Question

Question: A company regularly purchases materials from a manufacturer on credit. Payments for these purchas...

A company regularly purchases materials from a manufacturer on credit. Payments for these purchases occur within the company’s operating cycle. They do not include interest and are established with an invoice outlining purchase details, credit terms, and shipping charges. Which current liability situation does this best describe?

sales tax payable

accounts payable

unearned revenue

income taxes payable

A ski company takes out a $400,000 loan from a bank. The bank requires eight equal repayments of the loan principal, paid annually. Assume no interest is paid or accumulated on the loan until the final repayment. How much of the loan principal is considered a current portion of a noncurrent note payable in year 3?

$50,000

$150,000

$100,000

$250,000

A client pays cash in advance for a magazine subscription to Living Daily. Living Daily has yet to provide the magazine to the client. What accounts would Living Daily use to recognize this advance payment?

unearned subscription revenue, cash

cash, subscription revenue

subscription revenue, unearned subscription revenue

unearned subscription revenue, subscription revenue, cash

Which of the following best describes a contingent liability that is likely to occur but cannot be reasonably estimated?

reasonably possible

probable and estimable

probable and inestimable

remote

What accounts are used to record a contingent warranty liability that is probable and estimable but has yet to be fulfilled?

warranty liability and cash

warranty expense and cash

warranty liability and warranty expense, cash

warranty expense and warranty liability

Which of the following accounts are used when a short-term note payable with 5% interest is honored (paid)?

short-term notes payable, cash

short-term notes payable, cash, interest expense

interest expense, cash

short-term notes payable, interest expense, interest payable

Sunlight Growers borrows $250,000 from a bank at a 4% annual interest rate. The loan is due in three months. At the end of the three months, the company pays the amount due in full. How much did the company remit to the bank?

$250,000

$10,000

$252,500

$2,500

An employee earns $8,000 in the first pay period. The FICA Social Security Tax rate is 6.2%, and the FICA Medicare tax rate is 1.45%. What is the employee’s FICA taxes responsibility?

$535.50

$612

None, only the employer pays FICA taxes

$597.50

$550

Employees at Rayon Enterprises earn one day a month of vacation compensation (twelve days total each year). Vacation compensation is paid at an hourly rate of $45, based on an eight-hour work day. Rayon’s first pay period is January. It is now April 30, how much vacation liability has accumulated if the company has four employees and no vacation compensation has been paid?

$1,440

$4,320

$5,760

$7,200

Answer 1

Which current liability situation does this best describe?

Ans: Accounts Payable

Explanation:

1)Purchases are made on credit, and need to pay after a month, so its creates a liability toward them,.

2)This is for short period. And obligation to pay later after making the purchase on credit.

3)So, this is accounts payable.

4)When we received payment in advance for the services provided in future its called unearned revenue. So this is not the here, so its not the correct option.

5)When we need to pay tax on sales , its sales tax payable so again this is not applicable, so its incorrect option.

6)It does not create liability to pay tax, so its not income tax payable.