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Liabilities: practice exam questions

1. Current liabilities are
Due, but not receivable for more than one year
Due, but not payable for more than one year
Due and receivable within one year
Due and payable within one year

2. On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co. What is the due date of the note?
October 8
October 7
October 6
October 5

3. On July 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co. Assume that the fiscal year of Alton Co. ends July 31. Using the 360-day year in your calculations, what is the amount of interest expense recognized by Alton in the current fiscal year?
$1,200.00
$106.67
$306.67
$400.00

4. A business borrowed $40,000 on March 1 of the current year by signing a 30-day, 9% interest bearing note. When the note is paid on March 31, the entry to record the payment should include a
Debit to Interest Payable $300
Debit to Interest Expense $300
Credit to Cash for $40,000
Credit to Cash for $43,600

5. Mobile Co. issued a $45,000, 60-day, discounted note to Guarantee Bank. The discount rate is 6%. At maturity, the borrower will pay:
$45,450
$42,300
$45,000
$44,550

6. The journal entry to record the conversion of an $550 accounts payable to a notes payable would be:

7. The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n)
Payroll expense
Contra account
Asset
Liability

8. An employee receives an hourly rate of $40, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the gross pay for the employee?
$775.00
$1,840.00
$1,960.00
$1,562.60

9. Which of the following are included in the employer's payroll taxes?
SUTA taxes
FUTA taxes
FICA taxes
All of the above

10. Moore Company has the following information for the pay period of December 15 - 31, 20xx.

Salaries Payable would be recorded for
$18,000
$12,950
$12,650
$11,534

11. Which of the following forms is typically given to employees at the end of the calendar year so that employees can file their individual income tax forms?
Employment Withholding Allowance Certificate (W-4)
Wage and Tax Statement (Form W-2)
Employer's Quarterly Federal Tax Return (Form 941)
401k plans

12. During its first year of operations, a company granted employees vacation privileges and pension rights estimated at a cost of $21,500 and $15,000. The vacations are expected to be taken in the next year and the pension rights are expected to be paid in the future 5-30 years. What is the total cost of vacation pay and pension rights to be recognized in the first year?
$15,000
$36,500
$6,500
$21,500

13. The journal entry a company uses to record accrued vacation privileges for its employees at the end of the year is
Debit Vacation Pay Expense; credit Vacation Pay Payable
Debit Vacation Pay Payable; credit Vacation Pay Expense
Debit Salary Expense; credit Cash
Debit Salary Expense; credit Salaries Payable

14. The journal entry a company uses to record pension rights that have not been funded for its salaried employees, at the end of the year is
Debit Salary Expense; credit Cash
Debit Pension Expense; credit Unfunded Pension Liability
Debit Pension Expense; credit Unfunded Pension Liability and Cash
Debit Pension Expense; credit Cash

15. Based on the following data, what is the acid-test ratio, rounded to one decimal point?

3.4
3.0
2.2
1.8

16. Research Company sells merchandise with a one year warranty. In 2009, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2009 and 70% in 2010. In the 2009 income statement, Searches should show warranty expense of
$25,000
$7,500
$17,500
$0

17. Estimating and recording product warranty expense in the period of the sale best follows which of the following accounting concepts?
Cost concept
Business entity concept
Matching Concept
Materiality concept

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1. Current liabilities are
Due, but not receivable for more than one year
Due, but not payable for more than one year
Due and receivable within one year
**Due and payable within one year

Have to be "satisfied" within one year or operating cycle

2. On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co. What is the due date of the note?
October 8
October 7
**October 6
October 5

June = 30 â?" 8 = 22 days
July = 31 days
Aug = 31 days
Sep = 30 days
Total = 114
Oct 6th (6 more days)

3. On July 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co. Assume that the fiscal year of Alton Co. ends July 31. Using the 360-day year in your calculations, what is the amount of interest expense recognized by Alton in the current fiscal year?
$1,200.00
$106.67
**$306.67
$400.00

$306.67 ($80,000 x 6% x 23/360)

4. A business borrowed $40,000 on March 1 of the current year by signing a 30-day, 9% interest bearing note. When the note is paid on March 31, the entry to record the payment should include a
Debit to Interest Payable $300
**Debit to Interest Expense $300
Credit to Cash for $40,000
Credit to Cash for $43,600

40,000 x .09 x 1/12 = $300

5. Mobile Co. issued a $45,000, 60-day, discounted note to Guarantee Bank. The discount rate is 6%. At maturity, the ...

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