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Exam 9: Accounting for Current Liabilities and Payroll

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Question 1

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Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -On December 31,2016,Warren Co.accrued $625 of interest on a $25,000 note it had issued from the National Bank on July 1,2016.The principal and interest on the note are to be repaid on June 30,2017.How would Warrens's year-end adjustment to accrue the interest on the loan affect its financial statements for 2016?

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Question 2

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On October 1,2016,Tankard Company borrowed $45,000 from the bank by issuing a one year 8% interest bearing note. a)Prepare the journal entry to record the issuance of the note. b)Compute the amount of interest expense that will be shown on the 2016 income statement. c)What is the total amount of cash that will be paid to the bank at the maturity of the note on October 1,2017? d)Prepare the liabilities section of the balance sheet at December 31,2016.

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Question 3

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Which of the following represents the correct journal entry to record a taxable cash sale of $400 if the sales tax rate is 5%?

West Company borrowed $10,000 on September 1,2016 from the Valley Bank.West agreed to pay interest annually at the rate of 6% per year.The note issued by West carried an 18-month term.Based on this information the amount of interest expense appearing on West's 2016 income statement would be

The current ratio is calculated as total current assets divided by total assets.

Wythe Company received proceeds of $141,000 from discounting a $150,000,one year,discount note at Centennial Bank. a)What discount rate did the bank use? b)Prepare the journal entry to record the proceeds of the loan.

When is warranty expense usually recognized?

How do the issuance of a note payable,accrual of interest,and repayment of the note's principal and interest each affect a company's Statement of Cash Flows?

The following transactions apply to Baird Corporation. 1)Issued common stock for $40,000 cash. 2)Provided services to customers for $32,000 on account. 3)Borrowed $30,000 on September 1 at 8% interest with a one year term. 4)Purchased land for $32,000 cash. 5)Paid $22,000 for operating expenses. 6)Collected $28,000 cash from customers. 7)Recorded interest on the note payable at year end. 8)Paid $4,000 dividends to stockholders. Required: a)Identify the effect on the statement of cash flows for each of the above transactions.Include the amount and the type of cash flow activity.Cash payments should be entered with a minus sign. b)Classify the above accounting events into one of four types of transactions (asset source,asset use,asset exchange,claims exchange).

Use the following to answer questions Seattle Company issued a $90,000 face value discount note payable to the First Federal Bank on September 1,2016.The note carried a one-year term and a 4% discount rate. -The carrying value of the liability appearing on the December 31,2016 balance sheet will amount to:

Joseph Company is preparing to repay a one-year note on May 1,2016.The first step in this process is to accrue eight months of interest expense.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Charles Company submitted payment for withheld state and federal employment taxes.

Indicate whether each of the following statements is true or false. _____ a)An eight-month,6% note for $10,000 will require the issuer to pay $600 in interest. _____ b)Interest expense is considered an operating expense on the income statement. _____ c)Payment of interest is considered an operating activity on the statement of cash flows. _____ d)Payment of interest on a one-year note due on March 1 will include a reduction in liabilities. _____ e)The adjusting entry to recognize interest expense is an asset use transaction.

The current ratio is a measure of:

Issuing a note payable is a(n)

The party who borrows money in a note payable is known as the

The amount of total liabilities that would appear on Riley's December 31 balance sheets for 2016 and 2017 would be 2016 2017

Flora's Flower Market sells eight potted petunias to a customer for $50.00,plus 5% sales tax.Flora's will recognize $52.50 in sales revenue.

On October 1,2015,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a term of 1 year.The amount of cash that Harrison received on that date was $22,080.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Charles Company recorded accrued vacation pay.