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Exam 9: Accounting for Current Liabilities and Payroll

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Question 31

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The amount of cash flow from operating activities that would appear on the 2017 statement of cash flows would be:

A) $770 inflow
B) $1,400 inflow
C) $38,520 outflow
D) $1,120 outflow

E) A) and D)
F) A) and C)

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Question 32

True/False

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When calculating interest expense on a 6-month note,multiply the principal by the interest rate,and then multiply by 6/12.

A) True
B) False

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Question 33

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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.On that date,Harrison recorded a Discount on Notes Payable in the amount of $1,920.

When do the effects of product warranties appear on the statement of cash flows?

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. -Gilliam Co.repaid a note payable on September 30,2016.The 8-month note had been issued on February 1,2016.The $20,800 cash payment included a $20,000 repayment of principal and an $800 payment for interest.

Why does the recording of a taxable sale increase a company's liabilities?

Fisher Company has been named as the defendant in a class action lawsuit.Indicate whether each of the following statements regarding the lawsuit is true or false. _____ a)If the outcome is likely,a liability should be recognized on the balance sheet for the full amount of the suit,even if the company's attorneys estimate the outcome to be much lower. _____ b)If the outcome is likely,but cannot be reasonably estimated,the contingency should be disclosed in the notes to the financial statements. _____ c)If the outcome is reasonably possible,the contingency should be disclosed in the notes to the financial statements. _____ d)Every lawsuit,regardless how frivolous,should be disclosed in the notes to the financial statements. _____ e)If an active hurricane season has been predicted for the Florida gulf coast,businesses in that region should not disclose contingencies for catastrophic loss in the notes to their financial statements.

What factor distinguishes an employee from an independent contractor?

Selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%:

A classified balance sheet is necessary for calculating a company's current ratio.

Greer Company pays Jamal Perry a salary of $3,000 per week.How much FICA tax must Greer pay on Jamal's behalf,including both the employee and employer portions?

What accounting concept requires a company to accrue interest expense on a note payable?

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.The company's current ratio is closest to:

Recording an adjusting entry for product warranties is a claims exchange transaction.

A company with a high current ratio should be concerned that it is not maximizing its earnings potential.

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 October 1,2015,Kramer Co.issued a one-year discount note with a face value of $100,000 and interest of 6% to the North Star Bank and received cash in the amount of $94,000.

How does the going concern assumption affect accounting for notes payable?

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 paid Jason Hewitt for work he performed as an independent contractor.The work had not been previously accrued.

The current ratio is a measure of a company's liquidity.

The following is a list of balance sheet accounts (in random order)and balances for the Premium Office Supply Company.They have been updated as of December 31,2016. Required: Prepare a classified balance sheet for Premium Office Supply Company at December 31,2016.