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Exam 10: Liabilities: Current, Installment Notes, and Contingencies

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Question 101

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Hadley Industries warrants its products for one year. The estimated product warranty expense is 4% of sales. Assume that sales were $210,000 for June. In July, a customer received warranty repairs requiring $205 of parts and $75 of labor.(a)Journalize the adjusting entry required at June 30, the end of the first month of the current year, to record the estimated product warranty expense.(b)Journalize the entry to record the warranty work provided in July.

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(a)Product Warranty Expense
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Question 102

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Match the following terms or phrases in (a-g) with the explanations in 1-8. Terms or phrases may be used more than once. -Current assets/Current liabilities A)Current ratio B)Working capital C)Quick assets D)Quick ratio E)Record an accrual and disclose in the notes to the financial statements F)Disclose only in notes to financial statements G)No disclosure needed in notes to financial statements

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Question 103

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Use the following key (a-d) to identify the proper treatment of each contingent liability.a.Record only b.Record and disclose c.Disclose only d.Do not record or disclose -Event is remote and amount is not estimable

Lee Company has the following information for the pay period of December 15-31: Assuming no employees are subject to ceilings for taxes on their earnings, Salaries Payable would be recorded for

Which of the following will have no effect on an employee's take-home pay?

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?

Form W-4 is a form authorizing employers to withhold a portion of employee earnings for payment of an employee's federal income taxes.

Florida Keys Construction installs swimming pools. It calculates that warranty obligations are 3% of sales. For the year just ending, Florida Keys' sales were $1,450,000. Previous quarterly entries debiting Product Warranty Expense totaled $28,700. Determine the estimated warranty expense for the year and make the journal entry necessary to bring the account to the needed balance.

Grant Co. had the following liabilities at December 31, the end of its fiscal year: The note payable is an 8-year note with $30,000 due in the next year. Prepare the liabilities section of the balance sheet for the company.

Use the following key (a-d) to identify the proper treatment of each contingent liability.a.Record only b.Record and disclose c.Disclose only d.Do not record or disclose -Event is probable and amount is estimable

The amount borrowed is equal to the face amount of the note on an interest-bearing note payable.

The amount of money a borrower receives from the lender is called the discount rate.

The use of a separate payroll bank account is not an advantageous control, because it creates more complexity in reconciliation functions for a company and invites theft.

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

Kelly Howard has the following transactions. Prepare the journal entries.

Match each payroll item that follows to the one item (a-f) that best describes its characteristics. -Federal income tax A)Amount is limited, withheld from employee only B)Amount is limited, withheld from employee and matched by employer C)Amount is limited, paid by employer only D)Amount is not limited, withheld from employee only E)Amount is not limited, withheld from employee and matched by employer F)Amount is not limited, paid by employer only

Sterling Inc. has two long-term notes outstanding. One is a five-year note for $50,000. An equal amount of principal must be repaid each year of the loan. The other is a seven-year note for $210,000. In the next calendar year, the company will pay $21,000 of the principal. What is total amount of the notes that will be reported as current liabilities on its balance sheet?

Receiving payment prior to delivering goods or services causes a current liability to be incurred.

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, of the first year, for each of the next five years. After the final payment, the carrying amount on the note will be