Question 1

Short-term notes payable represent a written promise by the business to pay a debt,without the addition of interest,within one year or less.

Accepted Answer

Short-term notes payable often include interest, which the business agrees to pay in addition to the principal amount within one year or less.

Question 2

Which of the following correctly describes the accounting treatment for interest payable?

Accepted Answer

Interest payable is a current liability that represents the interest expense that has been incurred but has not yet been paid. It is recorded on the balance sheet as a current liability because it is expected to be paid within the next year.

Question 3

Which of the following liabilities is created when a company receives cash for services to be provided in the future?

Accepted Answer

Unearned revenue is a liability that arises when a company receives cash in advance for services or goods to be provided at a later date. It represents a company's obligation to deliver on goods or services that it has received payment for. Accrued liabilities arise when a company has incurred an expense, but has not yet paid for it. Accounts payable is a liability that arises when a company purchases goods or services on credit from a supplier or vendor. Estimated warranty payable is a liability that arises when a company sells a product that comes with a warranty and estimates the costs that it will incur to satisfy warranty claims in the future.

Question 4

On April 1,2019,Orbit Services received $8000 in advance of performing the services from a customer for three months of service - April,May and June.What would be the journal entry to adjust the accounts at the end of May? (Do not round any intermediate calculations,and round your final answer to the nearest dollar.)

Accepted Answer

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Question 5

A $54,000,four-month,12% note payable was issued on October 1,2018.Which of the following would be included in the journal entry required on the note's maturity date by the borrower? (Do not round any intermediate calculations,and round your final answer to the nearest dollar.)

Accepted Answer

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Question 6

A $45,000,two-month,9% note payable was issued on December 1,2018.What is the amount of interest expense recorded in the year 2019? (Round the final calculation to the nearest dollar.)

Accepted Answer

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Question 7

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

Accepted Answer

Accrued interest on a note payable represents interest expense that has been incurred but not yet paid. The journal entry for accrued interest on a note payable includes a debit to Interest Expense (to record the expense) and a credit to Interest Payable (to recognize the liability for the unpaid interest). Option A is incorrect because the credit should be to Interest Payable, not Cash. Option C is incorrect because the debit should be to Interest Expense, not Interest Payable. Option D is incorrect because the credit should be to Interest Payable, not Interest Expense; and there is no need to debit the Notes Payable account since that has already been recorded when the loan was received.

Question 8

Norwood Company 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.)

Accepted Answer

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Question 9

Cash received in advance of providing goods or performing services is recorded as ________.

Accepted Answer

Cash received in advance is considered a liability until the goods are provided or services are performed. This liability is called unearned revenue. Therefore, the correct answer is A - Unearned Revenue.

Question 10

Solutions Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2018,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2018 to September 30,2019.Adjusting entries are made on December 31 of each year.Prepare the journal entry for September 30,2019.Round to two decimal places.Omit explanation.

Accepted Answer

The answer of Solutions Services sells service plans for commercial...

Question 11

When a business records accrued interest expense on a note payable ________.

Accepted Answer

Accrued interest expense on a note payable is a liability and should be recorded by crediting Interest Payable. This entry reflects the obligation of the company to pay the interest on the note. No cash is involved in this transaction, and neither the Note Payable nor Interest Expense accounts are affected because they were already recorded when the note was issued.

Question 12

Fleetwood Company 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.)

Accepted Answer

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Question 13

A $49,000,three-month,12% note payable was issued on December 1,2018.What is the amount of accrued interest on December 31,2018? (Do not round any intermediate calculations,and round your final answer to the nearest dollar.)

Accepted Answer

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Question 14

When borrowing cash from a bank,the business is required to sign a promissory note stating that the business will pay the principal plus interest at a specified maturity date.

Accepted Answer

This statement is true. A promissory note is a legal document that outlines the terms and conditions of a loan, including the repayment schedule, interest rate, and the consequences of defaulting on the loan. When a business borrows money from a bank, it is required to sign a promissory note agreeing to these terms and promising to pay back the loan on a specific maturity date.

Question 15

To compute the interest for notes payable,multiply principal times the annual rate of interest.

Accepted Answer

The formula is principal × interest rate × time.

Question 16

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

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 17

Management Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2019,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2019 to September 30,2020.Prepare the December 31,2019 adjusting entry.Round to two decimal places.Omit explanation.

Accepted Answer

The answer of Management Services sells service plans for commercial...

Question 18

Unearned revenue,for services to be performed in six months,appears on the balance sheet as ________.

Accepted Answer

Unearned revenue is a liability because it represents an obligation to provide services or goods to customers in the future. In this case, the services are to be performed in six months, so it falls under current liabilities in the balance sheet.

Question 19

Jupiter Services sells service plans for commercial computer maintenance.The price for each service plan is $1,650 per year,paid in advance.On October 1,2018,a service plan was sold to a new customer for cash.Prepare the journal entry to record this transaction.Omit explanation.

Accepted Answer

The answer of Jupiter Services sells service plans for commercial...

Question 20

On August 31,2018,Allright Services received $3,500 in advance of performing the service.Which journal entry is needed to record the receipt of cash?

Accepted Answer

When a company receives cash in advance of performing a service, it creates a liability called "Unearned Revenue," as it has not yet earned the revenue. Therefore, we need to Debit Cash $3,500 (as we received the cash) and Credit Unearned Revenue $3,500 (as it is a liability).

Quiz 11: Current Liabilities and Payroll