Question 1

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 2

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. Determine the proceeds of the note assuming the note is discounted at 8%.

Accepted Answer

To calculate the proceeds of the note, we need to first find the discount, which is calculated by multiplying the face amount of the note by the discount rate and the time period in days (90/360, since it is a 90-day note).

Discount = $60,000 x 0.08 x 90/360 = $1,200

The proceeds of the note is calculated by subtracting the discount from the face amount:

Proceeds = Face Amount - Discount
Proceeds = $60,000 - $1,200
Proceeds = $58,800

Therefore, the correct answer is C) $58,800.

Question 3

Grayson Bank agrees to lend the Trust Company $100,000 on January 1. Trust Company signs a $100,000, 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

Trust Company receives cash of $100,000 from Grayson Bank, and issues a note payable for the same amount, with an interest rate of 8% and a term of 9 months. Therefore, the correct entry is to record the cash received and the note payable issued, with no interest expense or interest payable recorded yet. Choice A is incorrect because it records interest expense before it is due. Choice C is incorrect because it records the cash received and an additional $8,000 interest expense, which is not due until later. Choice D is incorrect because it records interest payable, which is not due until later, and also records interest expense before it is due.

Question 4

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 5

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

Accepted Answer

A current liability is defined as a debt that is expected to be paid within one year or within the operating cycle of a business, whichever is longer. This means that the debt must be payable within a relatively short period of time and can be reasonably expected to be paid using current assets or by the creation of other current liabilities. Therefore, choice (C) "within one year" is the best answer.

Question 6

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 7

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 8

Current liabilities are:

Accepted Answer

Current liabilities are those that are due and to be paid out of current assets within one year. This includes obligations such as accounts payable, short-term loans, and accrued expenses. Option A is partially correct, but it's the latter part of the definition that makes option B the best choice. Option C is incorrect because liabilities due more than one year from the balance sheet date are classified as long-term liabilities. Option D is incorrect because liabilities that are only payable if a possible subsequent event occurs are considered contingent liabilities.

Question 9

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

Accepted Answer

Delaying payments of payroll taxes to federal and state agencies is not a proper payroll accounting method, as it can lead to legal and financial consequences for the business. Therefore, this option does not belong with the other reasons that highlight the importance of proper payroll accounting methods. A, B, and D are correct as they emphasize the importance of accurate and timely payroll processing, compliance with regulations, and the impact of payroll on the financial statements of a business.

Question 10

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 11

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 12

On January 5, 2012, Garrett Company, a calendar-year company, issued $500,000 of notes payable, of which $100,000 is due on January 1 for each of the next five years. The proper balance sheet presentation on December 31, 2012, is

Accepted Answer

The $100,000 due within the next year is classified as a current liability, while the remaining $400,000 is classified as long-term debt.

Question 13

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

Accepted Answer

Unearned rent is a liability because it represents income received in advance for services or goods that have not yet been provided. The other options are long-term liabilities because they do not need to be paid within the next year.

Question 14

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 15

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 in their financial records. The payment involves two parts: repayment of the principal amount borrowed (Notes Payable) and payment of the interest accrued on the loan (Interest Expense). Therefore, the appropriate journal entry would be to debit both Notes Payable and Interest Expense and credit Cash. Option C is the only choice that correctly reflects this double-entry transaction. Option A only reflects the repayment of the principal amount borrowed, while options B and D do not account for the interest expense.

Question 16

The journal entry to record the conversion of an $550 accounts payable to a notes payable would be:

Accepted Answer

To record the conversion of accounts payable to notes payable, we need to debit accounts payable account and credit the notes payable account. Hence, option D is the correct answer. Option A is incorrect because it involves cash and not applicable in this scenario. Option B is incorrect as it involves notes receivable which is not relevant in this situation. Option C is also incorrect as it involves cash and not applicable here.

Question 17

The current portion of long-term debt should

Accepted Answer

The current portion of long-term debt represents the portion of long-term debt that is due within one year. Therefore, it should be reclassified as a current liability on the balance sheet.

Question 18

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...

Question 19

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 20

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 since it is money that the employer owes to the government on behalf of the employee.

Quiz 10: Current Liabilities and Payroll

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:

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. Determine the proceeds of the note assuming the note is discounted at 8%.

Grayson Bank agrees to lend the Trust Company $100,000 on January 1. Trust Company signs a $100,000, 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 issuance of a note for the purpose of converting an existing account payable would be

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

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 payment of a discounted note is

Current liabilities are:

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

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

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

On January 5, 2012, Garrett Company, a calendar-year company, issued $500,000 of notes payable, of which $100,000 is due on January 1 for each of the next five years. The proper balance sheet presentation on December 31, 2012, is

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

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

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

The journal entry to record the conversion of an $550 accounts payable to a notes payable would be:

The current portion of long-term debt should

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

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

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