Financial Accounting Final Exam Wiley Practice (Chapter 10)

True/False: Notes payable due for payment within one year of the balance sheet date are usually classified as current liabilities.

True Current portion of long term debt is classified as current liabilities.

True/False: Companies report any balance in an unearned revenue account as a current liability in the balance sheet.

True Unearned revenues are classified as current liabilities.

All of the following are current liabilities except: sales taxes payable. unearned rental revenue. current maturities of long-term debt. all of these answer choices are current liabilities.

all of these answer choices are current liabilities.

Maggie Sharrer Company borrows $88,500 on September 1, 2014, from Sandwich State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2014? $4,425 $10,620 $2,655 $3,540

$3,540 Accrued interest at 12/31/14 is computed as follows: $88,500 X 12% X (4/12) = $3,540. The computation is the face value ($88,500) times the interest rate (12%) times the portion of the year the debt was outstanding (4 months out of 12).

Becky Sherrick Company has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%, the amount to be credited to Sales Revenue is $4,000. $4,300. $4,289.25. None of these answer choices are correct.

$4,300. Dividing the total proceeds ($4,515) by one plus the sales tax rate (1.05) will result in the amount of sales to be credited to the Sales Revenue account ($4,515/1.05 = $4,300).

Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Service Revenue at December 31? $4,500 $18,000 $13,500 $0

$4,500 The monthly premium is $1,500 or $18,000 divided by 12. Sensible has recognized 9 months of insurance revenue (Apr 1-Dec 31), thus 3 months insurance premium (12-9) is still unearned. The amount that Sensible should be report as Unearned Service Revenue is $4,500 (3 months X $1500).

A retail store did not ring up sales tax separately. If the sales tax rate is 5% and the total receipts amounted to $126,000, what is the amount of the sales taxes owed to the taxing agency? $126,000 $6,300 $6,000 $120,000

$6,000 The $126,000 includes BOTH the sales and the sales tax. $126,000/1.05 = $120,000 of sales. Therefore, the sales tax = $126,000 - $120,000 = $6,000.

How would you record redemption of a bond? (3 accounts)

DR bonds payable DR loss of bond payable (if premium) CR cash

How would you journalize the payment of the bond interest? (2 accounts)

DR interest payable CR cash

True/False: A current liability is a debt that the company reasonably expects to pay from existing current assets.

False A current liability is a debt that the company reasonably expects to pay within one year or the operating cycle, whichever is longer.

The time period for classifying a liability as current is one year or the operating cycle, whichever is: probable. possible. longer. shorter.

Longer Because some firms have an operating cycle longer than one year, the time period for classifying a liability as current is one year or the operating cycle, whichever is longer.

The amount of sales tax collected by a retailer is recorded in the: Sales Tax Revenue account. Sales Revenue account. Sales Tax Expense account. Sales Taxes Payable account.

Sales Taxes Payable account.

RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. At December 31: neither the notes payable nor the interest payable is a current liability. the notes payable is a current liability, but the interest payable is not. the interest payable is a current liability but the notes payable is not. both the notes payable and interest payable are current liabilities.

both the notes payable and interest payable are current liabilities. This is a true statement. Both the notes payable and interest payable are current liabilities. Notes due for payment within one year of the balance sheet date are usually classified as current liabilities.

Prepare the journal entry to record the issuance of the bonds. (what 3 accounts)

cash discount/premium on bonds payable bonds payable

Janis Vick has a large consulting practice. New clients are required to pay one-half of the consulting fees up front. The balance is paid at the conclusion of the consultation. How does Vick account for the cash received at the end of the engagement? debit Cash and credit Service Revenue. debit Prepaid Service Fees and Service Revenue. debit Cash and credit Unearned Service Revenue. No entry is required when the engagement is concluded.

debit Cash and credit Service Revenue. you credit to service revenue because at the end they are paying you ALL of the money so there is no money left in the unearned service revenue portion.