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Chapter Quiz
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1
A current liability is a short-term obligation that:
A)will be paid with cash only.
B)will be paid within one year or one operating cycle, whichever is longer.
C)will be paid within one year or one operating cycle, whichever is shorter.
D)will be paid within one month of the balance sheet date.
2
Bush Corporation had a balance in Accounts Payable of $14,000 and $16,000 on December 31, 2014 and December 31, 2015 respectively. During 2015, Bush had a Cost of Good Sold of $120,000. What is Bush's Accounts Payable Turnover ratio?
A)8.6
B)8.0
C)7.5
D)None of the above
3
Abigail Association paid $14,000 in vacation pay during 2014 that was earned in 2013. It estimates that $63,500 in vacation time has been earned during 2014 but not taken. The required adjusting entry will include a:
A)debit to Compensation Expense and a credit to Cash for $63,500.
B)debit to Compensation Expense and a credit to Cash for $14,000.
C)debit to Compensation Expense and a credit to Accrued Vacation Liability for $63,500.
D)debit to Compensation Expense and a credit to Accrued Vacation Liability for $77,500.
4
Your company borrowed $50,000 on September 30 by issuing a 6-month short-term note payable that bears simple interest of 12%. On December 31, the end of the accounting period, the required adjusting entry related to the note will include a debit to Interest Expense and a credit to Interest Payable for the accrued amount of:
A)$1,500
B)$6,000
C)$3,000
D)$2,000
5
On October 1, 2015 your company issued a 30-year mortgage note of $459,000 that requires monthly payments, excluding interest, of $3,000 at the end of each month, beginning October 31, 2015. On the December 31, 2015 balance sheet, the mortgage note will be reported as a:
A)current liability of $27,000 and a long-term liability of $423,000.
B)current liability of $36,000 and a long-term liability of $414,000.
C)current liability of $9,000 and a long-term liability of $441,000.
D)a long-term liability of $450,000.
6
What causes a temporary difference with regards to taxes?
A)Poor accounting practices.
B)Differences between GAAP and the tax code that reverse over time.
C)Differences between GAAP and the tax code are permanent.
D)Paying the IRS more than you should.
7
On November 1, Bob's Plowing bought a snow plow for $400,000, which it financed with a note to be paid off in three years with annual installments due October 31 of $163,686 (the present value of the three installments is $400,000). On November 1, Bob's journal entry to record the purchase is:
A)<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025559/1014252/ch09_q7a.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (13.0K)</a>
B)<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025559/1014252/ch09_q7b.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a>
C)<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025559/1014252/ch09_q7c.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a>
D)<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025559/1014252/ch09_q7d.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a>
8
A contingent liability and its related loss should be recorded when:
A)it is material.
B)the amount of the loss is reasonably estimated and the occurrence of the loss is possible.
C)the amount of the loss is reasonably estimated and the occurrence of the loss is probable.
D)the amount of the loss can be estimated.
9
The difference between an operating and capital lease is that:
A)an operating lease records a liability for the entire lease amount while a capital lease does not.
B)an operating lease records an increase in an asset for the entire lease amount while a capital lease does not.
C)present values are used to calculate an operating lease but not a capital lease.
D)an operating lease records a rent expense as the asset is used and a capital lease does not.
10
Table A.4 - Present Value of Annuity of $1
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Your grandmother has agreed to send you $14,000 a year for 4 years to help finance your college education. What is the present value of this annuity at a discount rate of 10%?
A)$34,816.60
B)$56,000.00
C)$55,600.00
D)$44,378.60







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