ACC 206 Week 3 Quiz – Strayer



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CHAPTER11


CURRENTLIABILITIESANDPAYROLLACCOUNTING


CHAPTERSTUDYOBJECTIVES


1.Explainacurrentliability,andidentifythemajortypesofcurrentliabilities.

2.Describetheaccountingfornotespayable.

3.Explaintheaccountingforothercurrentliabilities.

4.Explainthefinancialstatementpresentationandanalysisofcurrentliabilities.

5.Describetheaccountinganddisclosurerequirementsforcontingentliabilities.

6.Computeandrecordthepayrollforapayperiod.

7.Describeandrecordemployerpayrolltaxes.

8.Discusstheobjectivesofinternalcontrolforpayroll.

9.Identifyadditionalfringebenefitsassociatedwithemployeecompensation.



TRUE-FALSESTATEMENTS

1.     A currentliability must bepaidoutof currentearnings.

2.     Currentliabilitiesareexpectedtobepaidwithinoneyearortheoperatingcycle, whichever islonger.

3.     Therelationshipbetweencurrentliabilitiesandcurrentassetsisimportantinevaluatinga company'sabilityto payoffits long-termdebt.

4.     Acompanywhosecurrentliabilitiesexceeditscurrentassetsmayhavealiquidity problem.

5.     Notespayableusuallyrequiretheborrowerto payinterest.

6.     Notespayableare oftenusedinsteadofaccountspayable.

7.     A notepayablemustalwaysbepaidbeforeanaccountpayable.

8.     A $30,000,8%,9-monthnotepayablerequiresaninterestpayment of$1,800 atmaturity.

9.     Mostnotesarenotinterest bearing.

10.     Withaninterest-bearingnote,theamountofcashreceiveduponissuanceofthenote generallyexceedsthenote'sfacevalue.

11.     Interestexpenseonanote payableis onlyrecordedatmaturity.

12.     Interestexpenseis reportedunderOtherExpensesandLossesinthe incomestatement.

13.    UnearnedrevenuesshouldbeclassifiedasOtherRevenuesandGainsontheIncome Statement.

14.     Thehigherthesalestaxrate,themoreprofitaretailercanearn.

15.     MetropolitanSymphonysells200seasonticketsfor$60,000thatincludesafiveconcert season. TheamountofUnearnedTicketRevenueafterthesecondconcertis$24,000.

16.     Duringthemonth,acompanysellsgoodsforatotalof$108,000,whichincludessales taxesof$8,000;therefore,thecompanyshouldrecognize$100,000inSalesRevenues and $8,000in SalesTaxExpense.

17.     Current maturitiesoflong-termdebtreferstotheamountofinterestonanotepayable that must be paidinthecurrent year.

18.     Thecurrentratiopermitsanalyststocomparethe liquidityofdifferent sizedcompanies.

19.     Workingcapital is currentassetsdivided bycurrentliabilities.

20.     Contingentliabilitiesshouldberecordedintheaccountsifthereisaremotepossibility that thecontingencywillactuallyoccur.

21.     A contingentliabilityisa liabilitythatmayoccur ifsomefutureeventtakesplace.

22.     Inconcept,theestimatingofWarrantyExpensewhenproductsaresoldunderwarrantyis similar to theestimatingofBadDebtsExpensebasedon creditsales.

23.     FICAtaxesandfederalincometaxesare leviedonemployees'earningswithoutlimit.

24.     FICAtaxeswithheldandfederalincometaxes withheldaremandatorypayrolldeductions.

25.     Theemployerincursapayrolltaxexpenseequaltotheamountwithheldfromthe employees'wagesforfederalincometaxes.

26.     Internalcontroloverpayrollisnotnecessarybecauseemployeeswillcomplainiftheydo not receivethecorrectamount ontheirpayrollchecks.

27.     Thetimekeepingfunctionincludessupervisorsmonitoringhoursworkedthroughtime cardsandtimereports.

28.     Thehumanresourcesdepartmentdocumentsandauthorizesemploymentofnew employees.

29.     Payrollactivitiesinvolvethreefunctions:hiringemployees,preparingthepayroll,and payingthepayroll.

a30.     Post-retirementbenefitsconsistofpaymentsbyemployerstoretiredemployees forhealth care, life insurance,andpensions.

Additional True-FalseQuestions

31.     A debt that isexpectedto be paidwithinone yearthroughthecreationof long-termdebt is a current liability.

32.     Notespayableusuallyareissuedtomeet long-termfinancingneeds.

33.     Currentmaturitiesoflong-termdebtareoftenidentifiedaslong-termdebtduewithinone yearon thebalancesheet.

34.     Inagivenyear,totalwarrantyexpenseisthesumofactualwarrantycostsincurredon unitssoldplustheestimatedcostofservicingthose unitsinthefuture.

35.     FICAtaxesarea voluntarydeductionfromemployeeearnings.

36.     FICAtaxesareadeductionfromemployeeearningsandarealsoimposedupon employersas an expense.

37.     Theobjectivesofinternalaccountingcontrolforpayrollsare(a)tosafeguardcompany assetsfromunauthorizedpaymentsofpayrollsand(b)toassureaccuracyandreliability oftheaccountingrecordspertainingto payroll.

a38.     Whenacompanygivesemployeesrightstoreceivecompensationforabsencesandthe paymentforsuchabsencesisprobableandtheamountcanbereasonablyestimated, the companyshould accruea liability.








MULTIPLECHOICEQUESTIONS

39.     Allof thefollowingarereportedascurrent liabilitiesexcept a.accountspayable.
b.bonds payable. c.notespayable.
d.unearnedrevenues.

40.     Therelationshipbetweencurrentliabilitiesandcurrentassets is a.usefulindetermining income.
b.usefulinevaluatinga company'sliquidity. c.calledthematchingprinciple.
d.usefulindeterminingtheamountof acompany'slong-termdebt.

41.     Mostcompaniespaycurrent liabilities a.outof currentassets.
b.by issuinginterest-bearing notespayable. c.byissuingstock.
d.bycreatinglong-term liabilities.

42.     A currentliability isadebt thatcanreasonably beexpectedtobepaid a.withinoneyear.
b.between6monthsand 18months.
c.outof currentlyrecognizedrevenues. d.outof cashcurrentlyonhand.

43.     Liabilitiesare classifiedon thebalancesheetascurrentor a.deferred.
b.unearned. c.long-term. d.accrued.

44.     Froma liquiditystandpoint,itismoredesirablefora companytohavecurrent a.assetsequalcurrentliabilities.
b.liabilitiesexceedcurrentassets. c.assetsexceedcurrentliabilities.
d.liabilitiesexceed long-termliabilities.

45.     Therelationshipof current assetstocurrentliabilitiesisusedinevaluatinga company's a.operatingcycle.
b.revenue-producingability.
c.short-termdebtpayingability. d.long-rangesolvency.

46.     Whichofthefollowingisusuallynotan accruedliability? a.Interestpayable
b.Wagespayable c.Taxespayable d.Notespayable

47.     Inmostcompanies,current liabilitiesarepaidwithin
a.oneyearthroughthecreationof othercurrentliabilities.
b.theoperatingcyclethroughthecreationof othercurrentliabilities. c.oneyearout of currentassets.
d.theoperatingcycle out of currentassets.

48.     Theentrytorecord theissuance ofaninterest-bearingnotecreditsNotesPayable forthe note's
a.maturityvalue. b.marketvalue. c.facevalue.
d.cashrealizablevalue.

49.     Withaninterest-bearingnote,theamountofassets receiveduponissuanceofthenoteis generally
a.equaltothenote'sface value.
b.greaterthanthe note'sface value. c.lessthanthenote'sfacevalue.
d.equaltothenote'smaturityvalue.
11-8       

50.     A notepayableis intheformof
a.a contingencythat isreasonablylikelyto occur. b.awrittenpromissorynote.
c.anoralagreement.
d.a standingagreement.

51.     Theentrytorecordthe proceedsuponissuinganinterest-bearingnoteis a.InterestExpense
Cash
NotesPayable b.Cash
NotesPayable c.NotesPayable
Cash d.Cash
NotesPayable InterestPayable

Usethefollowing informationforquestions52–54.

CoffeyCounty Bank agrees tolend Adcock BrickCompany$200,000on January1.Adcock Brick Companysignsa$200,000,8%,9-monthnote.

52.     TheentrymadebyAdcockBrickCompanyonJanuary1torecordtheproceedsand issuance ofthenote is
a.InterestExpense..................................................................              12,000 Cash....................................................................................     188,000
NotesPayable............................................................                               200,000 b.Cash....................................................................................     200,000
NotesPayable............................................................                               200,000 c.Cash....................................................................................      200,000
InterestExpense..................................................................           12,000
NotesPayable............................................................                               212,000 d.Cash....................................................................................     200,000
InterestExpense..................................................................           12,000
NotesPayable............................................................                               200,000 InterestPayable..........................................................                            12,000

53.     WhatistheadjustingentryrequiredifAdcockBrickCompanypreparesfinancial statements onJune30?
a.InterestExpense..................................................................                8,000
InterestPayable..........................................................                                  8,000 b.InterestExpense..................................................................         8,000
Cash...........................................................................                                  8,000 c.InterestPayable...................................................................         8,000
Cash...........................................................................                                  8,000 d.InterestPayable...................................................................         8,000
InterestExpense.........................................................                                  8,000
CurrentLiabilitiesandPayroll Accounting       11-9

54.     WhatentrywillAdcockBrickCompanymaketopayoffthenoteandinterestatmaturity assumingthat interesthas beenaccruedtoSeptember30?
a.NotesPayable...................................................................... 212,000 Cash.............................

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