1. A current liability is a debt that can reasonably be expected to be paid
a. within one year.
b. between 6 months and 18 months.
c. out of currently recognized revenues.
d. out of cash currently on hand.
2. As interest is recorded on an interest-bearing note, the Interest Expense account is
a. increased; the Notes Payable account is increased.
b. increased; the Notes Payable account is decreased.
c. increased; the Interest Payable account is increased.
d. decreased; the Interest Payable account is increased.
3.The interest charged on a $100,000 note payable, at the rate of 8%, on a 90-day note would be
a. $8,000
b. $4,444
c. $2,000
d. $667
4. On October 1, 2012, Pennington Company issued a $40,000, 10%, nine-month interest-bearing note. If the Pennington Company is preparing financial statements at December 31, 2012, the adjusting entry for accrued interest will include a:
a. credit to Notes Payable of $1,000.
b. debit to Interest Expense of $1,000.
c. credit to Interest Payable of $2,000.
d. debit to Interest Expense of $1,500.
5. On October 1, 2012, Pennington Company issued a $40,000, 10%, nine-month interest-bearing note. Assuming interest was accrued in June 30, 2013, the entry to record the payment of the note on July 1, 2013, will include a:
a. debit to Interest Expense of $1,000.
b. credit to Cash of $40,000.
c. debit to Interest Payable of $3,000.
d. debit to Notes Payable of $43,000.
6. Reliable Insurance Company collected a premium of $15,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Premiums at December 31?
a. $5,000
b. $6,250
c. $8,750
d. $15,000
7. Advances from customers are classified as a(n)
a. revenue.
b. expense.
c. current asset.
d. current liability.
8. Madden Electric began operations in 2012 and provides a one year warranty on the products it sells. They estimate that 10,000 of the 200,000 units sold in 2012 will be returned for repairs and that these repairs will cost $6 per unit. The cost of repairing 8,000 units presented for service in 2012 was $48,000. Madden should report
a. warranty expense of $12,000 for 2012.
b. warranty expense of $60,000 for 2012.
c. estimated warranty liability of $60,000 on December 31, 2012.
d. no warranty obligation on December 31, 2010, since this is only a contingent liability.
9.Lincoln Company sells 600 units of a product that has a one-year warranty on parts.The average cost of honoring one warranty contract is $50.During the year 30 contracts are honored at a cost of $1500.It is estimated that 60 contracts will be honored in the following year.The adjusting entry at the end of the current year will include a
a. credit to Estimated Warranty Liability for $3,000.
b. credit to Estimated Warranty Liability for $4,500.
c. debit to Warranty Expense for $1,500.
d. debit to Warranty Expense for $4,500.
10.The accounting for warranty cost is based on the matching principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense
a. when the product is brought in for repairs.
b. in the period in which the product was sold.
c. at the end of the warranty period.
d. only if the repairs are expected to be made within one year.
11. Shaw Company sells 2,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 40 units for a total cost of $2,000. What amount should Shaw Company accrue on December 31 for estimated warranty costs?
a. $3,000
b. $2,000
c. $1,000
d. $15,000
12. Shaw Company sells 2,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 40 units for a total cost of $2,000. What amount will be reported on Shaw Company's balance sheet as Estimated Warranty Liability on December 31?
a. $2,000
b. $1,000
c. $3,000
d. It cannot be determined.
13. The total compensation earned by an employee is called
a. take-home pay.
b. net pay.
c. net earnings.
d. gross earnings.
14. Which one of the following payroll taxes does not result in a payroll tax expense for the employer?
a. FICA
b. Federal Income Tax
c. Federal Unemployment Tax
d. State Unemployment Tax
15. Ann Ellis's regular rate of pay is $12 per hour with one and one-half times her regular rate for any hours which exceed 40 hours per week. She worked 48 hours last week. Therefore, her gross wages were
a. $576
b. $480
c. $624
d. $864
16. Assuming a FICA tax rate of 8% on the first $100,000 in wages, and a federal income tax rate of 20% on all wages, what would be an employee's net pay for the year if he earned $110,000 for the year?
a. $110,000
b. $79,200
c. $88,000
d. $80,000
17. Jan Goll has worked 44 hours this week. She worked in excess of 8 hours each day. Her regular hourly wage is $15 per hour. What are Jan's gross wages for the week? (The company Jan works for is in compliance with the Fair Labor Standards Act.)
a. $660
b. $690
c. $990
d. $720
18. Employee payroll deductions include each of the following except
a. federal unemployment taxes.
b. federal income taxes.
c. FICA taxes.
d. insurance, pension plans, and union dues.
19. Julie Norman, earns $20 per hour for a 40 hour work week and $30 per hour for overtime work. If Julie works 44 hours, her gross earnings are
a. $880.
b. $920
c. $1,045.
d. $1,320
20. Gary Dittman, an employee of Hopkins Company, has gross earnings for the month of October of $8,000. FICA taxes are 8% of gross earnings, federal income taxes amount to $1,270 for the month, state income taxes are 2% of gross earnings, and authorizes voluntary deductions of $20 per month to the United Way. What is the net pay for Gary?
a. $5,922.80
b. $5,910.00
c. $5,930.00
d. $5,935.40