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| 1.
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Which of the following is NOT a contingent liability? |
| | A) | Product warranty |
| | B) | Discounted note receivable |
| | C) | Pending law suit for slander |
| | D) | Pending law suit for property damage |
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| 2.
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A $6,000, 2-month, non-interest-bearing note payable was discounted by a bank at 9%. The amount of the proceeds were |
| | A) | $6,054 |
| | B) | $5,910 |
| | C) | $5,946 |
| | D) | $6,000 |
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| 3.
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Which of the following is created by the adjusting entry to recognize interest expense incurred but not yet paid? |
| | A) | Prepaid asset |
| | B) | Accrued expense |
| | C) | Deferred expense |
| | D) | Accrued asset |
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| 4.
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The recording of a product warranty expense in the year the merchandise under warranty is sold is supported by the |
| | A) | recognition principle |
| | B) | matching principle |
| | C) | realization principle |
| | D) | business entity concept |
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| 5.
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A $40,000, interest-bearing note payable is signed on December 26, 2002. If the note is a 120-day note, what is the maturity date for this short-term liability? |
| | A) | March 25 |
| | B) | March 26 |
| | C) | April 25 |
| | D) | April 26 |
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| 6.
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$20,000 cash is borrowed on a 2-month note payable. If the interest cost to borrow is $400, what is the actual interest rate on this note? |
| | A) | 10.00% |
| | B) | 12.00% |
| | C) | 20.00% |
| | D) | 22.50% |
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| 7.
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$20,000 cash is borrowed on a 2-month note payable. If the interest cost to borrow is $400, and the cash proceeds received and available to use for the 60 day period is $19,600, what is the actual interest rate on this note? |
| | A) | 10.00% |
| | B) | 12.00% |
| | C) | 12.24% |
| | D) | 12.45% |
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| 8.
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Which of the following is a contra-liability account? |
| | A) | Taxes Payable |
| | B) | Notes Payable |
| | C) | Discount on Notes Payable |
| | D) | Accumulated Amortization |
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| 9.
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Which of the following is a contra-liability account? |
| | A) | GST Payable |
| | B) | GST Receivable |
| | C) | PST Payable |
| | D) | CPP Payable |
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| 10.
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Which of the following statement is correct? |
| | A) | Warranty expense should be recorded when the products need service. |
| | B) | Warranty expense should be recorded when the sale occurs. |
| | C) | Warranty expense should not be recorded but should be disclosed in the notes of financial statements. |
| | D) | Warranty expense is hard to determine, and therefore, it is not required to record or disclose. |
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| 11.
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Which of the following statement is correct? |
| | A) | The likely contingent liability when the amount is determinable, should be disclosed in the notes to the financial statements. |
| | B) | The unlikely contingent liability should be disclosed in the notes to the financial statements. |
| | C) | Contingent gains should be recorded and reported in the balance sheet. |
| | D) | The likely contingent gain is disclosed in the notes to the financial statements. |
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