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Exam 9: Reporting and Interpreting Liabilities

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Question 41

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Which of the following statements is correct?

A) Social Security tax is paid only by the employer.
B) The pay period always ends in conjunction with the company's fiscal year-end.
C) Employee benefits such as vacation time and sick days should be recognized when the employees earn the benefit and not when they take the days off from work.
D) Unemployment taxes are paid by both the employer and the employee.

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

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Question 42

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A current liability is always a short-term obligation expected to be paid within one year of the balance sheet date.

A) True
B) False

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Question 43

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Alden Trucking Company is replacing part of its fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1,2019.Alden financed $37,908,000,and the note agreement will require $10 million in annual payments starting on December 31,2019 and continuing for a total of four more years (final payment December 31,2023) .Kenworthy will charge Alden Trucking Company the market interest rate of 10% compounded annually. - The amount of principal that is paid at December 31,2019 is:

On January 1,2019,Mission Company agreed to buy some equipment from Anna Company.Mission Company signed a non-interest-bearing note,agreeing to pay Anna Company the entire $500,000 for the equipment on December 31,2021.The market rate of interest for this note was 10%. (Round all answers to whole dollar amounts. ) A.Prepare the journal entry Mission Company would record on January 1,2019 related to this purchase. B.Prepare the December 31,2019,adjusting entry to record interest expense related to the note for the first year.Assume that no adjusting entries have been made during the year. C.Prepare the December 31,2020,adjusting entry to record interest expense related to the note for the second year.Assume that no adjusting entries have been made during the year. D.Prepare the entry Mission Company would record on December 31,2021,the due date of the note to record interest expense for the third year and payment of the note.Assume that no adjusting entries have been made during the year.Round the interest expense to an amount that will increase notes payable to the correct final payoff amount.

Which of the following is correct?

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. -What is the amount to be paid to the bank on March 31,2020 for interest and principal?

Which of the following is incorrect?

The following data is available for Tommy's Toys for the years 2017 through 2020: A.Calculate the accounts payable turnover ratio for the following years: B.Calculate the number of days it is taking Tommy's Toys to pay its vendors (assume a 365-day year): C.Explain whether Tommy's Toys is doing a better job over the years of paying its vendors in a timely manner.

Rachel Corporation purchased a building by paying $90,000 cash on the purchase date,agreeing to pay $50,000 every year for the next nine years and one payment of $100,000 ten years from the purchase date.The first payment is due one year after the purchase date.Rachel's incremental borrowing rate is 10%.(FV of $1,PV of $1,FVA of $1,and PVA of $1) (Use the appropriate factor(s) from the tables provided. ) - The building reported on the balance sheet as of the purchase date is closest to:

Huck Corporation is looking to purchase a truck costing $49,000 by agreeing to make payments every three months for the next two years.The first payment is due three months after the purchase date.Huck's incremental borrowing rate is 8%.Each of the payments is closest to: (FV of $1,PV of $1,FVA of $1,and PVA of $1) (Use the appropriate factor(s) from the tables provided. )

A contingent liability is disclosed in a note to the financial statements when the liability is reasonably possible and can be estimated.

A company's 2019 income tax return reported a $75,000 tax liability.During 2019,the deferred income tax liability account increased $9,000.Which of the following statements is correct?

Accounts payable and accrued liabilities are interchangeable account titles.

In order to calculate the cost of a long-term asset that is financed with long-term debt,present values concepts are used.

Black Corporation entered into the following transactions: • The accrual of wages and salaries expense. • The cash sale of equipment for a loss. • The cash payment in advance for a one-year insurance policy. Which of the following statements is correct with respect to determining Black's cash flows from operating activities on the statement of cash flows?

Which of the following is incorrect with regard to short-term leases?

Income taxes payable is an example of an accrued liability.

Which of the following statements about contingent liabilities is incorrect?

Which of the following statements is incorrect?

The journal entry to record a contingent liability creates an accrued liability on the balance sheet and a loss on the income statement.