies, Inc.. Spot does not pay cash for the purchase, and now owes the amount to Sally. This transaction would typically be recorded in which account in Spot's books?

Accounts Payable

Most bonds require par value to be repaid _______ and interest to be paid _________.

At the maturity date; semiannually

Which of the following statements are disadvantages of bond financing? (Check all that apply.)

Bonds can decrease return on equity; Bonds require payment of interest and par value.

Which of the following statements is an advantage of bond financing?

Bonds do not affect owner control.

Which of the following statements is not an advantage of bond financing?

Bonds require interest payments and payment of par value.

Which of the following is a disadvantage of bond financing?

Bonds require payment of periodic interest and the par value.

_____ bonds give the issuer the option to retire the bonds at a stated dollar amount before maturity.

Callable

Anchor Co. has accrued payroll expense of $1,300 which includes employee withholdings of $400. On payday, Anchor will record the distribution of paychecks with a credit to __________ in the amount of $__________

Cash 900

On March 1, Young Co. borrowed $1,000 by extending their past-due account payable with a 120-day, 6% interest-bearing note. On June 29, the due date, Young pays the amount due in full. This entry would be recorded by Young with a credit to _____ in the amount of ______.

Cash; $1,020

On March 1, Young Co. borrowed $1,000 cash from Superior Bank by signing a 120-day, 6% interest-bearing note. On June 29, Young pays the amount due in full. This entry would be recorded by Young with a credit to _____ in the amount of ______.

Cash; $1,020

Mary's Magazine Sales sells popular magazine subscriptions. During January, Mary collected $1,200 from various customers to provide magazines over the next 12 months. At the end of February, Mary would make an adjusting entry to record one month of magazines subscriptions earned. This transaction would include which of the following entries? (Check all that apply.)

Credit to Subscriptions Earned Debit to Unearned Subscriptions

Patel Paving collected $1,000 cash in advance from a customer to provide paving services next month. The entry to record this cash receipt would include the following entries? (Check all that apply.)

Credit to Unearned Paving Fees Debit to Cash

John Grey owns Grey's Snow Plowing. In October, Grey's collects $12,000 cash for 6 commercial accounts for which he will provide snowplowing for the entire season. To record this transaction, Grey will enter which of the following entries? (Check all that apply.)

Credit to Unearned Plowing Revenue Debit to Cash

Leo Calvin is required to have ______ taxes withheld from his pay in order to cover the cost of future retirement, disability, and survivorship and medical expenses.

FICA

The federal Social Security system provides retirement, disability, survivorship, and medical benefits to qualified workers. Laws require employers to withhold _____ taxes from employees' pay to cover costs of the system.

FICA

Federal government taxes implemented on employers in order to provide unemployment benefits to qualified workers are known as (use acronym)

FUTA

The federal government requires that employers are taxed on employee wages to provide unemployment benefits to qualified workers. These taxes are known as:

FUTA

_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.

Gross pay

Which of the following formulas is used to compute the times interest earned?

Income before interest expense and income tax/interest expense

Bushra Co. replaced a $1,000 account payable balance to Elin Co. with a 120-day, $1,000 note bearing 8% annual interest. Bushra's entry to record this transaction would include a credit to which account?

Notes Payable

Lyon Co. collected $1,200 in sales tax from customers during the month of March. In April, Lyon sent the $1,200 sales tax to the state government. The entry to record payment to the state would include which of the following? (Check all that apply.)

Credit to Cash Debit to Sales Tax Payable

Zilo Co. has accrued employee salary expense of $1,000 which includes employee withholdings that total $300. On payday, Zilo will record the payment with which of the following entries? (Check all that apply.)

Credit to Cash for $700. Debit to Salaries Payable for $700.

Niwa Co. replaced a $3,000 account payable balance to Fiona Co. with a 60-day, $3,000 note bearing 5% annual interest. Niwa's entry to record this transaction would include which of the following entries? (Check all that apply.)

Credit to Notes Payable Debit to Accounts Payable

Fortiz Co. receives $85 for the sale of merchandise with a sales price of $80 and sales tax of $5. The entry to record the $5 sales tax would require which of the following?

Credit to Sales Tax Payable

On December 1, Campbell Co. borrowed $10,000 cash from Second Bank by signing a 90-day, 6% interest-bearing note. On December 31, Campbell accrued interest expense of $50. Campbell does not use reversing entries. On March 1, the due date of the note, Campbell will record the payment with debit entries to which of the following accounts? (Check all that apply.)

Notes Payable for $10,000 Interest Expense for $100 Interest Payable for $50

On June 1, Button Co. borrowed $1,000 cash from National Bank by signing a 120-day, 6% interest-bearing note. Button will record this transaction with a credit to _____ in the amount of ______.

Notes Payable; $1,000

On January 1, Avers Co. borrowed $10,000 by extending their past-due account payable with a a 60-day, 8% interest-bearing note. On March 1, the due date, Avers pays the amount due in full. This entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash)_____ in the amount of _______.

Notes Payable; $10,000

Harvey Co. has current period employee salary expenses of $800. Employee withholdings total $300. The entry to accrue current period payroll will include a credit to Salaries __________ in the amount of $__________

Payable 500

The journal entry to record employer tax accruals includes a debit to:

Payroll Tax Expense

Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?

SUTA

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as (use acronym)

SUTA

Which of the following items would be considered a current liability? (Check all that apply.)

Wages payable Accounts payable, terms n/30 Notes payable, due in 3 months

A liability created by buying goods or services on credit is typically recorded to

accounts payable

Bonds payable to whomever holds them are called _____ bonds or unregistered bonds.

bearer

A(n) __________ is the issuer's written promise to pay an amount equaling the par value. The par value is paid at a specified future date. Most often, the issuer is required to make semiannual interest payments.

bond

Holders of __________ bonds have the right to convert their bonds to stock. When conversion occurs, the bonds' carrying value is transferred to equity accounts and no gain or loss is recognized.

convertible

Teva Co. has current period employee salary expense of $2,000. Employee withholdings total $850. To accrue the current period payroll, Salaries Payable will be (debited/credited) __________ in the amount of ___________.

credited; $1,150

A __________ liability is a liability due to be paid or settled within one year or the company's operating cycle, whichever is longer.

current

Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? (Check all that apply.)

current liabilities long-term liabilities

On December 1, Hansen Co. borrowed $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen recorded an adjusting entry to record interest expense of $500. On March 1, the due date of the note, Hansen will record interest expense as a (debit/credit) ________ in the amount of ______.

debit; $1,000

The ____ ratio helps assess the risk of a company's financing structure by dividing total liabilities by total equity.

debt-to-equity

FICA and unemployment taxes are examples of (employee/employer) __________ taxes.

employee

Most employers are required to withhold ________ from an employee's paycheck. The amount withheld is computed using tables published by the IRS. The amount depends on the employee's annual earnings rate and the number of withholding allowances the employee claims.

federal income taxes

Rachel Ryder is an employee working at Brand-Mart. Rachel earns $35,000 per year and claims three withholding allowances. The amount withheld from her paycheck, using this information, is called federal __________ taxes.

income

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On April 8, Lee Co. will pay National Bank a total of $101,500. The difference between the amount paid back to National Bank of $101,500 and the amount borrowed of $100,000 (or $1,500) represents __________ expense

interest

The formula to compute the times interest earned is income before interest expense and income taxes divided by:

interest expense

A measurable obligation arising from agreements, contracts, or laws is called a __________ liability.

known

A __________ is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

liability

Bryne Co. sells merchandise and collects a 5% state sales tax. The tax is recorded on Bryne's general ledger as a(n) ______ account.

liability

When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account and a(n) ________ account.

liability

Obligations due after one year or one operating cycle, whichever is longer, are considered to be:

long-term liabilities

Ace Company borrowed $10,000 from Fair Rates Bank by signing a two-year note payable. Ace's operating cycle is 14 months. This note would be considered a ______ on the balance sheet.

long-term liability

The par value of a bond, also called the face amount or face value, is paid at a stated future date, known as the bond's __________ date.

maturity

A(n) _______ is a legal agreement that helps to protect a lender if a borrower fails to make required payments on notes or bonds. This agreement gives the lender the right to be paid from the cash proceeds of the sale of the borrower's assets, as identified in the agreement.

mortgage

Star Bank provided cash to a customer, J. Brown, to pay for a building. Star required that Brown also sign a(n) __________ (mortgage/installment/bond) note payable, which allows the bank to be paid by the cash proceeds of the sale of the building if Brown fails to pay on the note.

mortgage note payable

Unearned subscription revenues often consist of liabilities that will come due within one year and beyond one year. This is an example of a _______ known liability.

multi-period

Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions—equals __________ pay.

net

Lyle Co. borrowed $20,000 from First Bank by signing a written promise to pay a definite sum of money on a specific future date. Lyle will record this in the general ledger as a(n) __________ payable.

note

A bond is its issuer's written promise to pay an amount equaling the _____ value of the bond with interest.

par

The ________ value of a bond, also called the face amount or face value, is paid at a stated future date, known as the bond's maturity date.

par

Most bonds require (interest/par) ______ value to be repaid at maturity and (interest/par) ______ to be paid semiannually.

par interest

Employer taxes, such as SUTA, are recorded with a debit to Employer Tax Expense and a credit to SUTA (expense/payable) __________ until payments are submitted to state.

payable

Amounts withheld from an employee's gross pay are called:

payroll deductions

The __________ of a note is the amount that the signer of a note agrees to pay back when it matures, not including interest.

principal

_______ bonds (and notes) mature at more than one date (often in series) and, thus, are usually repaid over a number of periods.

serial

A written promise to pay a specified amount on a stated future date within one year or the company's operating cycle, whichever is longer, is considered a __________.

short-term note payable

Cadie Construction Co. signed a note promising to pay a cement supplier $1,000 60-days from now. As a result of this transaction, Cadie would record a(n) ________ on her balance sheet.

short-term note payable

Many bonds are _______, which reduces the holder's risk by requiring the issuer to set aside assets at specified amounts and dates to repay the bonds.

sinking fund bonds

The ratio of income before interest expense (and any income taxes) divided by interest expense—which reflects the risk of covering interest commitments when income varies—is called the ____________ ratio.

times interest earned

Examples of employee voluntary deductions may include all of the following except:

unemployment taxes.

Employers often withhold other amounts from employees' earnings which arise from employee requests, contracts, unions, or other agreements. These withholdings are called employee __________ and include items such as medical premiums.

voluntary deductions

A known liability arises from a situation with little uncertainty, with set agreements, contracts, or laws. These liabilities are measurable. Known liabilities would include all of the following items, except:

warranties

When recording a liability, a company may not know: (Check all that apply.)

whom to pay. how much to pay. when to pay.

A _____ _____ is similar to a bond payable but is normally transacted with a single lender such as a bank.

Note Payable

_______ bonds (and notes), also called debentures, are backed by the issuer's general credit standing.

Unsecured

__________ is the difference between the amount borrowed and the amount repaid.

Interest

On November 1, Lance Co. borrows $90,000 cash from First Bank by signing a 90-day, 5% interest-bearing note. On December 31, Lance will record an adjusting entry by crediting _______ in the amount of ______.

Interest Payable; $750

FICA tax includes both Social Security tax and _____.

Medicare tax

Which of the following items is not a payroll deduction?

Net pay

Damen's Co. sells merchandise with a list price of $500 and collects sales tax of $50. The sales tax would be recorded with a credit to which account?

Sales Tax Payable

Stalz Co. collected $2,500 in sales tax from customers during the month of February. In March, Stallon sends the $2,500 to the state government. The payment to the state would be recorded with a debit to which account?

Sales tax payable

Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?

Sales tax payable

_______ bonds (and notes) have specific assets of the issuer pledged (or mortgaged) as collateral.

Secured

_____ bonds (and notes) are scheduled for maturity on one specified date.

Term

Which of the following is a true statement concerning the employer FICA taxes:

The employer must pay FICA tax in an amount equal to that paid by the employee.

True or false: A liability can be recorded, even if there is uncertainty of when to pay, how much to pay, or whom to pay.

True

Amounts received in advance from customers for future products or services are typically recorded in a liability account called _______.

Unearned Revenues

A company sells 12-month subscriptions to popular magazines. During the month of May, the company sells $10,000 in magazines, which will start in June. The journal entry to record the sales not yet earned will include a credit to which account?

Unearned Subscription Revenue

Which of the following liabilities could be a multi-period known liability? (Check all that apply.)

Unearned Subscription Revenues Notes Payable