Question 1

In order to be a recorded contingent liability,the liability must be possible and easily estimated.

Accepted Answer

For a liability to be recorded as a contingent liability, it must be both probable and the amount can be reasonably estimated. "Possible" does not meet the threshold for recording; the standard is "probable."

Question 2

The accounting for defined benefit plans is usually very easy and straightforward.

Accepted Answer

The accounting for defined benefit plans involves complex calculations, such as determining the present value of future benefit payments and estimating the return on plan assets. These calculations require actuarial expertise and can be complicated and time-consuming.

Question 3

During the first year of operations,a company granted warranties on its products at an estimated cost of $8,500.The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

Accepted Answer

The product warranty expense should be recorded in the same period the revenue from the sale of the warranted products is recognized, not in the years when the expenditures for repairs occur, according to the matching principle in accounting.

Question 4

The journal entry to record the cost of warranty repairs that were incurred during the current period,but related to sales made in prior years,includes a debit to Warranty Expense.

Accepted Answer

The correct journal entry to record the cost of warranty repairs incurred during the current period for sales made in prior years would include a debit to a liability account (such as Warranty Liability or Accrued Warranty Cost) rather than a debit to Warranty Expense, as the expense was recognized in the period the sale was made, in accordance with the matching principle.

Question 5

Notes may be issued
A)when assets are purchased
B)to creditors to temporarily satisfy an account payable created earlier
C)when borrowing money
D)for all of these

Accepted Answer

Notes may be issued for all of these reasons: when assets are purchased to secure financing, to creditors to temporarily satisfy an account payable created earlier, and when borrowing money from a financial institution or individual.

Question 6

On May 18,Rodriguez Co.issued an $84,000,6%,120-day note payable on an overdue account payable to Wilson Company.Assume that the fiscal year of Rodriguez ends on June 30.Which of the following relationships is true?
A)Rodriguez is the creditor and credits Accounts Receivable
B)Wilson is the creditor and debits Accounts Receivable
C)Wilson is the borrower and credits Accounts Payable
D)Rodriguez is the borrower and debits Accounts Payable

Accepted Answer

Rodriguez Co. is the borrower of the note payable, so they would debit Accounts Payable. Wilson Company is the creditor, and they would credit Notes Payable. Neither Accounts Receivable nor Accounts Payable are affected in this transaction. Option B is incorrect because Wilson Company is not owed any money on their Accounts Receivable. Option A is incorrect because Rodriguez Co. is not owed any money on their Accounts Receivable. Option C is incorrect because Wilson Company is not borrowing any money.

Question 7

On June 8,Williams Company issued an $80,000,5%,120-day note payable to Brown Industries.Assuming a 360- day year,what is the maturity value of the note?
A)$82,600
B)$84,000
C)$81,333
D)$88,200

Accepted Answer

First, we need to calculate the interest on the note using the formula:

interest = principal x rate x time

where time is always expressed in terms of a fraction of a year. In this case, the time is 120/360 = 1/3.

So, the interest on the note is:

interest = $80,000 x 0.05 x 1/3 = $1,333.33

Next, we need to add the interest to the principal to get the maturity value:

maturity value = principal + interest = $80,000 + $1,333.33 = $81,333.33

Therefore, the best choice is C, which is $81,333.

Question 8

Anderson Co.issued a $50,000,60-day,discounted note to National Bank.The discount rate is 6%.At maturity,assuming a 360-day year,the borrower will pay
A)$53,000
B)$50,500
C)$50,000
D)$49,500

Accepted Answer

The answer of Anderson Co.issued a $50,000,60-day,discounted note to National...

Question 9

On June 8,Smith Technologies issued a $75,000,6%,140-day note payable to Johnson Company.What is the due date of the note?
A)October 28
B)October 27
C)October 26
D)October 25

Accepted Answer

To find the due date, we need to add the number of days in the note to the date it was issued.

June has 30 days, and adding 140 days will give us a total of 170 days.

Counting forward 170 days from June 8 gives us October 26 as the due date.

Therefore, the answer is choice C.

Question 10

Current liabilities are due
A)but not receivable for more than one year
B)but not payable for more than one year
C)and receivable within one year
D)and payable within one year

Accepted Answer

Current liabilities are those that are expected to be settled within one year or the operating cycle, whichever is longer. Therefore, option D ("and payable within one year") is the correct choice.

Question 11

Assuming a 360-day year,proceeds of $48,750 were received from discounting a $50,000,90-day note at a bank.The discount rate used by the bank in computing the proceeds was
A)6.25%
B)10.00%
C)10.26%
D)9.75%

Accepted Answer

The answer of Assuming a 360-day year,proceeds of $48,750 were...

Question 12

A defined contribution plan promises employees a fixed annual pension benefit.

Accepted Answer

A defined contribution plan does not promise a fixed annual pension benefit. The employer and employee contribute to the plan, and the benefit received is based on the amount contributed and investment earnings. Therefore, the benefit is not fixed and can vary depending on market performance.

Question 13

When a borrower receives the face amount of a discounted note less the discount,the amount is known as
A)the note proceeds
B)the note discount
C)the note deferred interest
D)the note principal

Accepted Answer

The note proceeds refer to the actual amount received by the borrower after deducting the discount from the face value of the discounted note. So, option A is the correct answer. Option B is incorrect as note discount refers to the amount of the discount itself. Option C is incorrect as deferred interest is the amount of interest that accrues but is not paid until some future date. Option D is incorrect as note principal refers to the face value of the discounted note before deducting any discounts.

Question 14

Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.

Accepted Answer

The answer of Obligations that may arise from past transactions...

Question 15

Martinez Co.borrowed $50,000 on March 1 of the current year by signing a 60­day,9%,interest-bearing note.Assuming a 360-day year,when the note is paid on April 30,the entry to record the payment should include a
A)debit to Interest Payable for $750
B)debit to Interest Expense for $750
C)credit to Cash for $50,000
D)credit to Cash for $54,500

Accepted Answer

The interest on the note can be calculated using the formula:

Interest = Principal x Rate x Time

Time is calculated as 60/360 = 1/6 of a year.

Interest = $50,000 x 0.09 x 1/6 = $750

Since the note is being paid off, the entry would be to debit the liability account (Notes Payable) for $50,000, debit the expense account (Interest Expense) for $750, and credit the asset account (Cash) for $50,750 ($50,000 + $750 interest). Therefore, the correct option is B, debit to Interest Expense for $750.

Question 16

On June 1,Davis Inc.issued an $84,000,5%,120-day note payable to Garcia Company.Assume that the fiscal year of Garcia ends June 30.Using the 360-day year,what is the amount of interest revenue recognized by Garcia in the following year?
A)$700
B)$1,600
C)$1,061
D)$4,200

Accepted Answer

First, we need to calculate the interest on the note payable:
$84,000 x 5% x (120/360) = $1,400

Since the note was issued on June 1 and Garcia's fiscal year ends on June 30, only one month of interest will be recognized in that fiscal year:
$1,400 x (30/360) = $117

The remaining $1,283 ($1,400-$117) will be recognized in the following fiscal year. Therefore, the amount of interest revenue recognized by Garcia in the following year is $1,283, which is closest to option C ($1,061).

Question 17

Assuming a 360-day year,when a $50,000,90-day,9% interest-bearing note payable matures,total payment will be
A)$51,125
B)$54,500
C)$1,125
D)$4,500

Accepted Answer

Total payment = [$50,000 + ($50,000 × 9% × 90 ÷ 360)] = $51,125

Question 18

Assuming a 360-day year,the interest charged by the bank,at the rate of 6%,on a 90­day,discounted note payable of $100,000 is
A)$6,000
B)$1,500
C)$500
D)$3,000

Accepted Answer

To calculate the interest charged by the bank, we need to use the simple interest formula:
Interest = Principal x Rate x Time
Here, the Principal (P) is $100,000, the Rate (R) is 6%, and the Time (T) is 90 days.
However, since we are assuming a 360-day year, we need to convert the time from days to years by dividing by 360:
T = 90/360 = 0.25 years
Now we can plug in the values and solve for the Interest:
Interest = $100,000 x 0.06 x 0.25 = $1,500
Therefore, the answer is B) $1,500.

Question 19

On July 8,Jones Inc.issued an $80,000,6%,120-day note payable to Miller Company.Assume that the fiscal year of Jones ends July 31.Using the 360-day year,what is the amount of interest expense recognized by Jones in the current fiscal year?
A)$700
B)$4,200
C)$307
D)$1,400

Accepted Answer

The formula for interest expense is:

Interest Expense = Principal x Interest Rate x Time

First, we need to find the interest rate per day:

6% annual rate / 360 days per year = 0.0167 (rounded to four decimal places)

Next, we need to find how many days of the 120-day period fall within the current fiscal year:

July 8 to July 31 = 24 days
24 / 120 = 0.2 (fraction of days in current fiscal year)

Finally, we can calculate the interest expense for the current fiscal year:

Interest Expense = $80,000 x 0.0167 x 0.2 = $267.20 (rounded to nearest cent)

Therefore, the answer is C) $307.

Question 20

In a defined benefits plan,the employer bears the investment risks in funding a future retirement income benefit.

Accepted Answer

In a defined benefits plan, the employer is responsible for providing a specific retirement income benefit to the employee. This means that the employer must bear the investment risks in order to ensure that the required level of retirement income is available when the employee retires.

Quiz 10: Current Liabilities and Payroll

In order to be a recorded contingent liability,the liability must be possible and easily estimated.

The accounting for defined benefit plans is usually very easy and straightforward.

During the first year of operations,a company granted warranties on its products at an estimated cost of $8,500.The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

The journal entry to record the cost of warranty repairs that were incurred during the current period,but related to sales made in prior years,includes a debit to Warranty Expense.

Notes may be issued

On May 18,Rodriguez Co.issued an $84,000,6%,120-day note payable on an overdue account payable to Wilson Company.Assume that the fiscal year of Rodriguez ends on June 30.Which of the following relationships is true?

On June 8,Williams Company issued an $80,000,5%,120-day note payable to Brown Industries.Assuming a 360- day year,what is the maturity value of the note?

Anderson Co.issued a $50,000,60-day,discounted note to National Bank.The discount rate is 6%.At maturity,assuming a 360-day year,the borrower will pay

On June 8,Smith Technologies issued a $75,000,6%,140-day note payable to Johnson Company.What is the due date of the note?

Current liabilities are due

Assuming a 360-day year,proceeds of $48,750 were received from discounting a $50,000,90-day note at a bank.The discount rate used by the bank in computing the proceeds was

A defined contribution plan promises employees a fixed annual pension benefit.

When a borrower receives the face amount of a discounted note less the discount,the amount is known as

Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.

Martinez Co.borrowed $50,000 on March 1 of the current year by signing a 60day,9%,interest-bearing note.Assuming a 360-day year,when the note is paid on April 30,the entry to record the payment should include a

On June 1,Davis Inc.issued an $84,000,5%,120-day note payable to Garcia Company.Assume that the fiscal year of Garcia ends June 30.Using the 360-day year,what is the amount of interest revenue recognized by Garcia in the following year?

Assuming a 360-day year,when a $50,000,90-day,9% interest-bearing note payable matures,total payment will be

Assuming a 360-day year,the interest charged by the bank,at the rate of 6%,on a 90day,discounted note payable of $100,000 is

On July 8,Jones Inc.issued an $80,000,6%,120-day note payable to Miller Company.Assume that the fiscal year of Jones ends July 31.Using the 360-day year,what is the amount of interest expense recognized by Jones in the current fiscal year?

In a defined benefits plan,the employer bears the investment risks in funding a future retirement income benefit.

Quiz 10: Current Liabilities and Payroll

In order to be a recorded contingent liability,the liability must be possible and easily estimated.

The accounting for defined benefit plans is usually very easy and straightforward.

During the first year of operations,a company granted warranties on its products at an estimated cost of $8,500.The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

The journal entry to record the cost of warranty repairs that were incurred during the current period,but related to sales made in prior years,includes a debit to Warranty Expense.

Notes may be issued

On May 18,Rodriguez Co.issued an $84,000,6%,120-day note payable on an overdue account payable to Wilson Company.Assume that the fiscal year of Rodriguez ends on June 30.Which of the following relationships is true?

On June 8,Williams Company issued an $80,000,5%,120-day note payable to Brown Industries.Assuming a 360- day year,what is the maturity value of the note?

Anderson Co.issued a $50,000,60-day,discounted note to National Bank.The discount rate is 6%.At maturity,assuming a 360-day year,the borrower will pay

On June 8,Smith Technologies issued a $75,000,6%,140-day note payable to Johnson Company.What is the due date of the note?

Current liabilities are due

Assuming a 360-day year,proceeds of $48,750 were received from discounting a $50,000,90-day note at a bank.The discount rate used by the bank in computing the proceeds was

A defined contribution plan promises employees a fixed annual pension benefit.

When a borrower receives the face amount of a discounted note less the discount,the amount is known as

Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.

Martinez Co.borrowed $50,000 on March 1 of the current year by signing a 60­day,9%,interest-bearing note.Assuming a 360-day year,when the note is paid on April 30,the entry to record the payment should include a

On June 1,Davis Inc.issued an $84,000,5%,120-day note payable to Garcia Company.Assume that the fiscal year of Garcia ends June 30.Using the 360-day year,what is the amount of interest revenue recognized by Garcia in the following year?

Assuming a 360-day year,when a $50,000,90-day,9% interest-bearing note payable matures,total payment will be

Assuming a 360-day year,the interest charged by the bank,at the rate of 6%,on a 90­day,discounted note payable of $100,000 is

On July 8,Jones Inc.issued an $80,000,6%,120-day note payable to Miller Company.Assume that the fiscal year of Jones ends July 31.Using the 360-day year,what is the amount of interest expense recognized by Jones in the current fiscal year?

In a defined benefits plan,the employer bears the investment risks in funding a future retirement income benefit.

Martinez Co.borrowed $50,000 on March 1 of the current year by signing a 60day,9%,interest-bearing note.Assuming a 360-day year,when the note is paid on April 30,the entry to record the payment should include a

Assuming a 360-day year,the interest charged by the bank,at the rate of 6%,on a 90day,discounted note payable of $100,000 is