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Exam 9: Reporting and Interpreting Liabilities

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Question 71

Multiple Choice

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Melanie Corp.borrowed $100,000 cash on September 1,2019,and signed a one-year 6%,interest-bearing note payable.The interest and principal are both due on August 31,2020.Assume that the appropriate adjusting entry was made on December 31,2019 and that no adjusting entries have been made during 2020.Which of the following would be the required journal entry to pay the note on August 31,2020?

A)
B)
C)
D)

E) C) and D)
F) None of the above

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Question 72

Multiple Choice

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A loan supported by an agreement to transfer ownership of assets if the loan is not repaid is called a:

A) Private placement of debt
B) Publicly traded debt
C) Secured debt
D) Capital lease

E) A) and D)
F) None of the above

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Question 73

Multiple Choice

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Rudy Corporation is looking to purchase a building costing $500,000 by paying $100,000 cash on the purchase date,and agreeing to make annual payments for the next ten years.The first payment is due one year after the purchase date.Rudy's incremental borrowing rate is 10%.Each of the annual payments is closest to: (FV of $1,PV of $1,FVA of $1,and PVA of $1) (Use the appropriate factor(s) from the tables provided. )

Which of the following transactions will decrease the accounts payable turnover ratio?

Your goal is to be able to withdraw $5,000 for each of the next ten years beginning one year from today.The return on the investment is expected to be 12%.The amount that needs to be invested today is closest to: (FV of $1,PV of $1,FVA of $1,and PVA of $1) (Use the appropriate factor(s) from the tables provided. )

Young Company is involved in a lawsuit.When would the lawsuit be recorded as a liability on the balance sheet?

Rusty Corporation purchased a rust-inhibiting machine by paying $50,000 cash on the purchase date and agreeing to pay $10,000 every three months during the next two years.The first payment is due three months after the purchase date.Rusty's incremental borrowing rate is 8%.(FV of $1,PV of $1,FVA of $1,and PVA of $1) (Use the appropriate factor(s) from the tables provided. ) -The machine reported on the balance sheet as of the purchase date is closest to:

Answer the following four questions. A.What is a contingent liability? B.When must a contingent liability be recorded through a journal entry? C.When should a contingent liability be disclosed in the footnotes to the financial statements? D.When is disclosure of a contingent liability not required?

A company's income statement reported net income of $80,000 during 2019.The income tax return excluded a revenue item of $10,000 (reported on the income statement)because under the tax laws the $10,000 would not be reported for tax purposes until 2020. Prepare the journal entry to record the 2019 income tax expense assuming a 21% tax rate.