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

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Question 91

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When a borrower receives the face amount of a discounted note less the discount, the amount received is known as

A) the note proceeds
B) the note discount
C) the note deferred interest
D) the note principal

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

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Question 92

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Journalize the following, assuming a 360-day year is used for interest calculations: ​ Apr. 30 $\quad$ Issued a $\$ 150,000,30$ -day, $6 \%$ note dated April 30 to Misner Co. on account. May 30 $\quad$ Paid Misner Co. the amount owed on the note dated April 30.

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Question 93

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Lamar Industries warrants its products for one year. The estimated product warranty expense is 3% of sales. Sales for June were $190,000. In July, a customer received warranty repairs requiring $185 of parts and $50 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.

Current liabilities are

On January 1, Gemstone Company obtained a $165,000, 10-year, 7% installment note from Guarantee Bank. The note requires annual payments of $23,492, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry to record the issuance of the installment note for cash on January 1 would include a

An aid in internal control over payrolls that indicates employee attendance is

The Young Company has the following assets and liabilities: $\begin{array} { | l | r | } \hline { \text { ASSETS } } & \\\hline \text { Cash } & \$ 35,000 \\\hline \text { Accounts receivable } & 15,000 \\\hline \text { Inventory } & 30,000 \\\hline \text { Equipment } & 50,000 \\\hline { \text { LIABILITIES } } & \\\hline \text { Current portion of long-term debt } & 10,000 \\\hline \text { Accounts payable } & 2,000 \\\hline \text { Long-term debt } & 25,000 \\\hline\end{array}$ Determine the quick ratio (rounded to one decimal point) .

Journalize the following entries on the books of the borrower and creditor. Label accordingly. (Assume a 360-day year is used for interest calculations.) ​ ​

Notes payable may be issued to creditors to satisfy previously created accounts payable.

The proceeds of a discounted note are equal to the face value of the note.

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

Salif, Inc. has 15 full-time manufacturing employees. Their weekly payroll averages $17,800, but it varies from week to week primarily due to overtime worked. Last month, the weekly average climbed to $18,700, but no additional overtime had been authorized. ​ All employees swipe their badges at the beginning and end of their shift. They are also supposed to swipe their badges when they come and go at lunchtime. The computer automatically calculates the hours worked for each employee. A clerk prints out the time sheets, which are then approved by each employee's supervisor and a manager. The manager rarely finds any problems with the time sheets and frequently signs them without checking them carefully. Once the time sheets are approved, the clerk sends the information to a payroll processor, who completes all the remaining payroll functions. Employees' money is direct-deposited into their accounts, and they receive a pay stub each week. ​ When management investigates, they discover that a supervisor had authorized additional overtime for two employees to complete an important project. However, the supervisor had not obtained formal authorization for the overtime. The authorization was given verbally by the plant manager. What internal control procedure would have avoided the extra overtime expense?

Wright Company sells merchandise with a one-year warranty. This year, sales consisted of 2,000 units. It is estimated that warranty repairs will average $15 per unit sold, and 30% of the repairs will be made this year and 70% next year. In this year's income statement, Wright should show warranty expense of

Taxes deducted from an employee's earnings to finance social security and Medicare benefits are called FICA taxes.

Depending upon when an unfunded pension liability is to be paid, it will be classified on the balance sheet as either a long-term or a current liability.

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 2 carrying amount in the allocation of periodic payments table for this installment note will be equal to

A business issued a 120-day, 6% note for $10,000 to a creditor on account. The company uses a 360-day year for interest calculations. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity, including interest. $\begin{array} { | c | l | l | l | } \hline & \text { Description } & \text { Debit } & \text { Credit } \\\hline \text { (a) } & & & \\\hline & & & \\\hline & & & \\\hline \text { (b) } & & & \\\hline & & & \\\hline & & & \\\hline\end{array}$

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

-Salaries Payable would be recorded in the amount of

The journal entry used to record the payment of an interest-bearing note is