accounting 571

A 3 month, 7% note for $14,000 is signed on November 1. What is the entry to accrue interest on December 31?

A) Debit to Interest Expense for $245 ; Credit to Interest Payable for $245.
B) Debit to Interest Expense for $245; Credit to Cash for $245.
C) Debit to Interest Expense for $163.33; Credit to Interest Payable for $163.33.
D) Debit to Interest Expense for $163.33; Credit to Cash for $163.33.

If cash sales are made of $100,000, and a state-imposed sales tax of 5% is collected, which of the following will occur in the journal entry to record the sale? 
A) Debit to Cash for $100,000 
B) Credit to Sales Tax Expense for $5,000 
C) Credit to Sales Revenue of $100,000 
D) Credit to Sales Revenue of $105,000 

 

Which of the following will be reported in the balance sheet as a current liability? 
A) Income tax payable due in 4 months. 
B) Mortgage payable due in 18 months. 
C) Current portion of long-term payable. 
D) Both A and C will be reported in the balance sheet as current liabilities. 

 

How should contingent liabilities be treated if the outcome is probable and the amount can be reasonably estimated? 
A) Journalize the entry for the estimated amount, recognizing it on the balance sheet only. 
B) Create a note to the financial statements sharing the probability of the contingency loss only. 
C) Do both A and B. 
D) Do neither. We don’t record loss contingencies until we are required to pay under any circumstances. 

 

If sales of $15,000 are made for the month, and estimated warranty costs are 3%, how do we recognize the warranty expense for the month? 

A) Debit Warranty Payable for $450; Credit Warranty Expense for $450. 
B) Debit Warranty Expense for $450; Credit Cash for $450.
C) Debit Warranty Expense for $450; Credit Warranty Payable for $450. 
D) No entry is made to estimate the warranty costs

 
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