Question 1

Assuming a 360-day year, when a $50,000, 90-day, 9% interest-bearing note payable matures, total payment will be
A) $51,125
B) $54,500
C) $1,125
D) $4,500

Accepted Answer

Interest on the note payable = (50,000 x 9% x 90/360) = $1,125
Total payment = principal + interest = 50,000 + 1,125 = $51,125.

Question 2

During the first year of operations, a company granted warranties on its products at an estimated cost of $8,500. The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

Accepted Answer

The product warranty expense should be recorded in the same period the revenue from the sale of the warranted products is recognized, not in the years when the expenditures for repairs occur, according to the matching principle in accounting.

Question 3

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
A) 6.25%
B) 10.00%
C) 10.26%
D) 9.75%

Accepted Answer

The answer of Assuming a 360-day year, proceeds of $48,750...

Question 4

Martinez Co. borrowed $50,000 on March 1 of the current year by signing a 60­day, 9%, interest-bearing note. Assuming a 360-day year, when the note is paid on April 30, the entry to record the payment should include a
A) debit to Interest Payable for $750
B) debit to Interest Expense for $750
C) credit to Cash for $50,000
D) credit to Cash for $54,500

Accepted Answer

The interest on the note can be calculated using the formula: 
Interest = (Principal x Rate x Time) / 360 
= ($50,000 x 9% x 60) / 360 
= $750

Therefore, the entry to record the payment should include a debit to Interest Expense for $750. The credit to Cash should be $50,000 since that is the amount borrowed and being paid back. Choice A is incorrect because Interest Payable is a liability account and would have already been recorded when the interest accrued. Choice C is incorrect because it does not account for the payment of interest. Choice D is incorrect because it would overstate the amount of cash received, which includes both the principal and interest.

Question 5

The accounting for defined benefit plans is usually very easy and straightforward.

Accepted Answer

The accounting for defined benefit plans can be complex and involves actuarial calculations to determine the plan's funded status, net periodic pension cost, and other financial statement disclosures. It also requires assumptions about future demographic, economic, and financial events, which can impact the plan's financial position.

Question 6

Notes may be issued
A) when assets are purchased
B) to creditors to temporarily satisfy an account payable created earlier
C) when borrowing money
D) for all of these

Accepted Answer

Notes may be issued for all of these reasons- when assets are purchased, to creditors to temporarily satisfy an account payable created earlier, and when borrowing money.

Question 7

On June 8, Smith Technologies issued a $75,000, 6%, 140-day note payable to Johnson Company. What is the due date of the note?
A) October 28
B) October 27
C) October 26
D) October 25

Accepted Answer

To calculate the due date, we need to add 140 days to the issuance date of June 8. There are 30 days in June, 31 days in July, 31 days in August, 30 days in September, and 14 days in October (140-30-31-31-30). Therefore, the due date is October 26.

Question 8

On June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using the 360-day year, what is the amount of interest revenue recognized by Garcia in the following year?
A) $700
B) $1,600
C) $1,061
D) $4,200

Accepted Answer

First, we need to calculate the interest payable on the note:

$84,000 x 0.05 x (120/360) = $1,400

Since the note extends past the end of Garcia's fiscal year, they will need to accrue interest revenue for the portion of the note that falls within the following year. This can be calculated as follows:

$84,000 x 0.05 x (240/360) = $2,800

Therefore, the total interest revenue recognized by Garcia in the following year is:

$2,800 - $1,400 = $1,400

However, we need to adjust this for the fact that Garcia's fiscal year is only half over when the note is issued. Therefore, Garcia is only entitled to recognize half of the interest revenue for the following year in their current fiscal year. This gives us:

$1,400 x 0.5 = $700

Therefore, the answer is C, $1,061.

Question 9

On July 8, Jones Inc. issued an $80,000, 6%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using the 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year?
A) $700
B) $4,200
C) $307
D) $1,400

Accepted Answer

The formula for calculating interest expense on a note payable is:
Interest Expense = Principal x Rate x Time

In this case, the principal is $80,000, the rate is 6%, and the time is 120/360 (since we're using a 360-day year). So:

Interest Expense = $80,000 x 6% x (120/360)
Interest Expense = $1,600

However, since Jones' fiscal year ends on July 31 and the note is due 120 days after July 8 (i.e. October 6), only a portion of this interest expense will be recognized in the current fiscal year. Specifically, from July 8 to July 31 is 24 days, and from August 1 to October 6 is 67 days (the remaining 29 days are after the end of the fiscal year). So:

Interest Expense in Current Fiscal Year = $1,600 x (24/120 + 67/360)
Interest Expense in Current Fiscal Year = $307.11

Therefore, the correct answer is C) $307.

Question 10

Anderson Co. issued a $50,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay
A) $53,000
B) $50,500
C) $50,000
D) $49,500

Accepted Answer

The answer of Anderson Co. issued a $50,000, 60-day, discounted...

Question 11

A defined contribution plan promises employees a fixed annual pension benefit.

Accepted Answer

A defined contribution plan does not promise employees a fixed annual pension benefit. Instead, the benefit is based on the amount contributed and the performance of investments.

Question 12

Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.

Accepted Answer

The answer of Obligations that may arise from past transactions...

Question 13

Current liabilities are due
A) but not receivable for more than one year
B) but not payable for more than one year
C) and receivable within one year
D) and payable within one year

Accepted Answer

Current liabilities are expected to be paid within one year, so the best choice is D, which states that current liabilities are payable within one year. Choices A and B are incorrect because they imply that current liabilities are not due within one year. Choice C is incorrect because it only addresses the receivables side and not the payable side.

Question 14

On June 8, Williams Company issued an $80,000, 5%, 120-day note payable to Brown Industries. Assuming a 360- day year, what is the maturity value of the note?
A) $82,600
B) $84,000
C) $81,333
D) $88,200

Accepted Answer

Step 1: Find the interest on the note payable: 
Interest = Principal x Rate x Time 
= $80,000 x 5% x 120/360 
= $1,333.33

Step 2: Find the maturity value of the note payable: 
Maturity Value = Principal + Interest 
= $80,000 + $1,333.33 
= $81,333.33

Therefore, the correct answer is C.

Question 15

In a defined benefits plan, the employer bears the investment risks in funding a future retirement income benefit.

Accepted Answer

In a defined benefits plan, the employer is responsible for funding the promised retirement benefit, therefore they also carry the investment risks associated with generating the necessary returns on the plan's assets.

Question 16

When a borrower receives the face amount of a discounted note less the discount, the amount is known as
A) the note proceeds
B) the note discount
C) the note deferred interest
D) the note principal

Accepted Answer

The amount received by the borrower when a discounted note is issued is called the note proceeds. This amount is the face amount of the note less the discount, meaning it is the principal amount of the loan that the borrower will receive. Therefore, option A is the correct answer. Option B refers to the amount of money the lender would receive as a discount from the face amount of the note. Options C and D are not correct because they do not refer to the actual amount of money received by the borrower.

Question 17

The journal entry to record the cost of warranty repairs that were incurred during the current period, but related to sales made in prior years, includes a debit to Warranty Expense.

Accepted Answer

The correct journal entry to record the cost of warranty repairs incurred during the current period for sales made in prior years would include a debit to a liability account (such as Warranty Liability or Accrued Warranty Cost) rather than a debit to Warranty Expense, as the expense was recognized in the period the sale was made, in accordance with the matching principle.

Question 18

In order to be a recorded contingent liability, the liability must be possible and easily estimated.

Accepted Answer

For a liability to be recorded as a contingent liability, it must be both probable and the amount can be reasonably estimated. "Possible" does not meet the threshold for recording; the standard is "probable."

Question 19

On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true?
A) Rodriguez is the creditor and credits Accounts Receivable
B) Wilson is the creditor and debits Accounts Receivable
C) Wilson is the borrower and credits Accounts Payable
D) Rodriguez is the borrower and debits Accounts Payable

Accepted Answer

Rodriguez Co. issued the note payable, so they are the borrower. They will need to record this transaction by debiting the Accounts Payable account. Option A is incorrect because Rodriguez is not the creditor, rather they are the borrower. Option B is incorrect because Wilson Company is not the borrower, rather they are the creditor. Option C is incorrect because Wilson Company is not borrowing any money, rather they are receiving payment on an overdue account payable.

Question 20

Assuming a 360-day year, the interest charged by the bank, at the rate of 6%, on a 90­day, discounted note payable of $100,000 is
A) $6,000
B) $1,500
C) $500
D) $3,000

Accepted Answer

The interest for a 90-day period on a 360-day year is calculated as follows:

Interest = (Principal x Rate x Time) / 360

Here, 
Principal = $100,000 
Rate = 6% 
Time = 90 days

Therefore,

Interest = (100,000 x 6% x 90) / 360

Interest = $1,500

Hence, the interest charged by the bank on a 90-day, discounted note payable of $100,000 at the rate of 6% is $1,500.

Quiz 10: Current Liabilities and Payroll

Assuming a 360-day year, when a $50,000, 90-day, 9% interest-bearing note payable matures, total payment will be

During the first year of operations, a company granted warranties on its products at an estimated cost of $8,500. The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

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

Martinez Co. borrowed $50,000 on March 1 of the current year by signing a 60day, 9%, interest-bearing note. Assuming a 360-day year, when the note is paid on April 30, the entry to record the payment should include a

The accounting for defined benefit plans is usually very easy and straightforward.

Notes may be issued

On June 8, Smith Technologies issued a $75,000, 6%, 140-day note payable to Johnson Company. What is the due date of the note?

On June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using the 360-day year, what is the amount of interest revenue recognized by Garcia in the following year?

On July 8, Jones Inc. issued an $80,000, 6%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using the 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year?

Anderson Co. issued a $50,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay

A defined contribution plan promises employees a fixed annual pension benefit.

Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.

Current liabilities are due

On June 8, Williams Company issued an $80,000, 5%, 120-day note payable to Brown Industries. Assuming a 360- day year, what is the maturity value of the note?

In a defined benefits plan, the employer bears the investment risks in funding a future retirement income benefit.

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

The journal entry to record the cost of warranty repairs that were incurred during the current period, but related to sales made in prior years, includes a debit to Warranty Expense.

In order to be a recorded contingent liability, the liability must be possible and easily estimated.

On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true?

Assuming a 360-day year, the interest charged by the bank, at the rate of 6%, on a 90day, discounted note payable of $100,000 is

Quiz 10: Current Liabilities and Payroll

Assuming a 360-day year, when a $50,000, 90-day, 9% interest-bearing note payable matures, total payment will be

During the first year of operations, a company granted warranties on its products at an estimated cost of $8,500. The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

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

Martinez Co. borrowed $50,000 on March 1 of the current year by signing a 60­day, 9%, interest-bearing note. Assuming a 360-day year, when the note is paid on April 30, the entry to record the payment should include a

The accounting for defined benefit plans is usually very easy and straightforward.

Notes may be issued

On June 8, Smith Technologies issued a $75,000, 6%, 140-day note payable to Johnson Company. What is the due date of the note?

On June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using the 360-day year, what is the amount of interest revenue recognized by Garcia in the following year?

On July 8, Jones Inc. issued an $80,000, 6%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using the 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year?

Anderson Co. issued a $50,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay

A defined contribution plan promises employees a fixed annual pension benefit.

Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.

Current liabilities are due

On June 8, Williams Company issued an $80,000, 5%, 120-day note payable to Brown Industries. Assuming a 360- day year, what is the maturity value of the note?

In a defined benefits plan, the employer bears the investment risks in funding a future retirement income benefit.

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

The journal entry to record the cost of warranty repairs that were incurred during the current period, but related to sales made in prior years, includes a debit to Warranty Expense.

In order to be a recorded contingent liability, the liability must be possible and easily estimated.

On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true?

Assuming a 360-day year, the interest charged by the bank, at the rate of 6%, on a 90­day, discounted note payable of $100,000 is

Martinez Co. borrowed $50,000 on March 1 of the current year by signing a 60day, 9%, interest-bearing note. Assuming a 360-day year, when the note is paid on April 30, the entry to record the payment should include a

Assuming a 360-day year, the interest charged by the bank, at the rate of 6%, on a 90day, discounted note payable of $100,000 is