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When a warranty repair job is completed,what is the effect on the accounting equation?

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Assets are decreased (for the ...

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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. 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 recognized payroll tax expense for employer portion of FICA tax and federal and state unemployment taxes. -Charles Company recognized payroll tax expense for employer portion of FICA tax and federal and state unemployment taxes. 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 recognized payroll tax expense for employer portion of FICA tax and federal and state unemployment taxes.

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(N)(I)(D)(...

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Use the following to answer questions Seattle Company issued a $90,000 face value discount note payable to the First Federal Bank on September 1,2016.The note carried a one-year term and a 4% discount rate. -As a result of the recognition of interest expense on December 31,2016,


A) liabilities will increase and retained earnings will decrease.
B) assets and liabilities will decrease.
C) assets will increase and retained earnings will increase.
D) liabilities will increase and assets will decrease.

E) B) and D)
F) A) and B)

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Sales tax is reported as revenue when it is collected,and reported as an expense when it is paid.

A) True
B) False

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Monthly remittance of sales tax due has no impact on the income statement,but reduces cash flow from operating activities.

A) True
B) False

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Vacation pay is considered a contingent liability to the extent that the obligation exists due to work already performed.

A) True
B) False

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Which of the following items is not classified as a current asset?


A) Office equipment.
B) Merchandise inventory.
C) Office supplies.
D) Prepaid rent.

E) None of the above
F) C) and D)

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The Clarion Company provides a one-year warranty on all merchandise it sells.In 2016,the company recorded sales of $500,000.It estimated that the warranty costs on these sales would amount to $2,000.In July 2017,Clarion paid $250 to satisfy a warranty claim.Indicate whether each of the following statements is true or false. _____ a)Clarion's adjusting entry recording the warranty at the end of 2016 reduced total assets and total equity. _____ b)Clarion's adjusting entry recording the warranties at the end of 2016 increased Clarion's total liabilities. _____ c)The July 2017 entry reduced total assets and net income for 2017. _____ d)The July 2017 entry reduced Clarion's total liabilities. _____ e)The adjusting entry recorded at the end of 2016 did not affect Clarion's revenue for the year.

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a)False b)...

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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 December 31,2015,Harrison should accrue interest expense in the amount of $1,920.

A) True
B) False

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Payment of interest on a note payable is considered a financing activity on the statement of cash flows.

A) True
B) False

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Which of the following is a claims exchange transaction?


A) Accrued interest on a note payable.
B) Issued a note to purchase equipment.
C) Repaid principal on a note payable.
D) Paid interest on a note payable.

E) B) and D)
F) C) and D)

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Burger Barn has been named as a plaintiff in a $5 million lawsuit filed by a customer over the addictive nature of the company's french fries.Burger Barn's attorneys have advised them that the likelihood of a future obligation from the suit is remote.As a result of the lawsuit,Burger Barn should:


A) Disclose the lawsuit in the notes to the financial statements.
B) Recognize a $5 million liability on its balance sheet for the contingency.
C) Ignore the lawsuit in its financial statements.
D) Settle with the customer immediately for $5 million to avoid harmful publicity.

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

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The current ratio is computed as follows:


A) Current assets divided by total assets.
B) Current assets minus current liabilities.
C) Current assets divided by current liabilities.
D) Retained earnings divided by current liabilities.

E) All of the above
F) A) and C)

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Houston Co.borrowed $20,000 from Dallas Co.on March 1,2016.Houston is to repay the principal and interest on March 1,2017.The interest rate is 8%.If the year-end adjustment is properly recorded,what will be the effects of the accrual on Houston's 2016 financial statements?


A) Increase liabilities and increase expenses
B) Increase assets and increase revenues
C) Increase assets and increase liabilities
D) No effect

E) All of the above
F) A) and C)

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What is the purpose of the Federal W-4 form?


A) To notify the federal government when a new employee is hired.
B) To allow an employee to choose the number of withholding allowances for calculating federal withholding tax.
C) To remit monthly payments for FICA to the federal government.
D) To notify the employee at year-end of the amount of federal tax withheld.

E) A) and D)
F) B) and D)

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Use the following to answer questions The following information is taken from the balance sheet of Menendez Company on January 1,2016: Use the following to answer questions The following information is taken from the balance sheet of Menendez Company on January 1,2016: -Use the information on January 1,2016 to determine the effect of the following entry on the current ratio of Menendez Company: This transaction will A) have no effect on the current ratio. B) cause the current ratio to increase. C) cause the current ratio to decrease. D) potentially affect the current ratio,but the direction of the change cannot be determined without more information. -Use the information on January 1,2016 to determine the effect of the following entry on the current ratio of Menendez Company: This transaction will Use the following to answer questions The following information is taken from the balance sheet of Menendez Company on January 1,2016: -Use the information on January 1,2016 to determine the effect of the following entry on the current ratio of Menendez Company: This transaction will A) have no effect on the current ratio. B) cause the current ratio to increase. C) cause the current ratio to decrease. D) potentially affect the current ratio,but the direction of the change cannot be determined without more information.


A) have no effect on the current ratio.
B) cause the current ratio to increase.
C) cause the current ratio to decrease.
D) potentially affect the current ratio,but the direction of the change cannot be determined without more information.

E) B) and C)
F) None of the above

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Franklin Company issued a $40,000 note to the Mercantile Bank on August 1,2016.The note carried a one-year term and a 12% rate of interest.The adjusting entry on Franklin's books to record accrued interest expense on December 31,2016 will


A) Decrease assets and decrease retained earnings by $2,000.
B) Increase liabilities and decrease equity by $2,000.
C) Increase liabilities and decrease equity by $1,600.
D) Decrease equity and increase liabilities by $4,800.

E) A) and B)
F) None of the above

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Which of the following accounts appear in the liabilities section of the balance sheet?


A) Accounts payable,notes payable,allowance for doubtful accounts.
B) Warranties payable,discount on notes payable,accounts payable.
C) Notes payable,discount on notes payable,credit card receivables.
D) Accounts payable,allowance for doubtful accounts,warranties payable.

E) B) and D)
F) C) and D)

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Under what conditions should a pending lawsuit be recognized in a company's financial statements? Under what conditions should the lawsuit be disclosed in the notes to the financial statements?

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A pending lawsuit should be recognized i...

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In September of 2016,Hansen Company issued a note payable to borrow money from its bank.Principal and interest on the note would come due in June 2017.Interest expense on this note must be accrued at the end of 2016 for the period from issuance of the note to the last day of the accounting period.

A) True
B) False

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