PCP - Chapter 9: Accounting for Current Liabilities

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

$1,500 $15,000 x 10% =

On November 1, Wright Co. borrowed $20,000 cash from Third Bank by signing a 90-day, 6% interest-bearing note. On December 31, Wright recorded an adjusting entry to interest expense of $200. On January 30, the due date of the note, Wright will record the payment with a debit to Interest Expense in the amount of

$100 $20,000 x 6% (90/360) = $300 $300 - 200 =

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

$100,000

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 12/1 - 12/31 = 30 days $100,000 x 6% (30/360) =

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

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.

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? -Credit to Unearned Subscriptions -Debit to Subscriptions Earned -Credit to Subscriptions Earned -Credit to Cash -Debit to Cash -Debit to Unearned Subscriptions

Credit to Subscriptions Earned Debit to Unearned Subscriptions

A liability due within one year or the company's operating cycle, whichever is longer.

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? -Credit to Accounts Payable -Debit to Cash -Debit to Accounts Payable -Debit to Notes Payable -Credit to Notes Payable -Credit to Cash

Debit to Accounts Payable Credit to Notes Payable

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? -Debit to Cash -Debit to Unearned Plowing Revenue -Credit to Plowing Revenue -Debit to Plowing Revenue -Credit to Unearned Plowing Revenue -Credit to Cash

Debit to Cash Credit to Unearned Plowing Revenue

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 30 days interest was recorded at 12/31. 60 days interest is recorded on 3/1. $100,000 x 6% (60/360) =

On June 1, Sawyer Co. borrowed $5,000 cash from Crystal Bank by signing a 45-day, 12% interest-bearing note. On July 16, Sawyer pays the amount due in full. Sawyer would record this payment with a (debit/credit) ____ to Interest Expense in the amount of ____.

Debit; $75 $5,000 x 12% (45/360) =

The difference between the amount borrowed and the amount repaid.

Interest

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? -Notes Payable for $10,000 -Interest Expense for $100 -Interest Payable for $50 -Cash for $10,150

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

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

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 cash from Main St. Bank by signing a 60-day, 8% interest-bearing note. On March 1, Avers pays the amount due in full. The March 1 entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash) ____ in the amount of ____.

Notes Payable; $10,000

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 popular magazine subscriptions. During the month of May, the company sells $12,000 in magazines, which will start in June. The adjusting entry to record the $1,000 of subscriptions earned in June will include a debit to which account?

Unearned Subscription Revenue

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 items would be considered a current liability? - Notes payable, due in 14 months -Notes payable, due in 3 months -Wages payable -Accounts payable, terms n/30

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

A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except: -notes payable -payroll obligations -unearned revenues -warranties -accounts payable

Warranties

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 credit to the Unearned Revenues which is a(n) liability account.

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 (debit/credit) ____ to Interest Expense in the amount of ____

debit; $75

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

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

liability account

KRS Co. sells merchandise for $120 and collects sales tax of $12. KRS would record the $12 sales tax with a credit to the Sales Tax

payable

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

$15,000

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 $15,000 x 8% (60/360) =

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 November 1 - December 31 = 60 days $90,000 x 5% (60/360) =

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

Known liabilities

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

Long-term liability on the balance sheet.

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)

Short-term note payable

The Principal of a Note

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

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 cash in the amount of $1,020 $1,000 x 6% (120/360) = $20 $1,000 + $20 =

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

accounts payable

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest 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

interest expense

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.