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Exam 10: Liabilities: Current,installment Notes,and Contingencies

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Question 81

True/False

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​The interest portion of an installment note payment is computed by multiplying the interest rate by the carrying amount of the note at the end of the period.

A) True
B) False

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Question 82

Multiple Choice

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The journal entry to record the monthly payroll on April 30 would include a

A) credit to Salaries Payable for $8,150
B) debit to Salaries Expense for $7,902
C) debit to Salaries Payable for $8,150
D) debit to Salaries Payable for $7,902

E) A) and C)
F) All of the above

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Question 83

Multiple Choice

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The journal entry a company uses to record the estimated product warranty liability expense is

​An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31,of the first year,for each of the next five years.After the final payment,the carrying amount on the note will be​

Depending upon when an unfunded pension liability is to be paid,it will be classified on the balance sheet as either a long-term or a current liability.

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

Match the following terms or phrases in (a-g) with the explanations in 1-8.Terms or phrases may be used more than once. -Reasonably possible likelihood of a liability

The amount of money a borrower receives from the lender is called the discount rate.

Several months ago,Jones Company experienced a spill of hazardous materials into the White River from one of its plants.As a result,the Environmental Protection Agency (EPA)fined the company $405,000.The company contested the fine.In addition,an employee is seeking $180,000 damages related to the spill.Finally,a homeowner has sued the company for $260,000.Although the homeowner lives 30 miles downstream from the plant,he believes that the spill has reduced his home's resale value by $260,000. Jones' legal counsel believes the following will happen in relationship to these incidents: ​

The current assets and current liabilities for Kolbie Company and Newton Company are as follows: ​ *These represent prepaid expenses and other non-quick current assets. (a)Determine the quick ratio for both companies.Round to two decimal places. (b)Interpret the quick ratio difference between the two companies.

Which of the following taxes are employers required to withhold from employees?

Scott Company sells merchandise with a one-year warranty.Sales consisted of 2,500 units in Year 1 and 2,000 units in Year 2.It is estimated that warranty repairs will average $10 per unit sold,and 30% of the repairs will be made in Year 1 and 70% in Year 2 for the Year 1 sales.Similarly,30% of repairs will be made in Year 2 and 70% in Year 3 for the Year 2 sales.In the Year 3 income statement,how much of the warranty expense shown will be due to Year 1 sales?

An employee's take-home pay is equal to gross pay less all voluntary deductions.

List five internal controls that relate directly to payroll.

Taylor Bank lends Guarantee Company $150,000 on January 1.Guarantee Company signs a $150,000,8%,9-month,interest-bearing note.The entry made by Guarantee Company on January 1 to record the proceeds and issuance of the note is ​

An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week.Assume that the employee worked 60 hours during the week,and that the gross pay prior to the current week totaled $58,000.Assume further that the social security tax rate was 6.0%,the Medicare tax rate was 1.5%,and the federal income tax to be withheld was $614. ​ (a)Determine the gross pay for the week. (b)Determine the net pay for the week.

Match the following terms or phrases in (a-g) with the explanations in 1-8.Terms or phrases may be used more than once. -Current assets / Current liabilities

During the first year of operations,employees earned vacation pay of $35,000.The vacations will be taken during the second year.The vacation pay expense should be recorded in the second year as the vacations are taken by the employees.

Use the following key (a-d) to identify the proper treatment of each contingent liability. -Event is reasonably possible and amount is estimable

Which of the following is the most desirable quick ratio?