Question 1

Benefits are extra compensation items that are not paid directly to an employee.

Accepted Answer

Benefits are additional compensation items that are not paid directly to an employee, such as health insurance, retirement plans, or paid time off.

Question 2

The current portion of long-term notes payable is ________.
A) the amount of principal that will be paid within five years
B) typically included with the long-term liabilities on the balance sheet
C) recorded as an adjusting entry
D) reclassified as current for reporting purposes on the balance sheet

Accepted Answer

The current portion of long-term notes payable refers to the portion of the principal that is due to be paid within the next year, and is therefore classified as a current liability on the balance sheet. It is reclassified as current for reporting purposes on the balance sheet.

Question 3

Mario worked 48 hours during the work week. He earns wages of $18 per hour for straight time (40 hours). The company pays time-and-half for overtime. Mario's gross pay is $864.

Accepted Answer

(40 hours × $18) + (8 hours × $27) = gross pay
$720 + $216 = $936

Question 4

Which of the following accounts will be credited by the borrower when a promissory note is issued?
A) Note Payable
B) Note Receivable
C) Interest Payable
D) Cash

Accepted Answer

When a borrower issues a promissory note, it increases their liability because they are promising to pay a certain amount in the future. Therefore, the Note Payable account, which represents this liability, is credited.

Question 5

On July 1, 2018, Sanchez, Inc. purchased merchandise inventory for $350,000 by signing a note payable. The note is for 6 months and bears interest at a rate of 8%. Prepare the journal entry for this transaction, using a perpetual inventory system. Omit explanation.

Accepted Answer

The answer of On July 1, 2018, Sanchez, Inc. purchased...

Question 6

A journal entry is prepared to reclassify the current portion of a note payable.

Accepted Answer

No journal entry is needed to reclassify the current portion of a note payable.

Question 7

Peter earns $14.50 per hour for straight time (40 hours), and the company pays him time-and-a-half for overtime. He worked 46 hours at his job during the first week of March 2018. What was Peter's gross pay for the week?
A) $667.00
B) $671.50
C) $710.50
D) $1000.50

Accepted Answer

Peter worked 40 hours at his regular rate of $14.50 per hour, which gives him $580.00 in straight time pay. 
For the 6 hours of overtime that he worked, he receives time-and-a-half, which makes his overtime pay rate $14.50 x 1.5= $21.75 per hour.
He worked for 6 hours, so his overtime pay is $21.75 x 6= $130.50.
Adding his straight time pay and his overtime pay, Peter's gross pay for the week is $580.00 + $130.50 = $710.50.

Question 8

The current portion of notes payable is the amount of the principal that is payable more than one year from the balance sheet date.

Accepted Answer

The current portion of notes payable is the amount of the principal that is payable within one year from the balance sheet date.

Question 9

Fleetwood, Inc. signed a three-year note payable for $59,000 at 7% annual interest. What is the interest expense for 2019 if the note was signed on August 1, 2019? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)
A) $2065
B) $1721
C) $12,390
D) $4130

Accepted Answer

To calculate the interest expense for 2019, we need to determine how many months are left in the year after August 1.

There are 5 months remaining in 2019 (August through December).

Interest expense = principal x rate x time
= $59,000 x 7% x 5/12
= $2,912.50

We round this to the nearest dollar, which gives us an interest expense of $2,921.

Therefore, the best choice is B, $1721.

Question 10

On December 31, 2018, Globe, Inc. borrowed $500,000 by signing a five-year, 8% note payable. The note is payable in five yearly installments of $100,000 plus interest, due at the end of every year beginning on December 31, 2019. Which portion is classified as the long-term portion of Notes Payable at December 31, 2018?

Accepted Answer

The answer of On December 31, 2018, Globe, Inc. borrowed...

Question 11

The journal entry for accrued interest on a note payable includes ________.
A) a debit to Interest Expense and credit to Cash
B) a debit to Interest Expense and credit to Interest Payable
C) a debit to Interest Payable and credit to Cash
D) a credit to Interest Expense and debit to Notes Payable

Accepted Answer

Accrued interest on a note payable means that interest has been earned but not yet paid. Therefore, a journal entry should be made to record the amount of interest accrued. This journal entry should include a debit to Interest Expense (since it is an expense incurred) and a credit to Interest Payable (since the interest has been earned but not yet paid).

Question 12

On October 1, 2019, Norway, Inc. borrowed $225,000 by signing a nine-month, 8% note payable. Interest was accrued on December 31, 2019. Prepare the journal entry on July, 1, 2020, the date the note was paid. Omit explanation.

Accepted Answer

The answer of On October 1, 2019, Norway, Inc. borrowed...

Question 13

At the maturity of a note payable, a borrower will pay ________.
A) the principal plus interest
B) the principal amount only
C) the interest amount only
D) the principal minus interest

Accepted Answer

At the maturity of a note payable, the borrower is required to pay back the principal amount borrowed plus the accrued interest. Therefore, the correct choice is A, which states that the borrower will pay the principal plus interest.

Question 14

On December 31, 2018, Barry's, Inc. borrowed $500,000 by signing a five-year, 8% note payable. The note is payable in five yearly installments of $100,000 plus interest, due at the end of every year beginning on December 31, 2019. What amount represents the current portion of Long-term Notes Payable at December 31, 2018?

Accepted Answer

The answer of On December 31, 2018, Barry's, Inc. borrowed...

Question 15

Maywood, Inc. recently signed a $350,000, six-month note on August 22, 2019. The interest rate is 7%. How much interest will be due at maturity?
A) $10,208
B) $24,500
C) $12,250
D) $8167

Accepted Answer

We can use the formula:

Interest = Principle x Rate x Time

Where Principle = $350,000, Rate = 7%, and Time = 6/12 = 0.5

Plugging in these values:

Interest = $350,000 x 0.07 x 0.5 = $12,250

Therefore, the answer is C.

Question 16

Norwood, Inc. signs a $11,000, 8.5%, six-month note dated November 1, 2018. The interest expense recorded for this note in 2018 will be ________. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)
A) $935
B) $156
C) $468
D) $312

Accepted Answer

The interest expense for 2018 can be calculated as follows: Principal ($11,000) * Annual Interest Rate (8.5%) * Time (2 months / 12 months) = $11,000 * 0.085 * (2/12) = $155.83, which rounds to $156.

Question 17

On September 1, 2018, Tri-Cities, Inc. borrowed $125,000 by signing a nine-month, 7.2% note payable. Prepare the journal entry to accrue interest expense on December 31, 2018. Omit explanation.

Accepted Answer

The answer of On September 1, 2018, Tri-Cities, Inc. borrowed...

Question 18

Retirement compensation is a benefit because the employer sets aside money for the employee's future retirement.

Accepted Answer

Retirement compensation is a benefit that is designed to help the employee save for their future retirement by setting aside a certain amount of money from their paycheck. This benefit is usually offered by the employer and can be a great way for employees to save for retirement without having to worry about it themselves.

Question 19

If a long-term debt is paid in installments, the business will report the current portion of the note payable as a current liability.

Accepted Answer

When a long-term debt is paid in installments, the portion of the debt that is due within the current year is reported as a current liability on the balance sheet. This current portion is separated from the long-term portion, which is reported as a long-term liability.

Question 20

On June 30, 2019, Development, Inc. purchased merchandise inventory for $500,000 by signing a six-month, 8% note payable. Prepare the journal entry for the payment of the note on December 30, 2019. Omit explanation.

Accepted Answer

The answer of On June 30, 2019, Development, Inc. purchased...

Quiz 11: Current Liabilities and Payroll

Benefits are extra compensation items that are not paid directly to an employee.

The current portion of long-term notes payable is ________.

Mario worked 48 hours during the work week. He earns wages of $18 per hour for straight time (40 hours). The company pays time-and-half for overtime. Mario's gross pay is $864.

Which of the following accounts will be credited by the borrower when a promissory note is issued?

On July 1, 2018, Sanchez, Inc. purchased merchandise inventory for $350,000 by signing a note payable. The note is for 6 months and bears interest at a rate of 8%. Prepare the journal entry for this transaction, using a perpetual inventory system. Omit explanation.

A journal entry is prepared to reclassify the current portion of a note payable.

Peter earns $14.50 per hour for straight time (40 hours) , and the company pays him time-and-a-half for overtime. He worked 46 hours at his job during the first week of March 2018. What was Peter's gross pay for the week?

The current portion of notes payable is the amount of the principal that is payable more than one year from the balance sheet date.

Fleetwood, Inc. signed a three-year note payable for $59,000 at 7% annual interest. What is the interest expense for 2019 if the note was signed on August 1, 2019? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

The journal entry for accrued interest on a note payable includes ________.

On October 1, 2019, Norway, Inc. borrowed $225,000 by signing a nine-month, 8% note payable. Interest was accrued on December 31, 2019. Prepare the journal entry on July, 1, 2020, the date the note was paid. Omit explanation.

At the maturity of a note payable, a borrower will pay ________.

Maywood, Inc. recently signed a $350,000, six-month note on August 22, 2019. The interest rate is 7%. How much interest will be due at maturity?

Norwood, Inc. signs a $11,000, 8.5%, six-month note dated November 1, 2018. The interest expense recorded for this note in 2018 will be ________. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

On September 1, 2018, Tri-Cities, Inc. borrowed $125,000 by signing a nine-month, 7.2% note payable. Prepare the journal entry to accrue interest expense on December 31, 2018. Omit explanation.

Retirement compensation is a benefit because the employer sets aside money for the employee's future retirement.

If a long-term debt is paid in installments, the business will report the current portion of the note payable as a current liability.

On June 30, 2019, Development, Inc. purchased merchandise inventory for $500,000 by signing a six-month, 8% note payable. Prepare the journal entry for the payment of the note on December 30, 2019. Omit explanation.