Question 1
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
a. $9,000.
b. $21,000.
c. $0.
d. $30,000.
Question 2
On June 8, Smith Technologies issued a $75,000, 6%, 140-day note payable to Johnson Company. What is the due date of the note?
a. October 27
b. October 28
c. October 26
d. October 25
Question 3
Assuming a 360-day year, when a $20,000, 90-day, 5% interest-bearing note payable matures, total payment will be
a. $21,000
b. $250
c. $20,250
d. $1,000
Question 4
During September, Excom sold 100 radios for $50 each and provided a two-year warranty with each unit. Each radio cost Excom $30 to produce. If 5% of the goods sold typically need to be replaced over the warranty period and one is actually replaced during September, for what amount in September would Excom debit Product Warranty Expense?
a. $120
b. $30
c. $50
d. $150
Question 5
A current liability is a debt that is reasonably expected to be paid
a. out of currently recognized revenues
b. between 6 months and 18 months
c. out of cash currently on hand
d. within one year
Question 6
An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $120; social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, 0.8% on the first $7,000. What is the net amount to be paid to the employee?
a. $601.50
b. $574.90
c. $660.00
d. $568.74