Accounting Exam 3

Money received today is worth more than the same amount in the future because you can invest it today and receive more in the future, thanks to interest. This defines a concept known as

time value of money

Which is not part of the basic definition of an annuity

variable dollar amounts

True of False: Interest Rates are generally expressed as annual rates

True

What is the formula to calculate basic interest

Interest = Principle X Rate X Time

Which of the following would not be part of payroll tax liability

Net amount of paycheck

In order to calculate bond premium or discount you need four pieces of information. Which is NOT one of them

Discount date

True or False: If you adjust your allowance for doubtful accounts based on a percentage of total credit sales at the end of each month, you are using the Percentage of Credit Sales Method

True

True or False:If you issue a bond at a premium, you receive more than face value

True

You purchase a $25 gift card from Starbucks. On Starbucks balance sheet, which type of liability would this represent

Unearned Revenue

A bank loans a customer $10,000. On the customers books how would this transaction be recorded?

Debit Cash, Credit Notes Payable

A bank loans a customer $10,000. ON the banks books how would this transaction be recorded?

Debit Notes Receivable, Credit Cash

Which of the following should NOT be done if you want to minimize credit losses?

Become a factor for another company's account receivable

True of false: the allowance is required by the Internal Revenue Service for tax reporting purposes, while the direct write off method is required by GAAP

False

If you won the lottery and wanted to calculate how much you would receive as a lump sum, which table would you use

Present value of an annuity of $1

True of False: Under the direct write off method for accounting for bad debt you will establish an allowance for doubtful accounts

False

Which of the following payroll taxes is withheld from an employees paycheck

Federal Income Tax Withholding

Factoring of Accounts Receivable

involves selling accounts receivable to a third party called a factor.