The accrual of interest results in an increase liabilities and a decrease in cash.
True
False
False
Which of the following is incorrect?
Current liabilities are those that will be satisfied within one year or the operating cycle, whichever is longer.
Working capital is equal to current assets minus current liabilities.
Current liabilities impact a compa
Liquidity is the ability of the company to meet its total obligations.
A current liability is created when a customer pays cash for services to be provided in the future.
True
False
True
A contingent liability is reported on the balance sheet if it is probable and can be estimated.
True
False
True
Which of the following statements is correct?
Unemployment taxes are paid by the employee only.
Social Security tax is paid only by the employer.
Compensation expenses should be recognized when the employees earn salaries.
Payroll taxes are paid to employ
Compensation expenses should be recognized when the employees earn salaries.
On October 1, 2016, Donna Equipment signed a one-year, 8% interest-bearing note payable for $50,000. Assuming that Donna Equipment maintains its books on a calendar year basis, how much interest expense should be reported in the 2017 income statement?
$3,
$3,000.
A liability that is estimated because the final settlement amount is unknown cannot be reported on the balance sheet.
True
False
False
Working capital decreases when accrued wages expense is recorded at year-end.
True
False
True
A company borrowed $100,000 at 6% interest on September 1, 2016. Assuming adjusting entries have not been made during the year, the entry to record interest accrued on December 31, 2016 would include a debit to interest expense and a credit to interest pa
True
Which of the following describes an accrued liability?
It is an expense that has been incurred but not yet paid.
It is a liability where the cash flow has taken place but the revenue has yet to be earned.
It is an expense that has been both incurred and p
It is an expense that has been incurred but not yet paid.
Which of the following transactions will increase the accounts payable?
Selling inventory for cash.
Purchasing inventory on account.
Selling inventory on account.
Using cash to pay an accounts payable balance.
Purchasing inventory on account.
Cash received from customers may result in a current liability.
True
False
True
Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and principal are both due on March 31, 2017.Assume that the appropriate adjusting entry was made on December 31, 2016 and that no
$1,500.
Which of the following best describes the accrual of interest?
Assets and stockholders' equity decrease.
Assets and liabilities decrease.
Expenses and liabilities increase.
Net income and expenses decrease.
Expenses and liabilities increase.
Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and principal are both due on March 31, 2017.Assume that no adjusting entries had been made before December 31, 2016. Which of the
Interest expense
xxx
Interest payable
xxx
Rocket Corporation entered into the following transactions:
The accrual of wages and salaries expense.
The cash payment of a six-month note payable.
The cash payment in advance for a one-year insurance policy.
Which of the following statements is correct
The accrual of wages and salaries expense decreases working capital.
Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and principal are both due on March 31, 2017.What is the amount to be paid to the bank on March 31, 2017 for interest and principa
$56,000.
Failure to make a necessary adjusting entry for accrued interest on a note payable would result in which of the following?
Net income would be understated and liabilities would be understated.
Net income and stockholders' equity would be overstated and li
Net income and stockholders' equity would be overstated and liabilities would be understated.
Which of the following is correct?
Unearned revenues will eventually become revenue earned.
Unearned revenues are considered increases to stockholders' equity.
Working capital is measured as current liabilities minus current assets.
Working capital increa
Unearned revenues will eventually become revenue earned.
An employee has an obligation to pay his payroll taxes to the employer.
True
False
False
Phipps Company borrowed $25,000 cash on October 1, 2016, and signed a nine-month, 8% interest-bearing note payable with interest payable at maturity. Assuming that adjusting entries have not been made during the year, the amount of accrued interest payabl
$500.
Current liabilities affect working capital and the cash flows from operating activities.
True
False
True
Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and principal are both due on March 31, 2017.Assume that the appropriate adjusting entry was made on December 31, 2016 and that no
Interest expense
xxx
Interest payable
xxx
Note payable
xxx
Cash
xxx
When a company receives cash before products or services are provided the following results:
Assets and stockholders' equity increase.
Liabilities and assets increase.
Assets and revenue increase.
Liabilities and revenues increase.
Liabilities and assets increase.
Smith Corporation entered into the following transactions:
Purchased inventory on account.
Collected an account receivable.
Purchased equipment using cash.
Which of the following statements about Smith's transactions is correct?
The equipment purchase dec
The equipment purchase decreases working capital.