Accounting Chapter 9 Smartbook

Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense for one year is?

$1,500

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 30,000/3,000 income before taxes and stuff divided by interest expense

Winn Co. signs a 60 day note payable for a $15,000 copy machine with an interest rate of 8%. Winn will record total interest expense of

200 15000 x 0.08 x (60/360) = 200

The form an employer files and submits to the IRS to report FICA tax information is Form

941

Keys Co. is located in Florida. An evacuation has been ordered due to Hurricane Edward, which is headed in the direction of Keys. Keys should record a contingent liability prior to the evacuation.

FALSE

Which of the following contingent liabilities would require a company to record a note to the financial statements?

The liability is possible and is estimated to be $35,000. The liability is possible and cannot be reasonably estimated. The liability is probable and cannot be reasonably estimated.

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

accounts payable

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

Angela Bennett is an employee of Marks Co. This past year, Angela received 1% of Marks net income, in addition to her annual salary. This added benefit is called a:

bonus plan

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

When a company guarantees the payment of debt owed by a supplier, customer or another company, the guarantor usually discloses the guarantee as a (known/contingent) liability.

contingent

Amounts withheld from employee's earnings for employee income tax is considered a Blank______ by the employer until the government is paid.

current liability

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?

debit to accounts payable credit to notes payable

Star Co. reported $10,000 of net income during the month of January. Star estimates that it owes income taxes of $2,000 for the month. The month-end adjusting entry to record this estimate would require which of the following entries?

debit to income tax expense credit to income taxes payable

On June 1, Sawyer Co. borrowed $5,000 by extending their past-due account payable with a 45-day, 12% interest-bearing note. On July 16, the due date, Sawyer pays the amount due in full. Sawyer would record this payment with a ______ to Interest Expense in the amount of ______.

debit; $75

Unemployment taxes are examples of ________ required taxes

employer

A(n) ______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated.

estimated

Simar Sales Co. sells and installs kitchen appliances. Simar guarantees parts and labor for one year after installation. Simar would record potential claims in a(n) ______ account

estimated warranty liability

Which of the following situations is not a contingent liability? future natural disaster possible legal claim against a company debt guarantee or owner probable legal claim against a company

future natural disaster

Each month, a corporation will accrue income taxes based on the month's earnings. To record the income tax for the month, the company will debit the Income Tax Expense account and credit the Blank______ account.

income taxes payable

the difference between the amount borrowed and the amount repaid

interest

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

known liability

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

liability

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

Bina Consulting Co. collected $500 from a customer in advance to provide consulting fees for the next two months. The $500 would be recorded with a debit to Cash and a credit to the Unearned Revenues, which is a(n)

liability account

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

Employee income tax depends on:

number of employee withholding allowances employee's income

A potential legal claim is recorded

only if payment for damages is probable and the amount can be reasonably estimated.

Which of the following items are considered employee benefits?

pension plant medical insurance

Most states require ______ payments and reports.

quarterly

contingent liability can be ignored (not recorded in the financial statements or notes to the financial statements) if it is considered as (probable/reasonably possible/remote) possibility.

remote

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

sales tax payable

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

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

unearned revenue

Which of the following liabilities could be a multi-period known liability?

unearned revenues notes payable

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

unemployment

Abby Co. allows each employee two weeks of paid time off during each calendar year. Since employees are working for 50 weeks, rather than 52 weeks, Abby must accrue the paid time off during the 50 weeks that the employees work. The year-end adjusting entry is recorded as a credit to the _____ account.

vacation benefis payable

A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except:

warranties

A (repair/warranty) is a seller's obligation to replace or fix a product (or service) that fails to perform as expected within a specified period.

warranty

Form 941, which employers use to report FICA and income tax information to the IRS is due

within one month after the end of each calendar quarter