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Exam 9: Accounting for Current Liabilities and Payroll

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Question 21

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[The following information applies to the questions displayed below.] The following information is taken from the balance sheet of Menendez Company on January 1, Year 1: -On January 2,Year 1,the company earned revenue on account of $8,000. How will this transaction affect the current ratio?

A) It will decrease the current ratio to 1:1.
B) It will increase the current ratio to 3:1.
C) It will increase the current ratio to 5:1.
D) It will have no effect on the current ratio.

E) All of the above
F) C) and D)

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Question 22

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What factor distinguishes an employee from an independent contractor?

A) The amount of the pay
B) Whether or not the company supervises and controls the work
C) Whether or not the work is performed on company property
D) Whether the individual chooses to be treated as an independent contractor

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

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Question 23

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Receivables are normally reported on the balance sheet at net realizable value.In contrast,payables are carried at face value.Which accounting principle requires this treatment of payables?

[The following information applies to the questions displayed below.] Riley Company borrowed $36,000 on April 1, Year 1 from Titan Bank. The note issued by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenues of $1,700 during Year 1 and $1,400 during Year 2. Assume no other transactions. -Based on this information alone,what is the amount of net income (loss) that will be reported on the Year 2 income statement?

On a classified balance sheet,the financial statement user will be able to distinguish between:

Flora's Flower Market sells eight potted petunias to a customer for $50.00,plus 5% sales tax.Flora's will recognize $52.50 in sales revenue.

All lawsuits in which a company has been named a defendant should be either disclosed in the company's notes to the financial statements,or recognized as a liability on its balance sheet.

On October 1,Year 1,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a one-year term to maturity.The amount of cash that Harrison received on that date was $22,080.

Payment of interest on a note payable is considered a financing activity on the statement of cash flows.

Vacation pay is considered a contingent liability.

The Wage and Tax Statement,Form W-2,is sent to the employee annually to report earnings and withheld taxes.

Which of the following happens as a result of selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%?

Employers must withhold unemployment taxes from employee salaries.

Houston Co.borrowed $20,000 from Dallas Co.on March 1,Year 1.Houston issued a note payable that had a one-year term and the annual interest rate is 8%.How will the necessary adjustment,dated December 31,Year 1,affect the elements of the Year 1 financial statements?

[The following information applies to the questions displayed below.] Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term. -Based on this information alone,what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows?

When do the effects of warranty obligations affect the statement of cash flows?

Indicate whether each of the following statements is true or false. -Product warranties usually represent legal liabilities that must be reported in the financial statements.

Recording an adjustment for product warranties is a claims exchange transaction.

Which of the following is not an item deducted from salary expense to arrive at net pay?

FICA taxes are recorded both as salary expense and as payroll tax expense.