Financial Accounting Quiz

1)

Which of the following would be considered an estimated liability?

A) Notes payable

B) Warranties payable

C) Pending litigation

D) Sales tax payable

2)

Current liabilities are expected to be settled within:

A) 3 months.

B) 6 months.

C) 1 year.

D) more than 1 year.

3)

A company signs a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest cent) will the company owe using a 360-day year?

A) $354.38

B) $315.00

C) $ 39.38

D) $ 38.84

4)

Utilize the ________ principle to estimate warranty liabilities.

A) matching

B) entity

C) conservatism

D) objectivity

5)

Which of the following would NOT be considered a contingent liability?

A) Pending legal action

B) Potential fines from the EPA

C) Mortgage payable

D) Cosigning a loan

6)

a 3 month, 7% note for $14,000 is signed on Nevmber 1. What is the entr to accrue interest on December 31?

a) debit to interest expense for $245; creit to interest payable for $245.

b) debit to interest expense for $245; credit to cash for $245.

c) debit to interest expense for $163.33; credit to interest payable for $163.33

d) debit to interest expense for $163.33; credit to cash for $163.33

7)

if cash sales are made of $100,000, and a state-imposed sales tax of 5% is collected, which of the following will occur in the journal entry to record the sale?

a) debit to cash for 100,000

b) credit to sales tax expense for 5,000

c) credit to sales revenue of 100,000

d) credit to sales revenue of 105,000

8)

which of the following will be reported in the balance sheet as current liability?

a) income tax payable due in 4 month

b) mortgage payable due in 18 months

c) current portion of long-term payable

d) both a and c will be reported in the balance sheet as current liabilities

9)

How should contingent liabilities be treated if the outcome is probable and the amount can be reasonably estimated?

a) journalize the entry for the estimated amount, recognizing it on the balance sheet only

b) create a note to the financial statements sharing the probability of the contingency loss only.

c) do both a and b

d) do neither. we don’t record loss contingencies until we are required to pay under any circumstances.

10)

If sales of 15,000 are made for the month, and estimated warranty costs are 3%, how do we recognize the warranty expense for the month?

a) debit warranty payable for 450, credit warranty expense for 450.

b) debit warranty expense for 450, credit cash for 450

c) debit warranty expense for 450, credit warranty payable for 450

d) no entry is made to estimae the warranty cost.