Acc- amounts owed for products or services, due within one year, are

1. Amounts owed for products or services, due within one year, are current liabilities.
      True or False

2. On December 1, 2015, Fine Products borrowed $80,000 on a 4%, 8­year note with annual installment  payments of $10,000 plus interest due on December 1 of each succeeding year.  Which of the following  describes the first installment payment made on December 1, 2016?
$10,000 principal plus $3,200 interest
$10,000 principal plus $400 interest
$10,000 principal plus $10,000 interest
$3,200 interest only

3. Issuance of a note by the issuer is recorded by crediting the Cash account and debiting the Note Receivable 
True or False

4. Which of the following statements is true of the debt to equity ratio?
The higher the debt to equity ratio, the greater the company’s financial risk.
The higher the debt to equity ratio, the lower the company’s financial risk.
If the debt to equity ratio is greater than 1, then the company is financing more assets with equity  than with debt.
If the debt to equity ratio is less than 1, then the company is financing more assets with debt than with equity

5. Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000.  The entire amount 
is under the OASDI limit of $110,100, and thus subject to FICA.  He is also subject to federal income tax at a 
rate of 20%.  His year­to­date pay has already exceeded the $7,000 cap for FUTA and SUTA.  The journal 
entry in the payroll cycle to record employer’s payroll tax expense includes a credit to FICA – Medicare Taxes 
Payable for $145. (Assume a FICA – OASDI Tax of 6.2% and FICA – Medicare Tax of 1.45%.)
True or False

6. The times­interest­earned ratio is calculated as:
profit before tax divided by interest expense.
net income divided by interest expense.
earnings before interest and tax divided by interest expense.
income tax expense plus interest expense divided by interest expense.

7. Why would a corporation issue bonds payable instead of issuing stock?
Debts affect the percentage of ownership of the corporation by the stockholders.
 Debts affect the percentage of ownership of the corporation by the stockholders.
 Debts don’t carry any cost.
 Borrowing by issuing bonds payable carries no risk to the company.

8. Taurus’s gross pay for the week is $980.  His yearly pay is under the limit for OASDI.  Assume that the rate 
for state and federal unemployment compensation taxes is 6.2%, and that Taurus’s pay year­to­date has not 
yet exceeded the $7,000 cap.  His yearly pay is under the limit for OASDI.  How much is the total amount of 
payroll taxes that his employer must record as payroll tax expenses?  (Do not round your intermediate 
calculations.  Assume a FICA – OASDI Tax of 6.2% and FICA – Medicare Tax of 1.45%.)

$60.76,     $135.73 
$55.37,     $120.56

9. Which of the following is an example of an estimated probable contingency?

A. Warranty payable,      B.  Income tax payable  c. Accounts payable,   D. FICA tax payable
10. On January 1, 2015, Carter Sales issued $15,000 in bonds for $14,300.  They were 8­year bonds with a 
stated rate of 9%, and pay semiannual interest.  Carter Sales uses the straight­line method to amortize the 
bond discount.  After the second interest payment on December 31, 2015, what was the bond carrying 
$14,300,  $14,388,  $14,344, $15,000

11. The journal entry for accrued interest on a note payable by the borrower includes:
                 a credit to Interest Expense and debit to Notes Payable.
                  a debit to Interest Expense and credit to Cash.
                  a debit to Interest Payable and credit to Cash.
                  a debit to Interest Expense and credit to Interest Payable.

12. On July 1, 2014, Miniature Company has bonds with balances as shown below.

Bonds Payable= $65,000    Premium Bonds on Payable= $ 3,250
If the company retires the bonds for $66,150, what will be the effect on the income statement?
loss on retirement of $2,100,   loss on retirement of $4,400,   gain on retirement of $4,400,  gain on retirement 
of $2,100.

13. is pay stated as a percentage of a sale amount.
Bonus,  Wage,  commission,   

14. Which of the following is included in the entry to record estimated warranty payable?
               a credit to Warranty Expense,
               a credit to Estimated Warranty Payable
               a debit to Estimated Warranty Payable
                 a credit to Merchandise Inventory

15. Refer to the following list of liability balances at December 31, 2015.
Accounts Payable ­ $13,000
Employee Health Insurance Payable­  $450
Employee Income Tax Payable ­ $400
Estimated Warranty Payable ­ $600
Long­Term Notes Payable (Due 2019)­ $33,000
FICA­OASDI Taxes Payable ­ $560
Sales Tax Payable  ­ $370
Mortgage Payable (Due 2020)­ $6,000
Bonds Payable (Due 2021) $53,000
Current Portion of Long­Term Notes Payable $3,500
•What is the total amount of current liabilities?
$15,380,  $15,380,   $18,880,  $14,980

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