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1. Unearned revenue is initially identified with a:

a. Credit to unearned revenue.
b. Credit to revenue.
c. Debit to revenue payable.
d. Debit to revenue.
e. Debit to unearned revenue.

 

2. On December 1, 20X4, company issued a $100,000, 12%, 6 month note payable to bank to borrow $100,000 needed for operating activities. On December 31, 20X4 following adjusting entry was made by company:
Interest Expense 1,000
Interest Payable 1,000
Maturity value of note will be:

a. $100,000
b. $106,000
c. $112,000
d. Some other amount.

 

3. Friday Company is being sued for $200,000. Company attorneys have concluded that chance of losing case is remote and there is only a 10% chance plaintiff will be successful. In financial statements prepared at end of current year Friday must:

a. Accrue $200,000 as a liability.
b. Do NOT accrue $200,000 as a liability but disclose the circumstances of the case in footnotes.
c. Do NOT accrue $200,000 nor footnote the circumstances of the case in footnotes.
d. Accrue $20,000 as a liability.

 

4. Greg Seller earns $30,000 as salesperson for Green Valley Company. Suppose that Combined PICA rate is 7.5% on base of $45,000, that $4,000 was withheld for federal and state income taxes, and combined FUTA/SUTA rate is 6% of first $7,000 paid to an employee. Total cost of keeping Greg on payroll is:

a. $30,000
b. $32,250
c. $32,670
d. $36,670
e. None of the above.

 

5. Dyson Company started operations on January 1 and had sales during year of $1,500,000. Company evaluates that warranty obligations will amount to 1% of sales. Prior to year-end, $9,500 had been expended to repair items covered under warranty agreements. What amounts must Dyson disclose in financial statements with regard to its warranty experience?

 

  Income Statement Balance Sheet 
a.  $15,000 $5,500
b.  $9,500 $5,500
c.  $9,500 $15,000
d.  $15,000 $9,500
e. None of the above.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M921809

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