Accounting Exam #4

What is an accounts payable turnover?

1.) A measure of the number of times a year a company is able to pay its accounts payable 2.) A measure of liquidity 3.) Purchases on account divided by average accounts payable

On Dec, 31, end of the current year, ABC Company needs to record 4 months of accrued interest on a loan for $10,000 at 5%. The note payable is not due for another 3 months, What is the amount of Interest Payable accrued on Dec 31 of the current year?

10,000 (.05) (4/12) = 167

Equity bank lends Boston furniture company $100,000 on December 1 on a 6% 4-month note. What is the maturity value of the note?

100,000 (0.06) (4/12) = 102,000

A typical credit period for payment is:

30 days

Wacky Welding Co. offers warranties on all products sold. Over the last several years, Wacky's warranty claims have approximated 25% of total sales. Wacky's currently has an Estimated Warranty Payable balance of $5,000, and sales for the year totaled $300,000. What is the amount of warrant expense recorded by Wacky at year end?

300,000 (.02) = 6000

If the accounts payable turnover is 6.7, what is the days' payable outstanding?

365/6.7 = 54

Under IFRS, if it is greater than ____ probability that an obligation is going to arise, and the amount can be estimated, then a provision should be recorded by making a journal entry

50%

Long term liabilities are usually associated with _______?

A purchase of a building (things that are not paid off within 12 months)

Which account is not an example of an accrued liability?

Accounts payable

The most frequently used current liabilities are:

Accounts payable, notes payable and accrued liabilities

All of the following are reported as current liabilities except?

Bonds payable due in 18 months

What are some examples of permanent accounts?

Common stock, Salaries Payable, Acc. Depreciation - Equipment, Unearned Revenue, Acc. Depreciation - Building, Franchise, Notes Payable, Building, Prepaid Rent

How do you compute the purchases from suppliers?

Cost of goods sold + ending inventory - beginning inventory

Nicholas Corp. accrues the interest expense on a short-term note payable at the end of the fiscal year. Due to this transaction:

Current liabilities will increase and stockholders' equity will decrease

Jules Jewelers recorded cash sales of $200,000 on April 24. Jules also collected an additional 6% in sales tax payable to the state of Maryland. Which of the following would be included in the journal entry to record this sales transaction?

Debit to cash $212,000

The accounting principle that requires a company to record warranty expense in the same period that it records sales revenue is the:

Expense recognition principle

Which account would be reported on the income statement?

Interest Expense

The journal entry to record accrued interest on a short-term note payable includes a debit to:

Interest Expense and a credit to Interest Payable

Which number that is not normally reported on the financial statements is needed to calculate the accounts payable turnover ratio?

Purchases from supplies

What are some examples of temporary accounts?

Salaries Expenses, Repairs Expense, Depreciation Expense, Service Revenue, Delivery Expense, Utilities Expense, Rent Expense, Supplies Expense Advertising Expense

The journal entry to accrue salaries earned by employees will debit:

Salary expense for gross pay, credit FICA Tax Payable, credit Employee Income Tax Payable and credit Salary Payable for the net pay

When a business receives cash from customers before earning the revenue, the _____ account is credited

Unearned Revenue

When a company receives cash from customers before earning the revenue, __________ will be credited.

Unearned Revenue

What is not reported as current liabilities?

Unearned revenues for services to be provided in 16 months