Question 1

Assuming a 360-day year, when a $40,000, 90-day, 9% interest-bearing note payable matures, total payment will amount to:

Accepted Answer

The answer of Assuming a 360-day year, when a $40,000,...

Question 2

The current portion of long-term debt should

Accepted Answer

The current portion of long-term debt is the portion of a long-term debt that is due within the next 12 months from the reporting date. As per the accounting principles, the current portion of long-term debt should be reclassified as a current liability because it is due within one year.

Question 3

The journal entry a company uses to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is

Accepted Answer

The answer of The journal entry a company uses to...

Question 4

Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. are

Accepted Answer

The cash proceeds can be calculated using the formula for the discount: Proceeds = Face Value - (Face Value * Discount Rate * (Time/360)). Here, it's $50,000 - ($50,000 * 6% * (120/360)) = $50,000 - $1,000 = $49,000.

Question 5

A current liability is a debt that is reasonably expected to be paid

Accepted Answer

A current liability is a debt that is reasonably expected to be paid within one year. This can include things like accounts payable, short-term loans, and payroll obligations. While some current liabilities may have longer payment terms, they are still expected to be paid within the current operating cycle of the business, which is typically one year.

Question 6

Mobile Co. issued a $45,000, 60-day, discounted note to Guarantee Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay:

Accepted Answer

The answer of Mobile Co. issued a $45,000, 60-day, discounted...

Question 7

The journal entry a company uses to record the issuance of a note for the purpose of converting an existing account payable would be

Accepted Answer

The answer of The journal entry a company uses to...

Question 8

The journal entry a company uses to record the payment of an interest-bearing note is

Accepted Answer

When a company pays off an interest-bearing note, they must record the payment of both the principal amount (Notes Payable) and the interest expense associated with the loan. Therefore, the correct journal entry would be to debit Notes Payable and Interest Expense and credit Cash. Option A is incorrect because it only records the payment of the principal amount and not the associated interest expense. Option B is incorrect because it implies that the company is paying off an accounts payable, which is a liability owed to a supplier or vendor, rather than a note payable, which is a liability owed to a lender. Option D is incorrect because it incorrectly records interest receivable, which is the amount of interest that a company expects to receive from its borrowers, rather than interest expense, which is the cost of borrowing money.

Question 9

On January 5, 2014, Garrett Company, a calendar-year company, issued $1,000,000 of notes payable, of which $200,000 is due on January 1 for each of the next five years. The proper balance sheet presentation on December 31, 2014, is

Accepted Answer

The $200,000 due within the next year is classified as current liabilities, while the remaining $800,000 is classified as long-term debt. Therefore, the proper balance sheet presentation would be Current Liabilities of $200,000 and Long-term Debt of $800,000.

Question 10

Assuming a 360-day year, when a $30,000, 90-day, 5% interest-bearing note payable matures, total payment will amount to:

Accepted Answer

The interest on the note payable can be calculated as:  
Interest = Principal x Rate x Time  
where Principal is the amount of the note payable, Rate is the interest rate per year, and Time is the number of days the note is outstanding divided by the number of days in a year.  
So, Interest = $30,000 x 5% x (90/360) = $375  
The total payment on the note payable will be the sum of the principal and the interest:  
Total payment = $30,000 + $375 = $30,375

Question 11

Current liabilities are:

Accepted Answer

Current liabilities are obligations that are due and must be paid within one year, or within the normal operating cycle of the business if it is longer than one year. These obligations are typically paid out of current assets, such as cash or accounts receivable. Option A is close, but it is not just receivable; it must be both due and receivable. Option C is incorrect because current liabilities are due within one year, not more than one year. Option D is incorrect because possible subsequent events are not yet certain and therefore do not meet the definition of a current liability.

Question 12

The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n)

Accepted Answer

The amount of federal income taxes withheld from an employee's gross pay is considered a liability as the employer is responsible for remitting that amount to the federal government.

Question 13

Grayson Bank agrees to lend the Trust Company $120,000 on January 1. Trust Company signs a $120,000, 8%, 9-month note. The entry made by Trust Company on January 1 to record the proceeds and issuance of the note is:

Accepted Answer

The entry to record the issuance of the note is a simple debit to Cash for the amount received and a credit to Notes Payable for the same amount, since the note is not discounted (no fees or interest are subtracted from the proceeds at issuance). Therefore, the correct answer is B, which corresponds to this journal entry. The other choices include interest expenses or interest payable, which are not relevant at the issuance of the note but later in its life. Choice C includes an incorrect total amount of cash, which is $120,000, not $129,600. Choice D introduces interest payable and expenses, which are not needed yet.

Question 14

The journal entry a company uses to record the payment of a discounted note is

Accepted Answer

The answer of The journal entry a company uses to...

Question 15

Which of the following would most likely be classified as a current liability?

Accepted Answer

Unearned rent is a liability that arises when rent is collected in advance but the related service or use period has not yet occurred. This is a current liability because it is expected to be settled within one year. The other choices are long-term liabilities because they will be settled over a period longer than one year.

Question 16

Proper payroll accounting methods are important for a business for all the reasons below except

Accepted Answer

Delaying payroll tax payments to federal and state agencies is not a proper accounting method and can result in penalties and legal consequences. The other options are all valid reasons why proper payroll accounting methods are important for a business.

Question 17

The journal entry to record the conversion of an $4,700 accounts payable to a notes payable would be:

Accepted Answer

To record the conversion of an accounts payable to a notes payable, we need to debit the accounts payable account and credit the notes payable account. Therefore, the correct journal entry would be Accounts Payable 4,700 and Notes Payable 4,700. Option D is the only choice that correctly reflects this journal entry. Option A is incorrect as it involves cash which is not involved in the conversion of accounts payable to notes payable. Option B is incorrect as it involves notes receivable which is not correct in our scenario. Option C is incorrect as it debits notes payable instead of accounts payable which is the account that needs to be debited.

Question 18

On October 30, Seba Salon, Inc. issued a 90-day note with a face amount of $60,000 to Reyes Products, Inc. for merchandise inventory. Assuming a 360-day year, determine the proceeds of the note assuming the note is discounted at 8%.

Accepted Answer

The answer of On October 30, Seba Salon, Inc. issued...

Question 19

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

Accepted Answer

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

Question 20

The journal entry a company uses to record the issuance of a discounted note for the purpose of borrowing funds for the business is

Accepted Answer

The answer of The journal entry a company uses to...

Quiz 11: Current Liabilities and Payroll

Assuming a 360-day year, when a $40,000, 90-day, 9% interest-bearing note payable matures, total payment will amount to:

The current portion of long-term debt should

The journal entry a company uses to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is

Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. are

A current liability is a debt that is reasonably expected to be paid

Mobile Co. issued a $45,000, 60-day, discounted note to Guarantee Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay:

The journal entry a company uses to record the issuance of a note for the purpose of converting an existing account payable would be

The journal entry a company uses to record the payment of an interest-bearing note is

On January 5, 2014, Garrett Company, a calendar-year company, issued $1,000,000 of notes payable, of which $200,000 is due on January 1 for each of the next five years. The proper balance sheet presentation on December 31, 2014, is

Assuming a 360-day year, when a $30,000, 90-day, 5% interest-bearing note payable matures, total payment will amount to:

Current liabilities are:

The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n)

Grayson Bank agrees to lend the Trust Company $120,000 on January 1. Trust Company signs a $120,000, 8%, 9-month note. The entry made by Trust Company on January 1 to record the proceeds and issuance of the note is:

The journal entry a company uses to record the payment of a discounted note is

Which of the following would most likely be classified as a current liability?

Proper payroll accounting methods are important for a business for all the reasons below except

The journal entry to record the conversion of an $4,700 accounts payable to a notes payable would be:

On October 30, Seba Salon, Inc. issued a 90-day note with a face amount of $60,000 to Reyes Products, Inc. for merchandise inventory. Assuming a 360-day year, determine the proceeds of the note assuming the note is discounted at 8%.

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

The journal entry a company uses to record the issuance of a discounted note for the purpose of borrowing funds for the business is