Question 1

Purdum Farms borrowed $10 million by signing a five-year note on December 31, 2013. Repayments of the principal are payable annually in installments of $2 million each. Purdum Farms makes the first payment on December 31, 2014 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2014, after the first payment is made?

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Question 2

On October 1, 2014, 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 2015 income statement?

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Question 3

Houston Company is involved in a lawsuit. In which of the following situations is only a note disclosure of the contingent liability reported within the financial statements?

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Question 4

Which of the following best describes the accrual of interest?

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Question 5

Miranda Company borrowed $100,000 cash on September 1, 2014, and signed a one-year 6%, interest-bearing note payable. Assume no adjusting entries have been made during the year. Which of the following would be the required adjusting entry at the end of the December 31, 2014 accounting period?

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Question 6

Failure to make a necessary adjusting entry for accrued interest on a note payable would result in which of the following?

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Question 7

Which of the following would not be a result of the adjusting entry to record accrued interest on a note payable?

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Question 8

Melanie Corp. borrowed $100,000 cash on September 1, 2014, and signed a one-year 6%, interest-bearing note payable. The interest and principal are both due on August 31, 2015. Assume that the appropriate adjusting entry was made on December 31, 2014 and that no adjusting entries have been made during 2015. Which of the following would be the required journal entry to pay the note on August 31, 2015?

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Question 9

Thomas Company decided to borrow $30,000 on March 1^st, 2014. Thomas signed a 2-year 6% interest-bearing note. What is the adjustment amount to accrue interest on December 31, 2015?

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Question 10

Which of the following results in a decrease in working capital?

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Question 11

Which of the following statements about contingent liabilities is incorrect?

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Question 12

Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2015. In 2014, cost of goods sold was $258 million and accounts payable was $72 million. Landseeker's accounts payable turnover ratio in 2015 is closest to:

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Question 13

Which of the following statements is incorrect?

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Question 14

How should a contingent liability that is reasonably possible but cannot reasonably be estimated be reported within the financial statements?

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Question 15

Phipps Company borrowed $25,000 cash on October 1, 2014, 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 payable to be reported on the December 31, 2014 balance sheet is which of the following?

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Question 16

The accrual of interest results in the following:

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Question 17

Phipps Company borrowed $25,000 cash on October 1, 2014, and signed a nine-month, 8% interest-bearing note payable with interest payable at maturity. The amount of interest expense to be reported during 2015 is which of the following?

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Question 18

Which of the following statements incorrectly describes the accounts payable turnover ratio?

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Question 19

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

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Question 20

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

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Quiz 9: Reporting and Interpreting Liabilities