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Exam 8: Current Liabilities

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Question 31

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Universal Travel,Inc.borrowed $500,000 on November 1,2012,and signed a twelve-month note bearing interest at 6%.Principal and interest are payable in full at maturity on October 31,2013.In connection with this note,Universal Travel,Inc.should record interest expense in 2013 in the amount of:

A) $8,000.
B) $30,000.
C) $5,000.
D) $25,000.

E) A) and D)
F) A) and C)

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Question 32

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The following selected transactions relate to liabilities of Deco Emporium whose fiscal year ends on December 31.

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Question 33

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Which of the following is true regarding the relationship between net income reported in the income statement and taxable income reported to the Internal Revenue Service (IRS) ?

On September 1,2012,Allied Moving Corp.borrows $100,000 cash from First National Bank.Allied signs a six-month,6% note payable.Interest is payable at maturity.Allied's year-end is December 31. 1.Record the note payable by Allied Moving Corp. 2.Record the appropriate adjusting entry for the note by Allied Moving Corp.on December 31,2012. 3.Record the payment of the note at maturity.

On December 1,2012,Old World Deli signed a $300,000,5%,six-month note payable with the amount borrowed plus accrued interest due six months later on June 1,2013.Old World Deli records the appropriate adjusting entry for the note on December 31,2012.What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1,2013?

Which of the following are not included in an employer's payroll tax expense?

Consultants notify management of Generic Drug that a prescription medication poses a potential health risk.Legal counsel indicates that a product recall is probable and is estimated to cost the company between $5 and $8 million.How will this affect the company's income statement and balance sheet this period?

Deductions from employee salaries in determining the amount of payroll checks include withholdings for federal and state income taxes,FICA taxes,and the employee portion of insurance and retirement contributions.

The Pita Pit borrowed $100,000 on November 1,2012,and signed a six-month note bearing interest at 12%.Principal and interest are payable in full at maturity on May 1,2013.In connection with this note,The Pita Pit should report interest expense at December 31,2012,in the amount of:

When a company collects sales taxes,the debit is to Cash and the credit is to Sales Tax Payable.

On December 1,2012,Old World Deli signed a $300,000,5%,six-month note payable with the amount borrowed plus accrued interest due six months later on June 1,2013.Old World Deli should record which of the following adjusting entries at December 31,2012?

The acid-test ratio is

Which of the following statements regarding liquidity ratios is false?

Assume that on July 1,2012,Togo's issues a $2 million,one-year note.Interest is payable at maturity.Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions:

United Supply has a $5 million liability at December 31,2012,of which $1 million is payable in each of the next five years.United Supply reports the liability on the balance sheet as:

Sales taxes collected from customers by the seller are not an expense,instead they represent current liabilities payable to the government.

Amplify,Inc.was sued by Sound City for $50,000.Sound City feels very confident that it will win the case and will be awarded the full amount.Amplify,Inc.feels it is probable that it will lose the case and pay Sound City the full amount.Which of the following is correct?

Region Jet has a $50 million liability at December 31,2012,of which $10 million is payable in 2013.In its December 31,2012 balance sheet,the company reports the $50 million debt as

The balance in the Warranty Liability account is always equal to Warranty Expense.

If a company borrows from another company rather than from a bank,the note is referred to as commercial paper.