Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 5

For the following questions, circle the best response.

All of the following are examples of “accrued expense” types of liabilities except the liability for

a. short-term notes taken out at a bank during the year.

b. payroll taxes owed by the employer for the year.

c. property taxes owed to local governments for the year.

d. salaries and wages owed to employees at the end of the year.

e. estimated product warranty costs on products sold during the year.

Step 1 of 6

(a)

A short-term note taken out at a bank during the year is recorded immediately as a Note Payable. It would not be considered an accrued liability because no accrual of expenses occurs on the principle amount borrowed. Only associated interest costs would be considered an accrued liability.