1 All the following are true about an installment note for a borrower except?

1

All the following are true about an installment note for a borrower except

Installment notes are a series of payments to a lender

Installment notes are recorded by including a credit to cash

Installment notes are recorded by including a credit to notes payable

Installment notes are recorded by including a debit to cash

2

Accounts payable are

Amounts owed to suppliers for products and/or services purchased on credit

Paid within 30 days

Estimated liabilities

Long-term liabilities

4

The face amount of a promissory note is called the:

time of the note

discount of the note

principal of the note

interest rate of the note

6

The entry to accrue interest at year-end on a note payable would be

debit Interest Expense, credit Cash

debit Interest Expense, credit Notes Payable

debit Interest Expense, credit Interest Payable

8

On June 20, 2013, ABC Services received $2,400 in advance from a customer for one month’s service. The journal entry to record the receipt of cash would be which of the following?

Debit Cash $2,400 and credit Service revenue $2,400

Debit Cash $2,400 and credit Unearned service revenue $2,400

Debit Unearned service revenue $2,400 and credit Cash $2,400

Debit Unearned service revenue $2,400 and credit Service revenue $2,400

Lenient Auto signed a $45,000 8% 30-year installment note on November 1, 2013. The note requires semiannual payments of $750 plus interest on May 1 and November 1 of each year. How will Lenient Auto classify this loan on its December 31, 2013 Balance Sheet?

Current Portion of Long-term debt, $0; Long-term debt, $45,000

Current Portion of Long-term debt, $45,000; Long-term debt, $0

Current Portion of Long-term debt, $750; Long-term debt, $44,250

Current Portion of Long-term debt, $1,500; Long-term debt, $43,500

4

Bingo Corp signed a promissory note of $1,000 for one of its vendors in exchange for supplies. $100 cash payment is due upon signing the note and the term is that the balance and interest are due in 90 days at 12% (assume 360 days and that interest payable has been recorded). Bingo will record the transaction at the end of the term as

Debit Accounts Receivable $900; Credit Cash $900

Debit Notes Payable $900, Debit Interest payable $27; Credit Cash $927

Debit Accounts Payable $900, Debit Interest expense $27; Credit Cash $927

None of the above

5

The cost of borrowing money or the return on lending money is called

Notes payable

Interest

Liabilities

None of the above

A short-term note payable

Is a contingent liability

Is an estimated liability

Is a written promise to pay a specified amount on a definite future date within one year or the company’s operating cycle, whichever is longer

Is not a liability until the due date

8

Archie’s had sales of $6,758. The state sales tax rate is 7%. All sales are cash. What amount will be debited to Cash?

$7,231.06

$866.06

$473.06

$6,758.00

When a company issues a promissory note, the entry will include a credit to Note Payable for the

face value of the note

face value of the note minus interest to pay

face value of the note plus interest to pay

maturity value of the note

We R Kids purchased playground equipment for 12,000 on credit and issued a 120-day note bearing interest at 9 percent a year as evidence of the debt. To record this transaction, the accountant would

Debit equipment for $12,000, debit Interest Expense for $360, and credit Notes Payable for $12,360

Debit equipment for $12,360, credit Interest Expense for $360, and credit Notes Payable for $12,000

Debit equipment for $12,000 and credit Notes Payable for $12,000

Debit equipment for $12,000 and credit Accounts Payable for $12,000

Vacation benefits are an example of:

accounts to be created

estimated liabilities, contingent liabilities

a pension plan

a reconciliation of petty cash

2

The matching principle requires businesses to record Warranty Expense: (choose 2)

incurred when the company makes a sale

with its accounts payable

in the same period the company records revenue related to said warranty

with a check number

P

3

Warranty obligations are estimated based on: (choose 2)

historical experience of anticipated product defects

the customer’s age and gender

material and labors estimates for repair

the suppliers

4

Contingent liabilities are: (choose 2)

set values used for the matching principle

potential liabilities that may not actually occur in the future

accrued when they are likely to occur & can be reasonably estimated

the same thing as estimated liabilities

5

Two examples of an “estimated liability” are: (choose 2)

Supplier information

Employee benefits

Income taxes

Account to be debited

5

The obligation a company has to the purchaser of its product or service is: (choose 2)

to keep records of competing products or services

an estimate of obligation

its names of suppliers

a warranty liability

7

Accounting for liabilities is important for a company to remain in compliance with: (choose 2)

GAAP

IRR

JIT

IFRS

8

An estimated liability is:

accrued overtime

a known obligation of uncertain amount that can be estimated, an obligation with no set value that will be determined in the future

the same as a payroll

the estimation of a business’ liability

7

A co-signed ‘note Payable’ is an example of a (an):

account to be credited

form of financial statement

assets

estimated current liability

8

Two types of classification of “Contingent Liability” are: (choose 2)

“Unreasonable”

“Unlikely”

“Probably”

“Remote”