Smartbook assignment Chapter 9 PDF

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1. Ace Electronics signed a 10-year, $100,000, 4% note payable on January 1.

When the note is signed, Ace should record a liability of 100,000. Reason: A liability is first recorded at its cash-equivalent amount of $100,000 2. Liabilities are classified as current if they will be paid within the company's operating cycle or within 1 year, whichever is longer. 3. Considering the direct relation that exists in many current liabilities and the operating activities of a business, these operating activities are financed, in part, by the related current liability. True Reason: Considering the direct relation that exists in many current liabilities and the operating activities of a business, these operating activities are financed, in part, by the related current liability. 4. Accounts (or trade) payable is a ______. It increases when ______ and decreases when ______. -current liability; purchases are made on credit; bills are paid 5. Cellem, Inc.'s Beginning Accounts Payable is $4,000 and its Ending Accounts Payable is $2,000. The accounts payable turnover is 6. Cost of Goods Sold must equal $18,000. Reason: The accounts payable turnover of 6 equals Cost of Goods Sold divided by Average Accounts Payable of $3,000. Cost of Goods Sold equals 6 times $3,000 = $18,000. 6. Assets are financed with liabilities and shareholders' equity. 7. Accruing a liability always involves recording both a(n) expense and a liability. Reason: Accrued Liabilities represent the amount of unpaid expenses, not assets. Accrued liabilities include unpaid wages, interest, etc. 8. True or false: A classified statement of financial position separates liabilities into current and non-current categories. True Reason: The classified statement of financial position separates both liabilities and assets into categories. 9. d

10. Canadian corporations pay federal taxes on: ● income. ● Payroll. 11. ABC purchased $500 of merchandise on account. ABC's journal entry to record this transaction includes a ______ of $500. (Check all that apply.) ● debit to Inventory ● credit to Accounts Payable

12. Who is responsible for the collection and remittance of GST? The business 13. During 2019, Barry Bees, Inc.'s Sales equal $30,000 and Cost of goods sold equals $10,000. Its December 31, 2018 Accounts payable was $800 and its December 31, 2019 Accounts payable is $1,200. Barry Bee's accounts payable turnover equals 10 times for the year ended December 31, 2019. Reason: Accounts payable turnover = Cost of Goods Sold/Average Accounts Payable or $10,000/(($800 + $1,200)/2) 14. Which of the following are not required payroll deductions from an employees' gross earnings? (Check all that apply.) ● Workplace safety insurance premiums ● Charitable contributions

15. If a company forgets to record the journal entry to accrue interest expense, then its net income is too High and its liabilities are too Low.

16. Gross earnings for the pay period are $50,000. Income taxes withheld are $10,925. The journal entry to record the taxes incurred and paid by the employer includes a: (check all that apply) ● $50,000 debit to Wages Expense. ● $10,925 credit to Federal Income Tax Withheld Payable

17. Which of the following are current liabilities? (Check all that apply.) ● Wages payable ● Note payable due in 3 months ● Accounts payable

18. Accrued Taxes Payable is a(n) liability and reports the amount owed for federal income taxes. 19. When entering a customer’s invoice in the sales journal, which is true? GST Payable is credited 20. Payroll deductions ______. (Check all that apply.) ● are amounts subtracted from employees' gross earnings to determine their net pay ● decrease the amount of cash an employee receives 21. Gross earnings for the pay period are $100,000. Income taxes withheld are $21,850. The journal entry to record the taxes incurred and paid by the employer includes a: (check all that apply) ● $21,850 credit to Federal Income Tax Withheld Payable ● $100,000 debit to Wages Expense.

22. Gross earnings for the pay period are $100,000. Required payroll deductions are: CPP $6,700; EI $1,450; Federal income tax $18,000 and Health Premiums Payable $3,850. What is the net pay to employees? $70,000 Reason: Net pay = $70,000 = $100,000 - $6,700 - $1,450 - $18,000 - $3,850. 23. John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: CPP Payable $37.20; EI Payable $8.70; Federal Income Tax

$68. Assuming that John gets paid in cash, ABC would record a journal entry that includes a: (Check all that apply.) ● credit to Federal Income Tax Payable of $68. ● credit to CPP Payable of $37.20. ● credit to Cash of $486.10. ● credit to EI Payable of $8.70. ● debit to Wages expense of $600.

24. John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: CPP $37.20; EI $8.70; Federal income tax $68. The entry to record the payment to John for these 40 hours includes a debit to Wages expense of $600 25. What are the key events that occur with any note payable? (Check all that apply.) ● Accruing interest incurred, but not paid ● Recording interest paid ● Recording principal paid

26. John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: CPP $37.20; EI $8.70; Federal income tax $58; and Health Plan Premiums Payable $10. What is John's net pay? Reason: Net pay = $600 - $37.20 - $8.70 - $58 - $10 = $468.10. 27. Gross earnings for the pay period are $100,000. Required payroll deductions are: CPP $6,700; EI $1,450; Federal income tax $18,000 and Health Plan Premiums $3,850. The journal entry to record wages paid includes a $100,000 debit to Wages expense 28. John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: CPP $37.20; EI $8.70; Federal income tax $58; and Health Plan Premiums deducted $10. Assuming that John gets paid in cash, how would ABC record the payroll deductions? Current liabilities increase $113.90. 29. Interest reflects the time value of money and is the cost of using someone else's money. 30. Issuing a note payable for cash results in a(n) increase in assets and an increase in liabilities.

31. On September 1, ABC Company borrowed $50,000 with a 6% annual rate by issuing a 9-month note payable to XYZ National Bank. Given no previous adjusting entries have been recorded, the adjusting entry at December 31 would include a debit to Interest expense of $1,000. 32. XYZ borrowed $50,000 this year. Half of the loan will be repaid next year and the remainder will be paid the following year. How will the $50,000 be reported on its statement of financial position at the end of this year? (Check all that apply.) ● Long-term debt of $25,000 ● Current portion of long-term debt of $25,000

33. ABC Airlines collects $300 for a round-trip ticket from Chicago to Los Angeles. The flights will not occur until the next accounting period. ABC Airlines records the $300 collected in advance with a debit to Cash and credit to Deferred (or Unearned) revenue. 34. To calculate interest payable, what pieces of information are needed? (Check all that apply.) ● annual interest rate ● time period for the loan ● Principal

35. On November 1, 2016, ABC Corp. borrowed $100,000 cash on a 1-year note payable with a 6% annual rate that requires ABC to pay all the interest as well as the principal on October 31, 2017. How would the December 31, 2016, year-end adjusting entry affect the accounting equation? Liabilities increase and shareholders' equity decreases. 36. Today's Fashions has a debt that has been properly reported as long-term debt before this year. Part of this debt is due this year. If Today's Fashions continues to report the current position of the debt as a long-term liability, then the current ratio will be overstated. 37. What kind of account is deferred (or unearned) revenue? Liability account 38. Which of the following is a guarantee that protects a customer from product defects for a specified period of time? Warranty

39. The feature that distinguishes loss contingencies from other liabilities is the Chance that a loss will occur. (Enter one word per blank) 40. On November 1, 2021, a company borrowed $100,000 at an annual rate of 12%. The interest and principal will be repaid in 3 months. The formula to calculate the interest payable on this note at December 31, 2021 equals $100,000 x 12% x (2/12). 41. Which type of contingent liability would most likely be found on a statement of financial position prepared under GAAP? Probable contingent liability that can be estimated 42. Sally Company manufactures large kitchen appliances. For the first year of purchase, the company will repair any manufacturing defect free of charge. Sally apparently sells its appliances with a warranty . (Enter one word per blank) 43. The current ratio and working capital are financial measures of liquidity. 44. A contingent liability is a possible liability that is created as a result of a past event, and may or may not become a recorded liability, depending on future events. 45. Working capital equals current assets minus current liabilities. 46. Which is the formula for calculating interest for the period? principal x annual interest rate x number of months/12 months 47. Burrows, Inc. issued 2 notes payable for $10,000 each on November 30. One is a 3-month, 6%, note and the other is a 6-month, 6% notes. The amount of interest owed at December 31 will be the same amount for both notes. Reason: The interest owed at December 31 equals one month's worth of interest of $50 (= $10,000 x 6% per year x 1/12 of a year). Both notes cost the same per month (= 6% x 1/12). The maturity dates of 3-months and 6-months do not enter into the calculation. However, when the notes mature, i.e., are paid off, the 6-month note will have twice as much interest as the 3-month note. 48. A company has the following assets: Cash of $100, Short-term Investments of $50, Accounts receivable of $50, Inventory of $200, and Other assets of $500. It also has Current liabilities of $200. What is the quick ratio for the company?

49. A company has the following assets: Cash of $100, Short-term Investments of $50, Accounts receivable of $50, Inventory of $200, and Other assets of $500. It also has Current liabilities of $200. What is the quick ratio for the company? 1.0 Reason: 1.0 = ($100+50+50)/$200. Quick ratio=(Cash+Short-term investments+Accounts receivable)/Current liabilities. Inventory, although a current asset, is excluded because it is not a quick asset. 50. What are the two criteria used to determine whether a contingent liability is reported in the financial statements? ● The ability to estimate the amount of the loss ● The likelihood of the loss

51. Both the quick ratio and the current ratio compare a firm's current assets to its current liabilities. The quick ratio differs from the current ratio in that it focuses on just the assets that can be quickly converted into cash 52. Analysts say that a company has Liquidity if it has the ability to pay its current obligations 53. In the operating activities section of the statement of cash flows, subtracting an increase in current assets or a decrease in current liabilities from net income adjusts for transactions that decreased cash, but did not affect net income. 54. New companies often experience rapid sales growth and increases in working capital. Working capital increases are caused by increases in sales-related asset accounts, such as: ● cash ● accounts receivable ● Inventory

55. Which financial statement ratio has the following formula, "Quick Assets / Current Liabilities"? Quick Ratio 56. The quick ratio indicates: (Check all that apply.) ● whether liquid assets are sufficient to pay current liabilities. ● the increased likelihood that a company will be able to pay quickly, assuming that the ratio is higher than in prior periods.

57. The Operating activities section indicates how well a company is able to generate cash through its normal business activities and management of working capital. 58. What are some reasons that working capital may be adversely affected? (Check all that apply.) ● Uncontrolled growth of accounts receivable ● Overstocking inventory

59. In the Operating activities section of the statement of cash flows, subtracting an increase in current assets or a decrease in current liabilities from net income adjusts for transactions that decreased cash, but did not affect net income. 60. D 61. D 62. D 63. D 64. D 65. D 66. D 67. D 68. D 69. Dd 70. D 71....