Q: Which formula is used to calculate accounts payable turnover?

$\text{Accounts Payable Turnover} = \frac{\text{Purchases from suppliers (on credit)}}{\text{Average accounts payable}}$

Q: How do you calculate purchases from suppliers if only cost of goods sold and inventory balances are given?

$\text{Purchases} = \text{Cost of Goods Sold} + \text{Ending Inventory} - \text{Beginning Inventory}$

Question 1

Which of the following best describes a current liability?

Accepted Answer

A debt payable in cash within one year or the operating cycle, whichever is longer.

Question 2

A company purchases inventory for $8,000 on January 1, 2024, using a short-term note payable with 10% annual interest. What is the accrued interest expense at September 30, 2024 (fiscal year-end)?

Accepted Answer

$600

Question 3

Which formula is used to calculate accounts payable turnover?

Accepted Answer

$	ext{Accounts Payable Turnover} = \frac{	ext{Purchases from suppliers (on credit)}}{	ext{Average accounts payable}}$

Question 4

If a company’s accounts payable turnover ratio is high, what does this generally indicate?

Accepted Answer

The company pays its suppliers quickly and has lower credit risk.

Question 5

How do you calculate purchases from suppliers if only cost of goods sold and inventory balances are given?

Accepted Answer

$	ext{Purchases} = 	ext{Cost of Goods Sold} + 	ext{Ending Inventory} - 	ext{Beginning Inventory}$

Question 6

Which of the following is NOT typically classified as a current liability?

Accepted Answer

Notes payable due in 18 months

Question 7

A company estimates that 3% of its $100,000 sales will require warranty replacement. What is the journal entry to record the warranty expense?

Accepted Answer

Debit Warranty Expense $3,000; Credit Accrued Warranties Payable $3,000

Question 8

Which of the following is an example of an accrued liability?

Accepted Answer

Salaries payable at the end of the period

Question 9

What is the correct treatment for a contingent liability that is probable and can be reasonably estimated?

Accepted Answer

Accrue the liability in the financial statements.

Question 10

On June 30, Amazon.com collects $3,000,000 for 1-year memberships to Amazon Prime. What is the adjusting entry on December 31 to recognize half the revenue earned?

Accepted Answer

Debit Unearned Revenue $1,500,000; Credit Service Revenue $1,500,000

Question 11

Which payroll liability is created when an employee’s income tax is withheld from their paycheck?

Accepted Answer

Employee Income Tax Payable

Question 12

What is the FICA tax rate applied to gross salary up to $137,700?

Accepted Answer

6.2%

Question 13

Which of the following is a benefit of using robotic process automation (RPA) in the accounts payable process?

Accepted Answer

Employees can be reassigned to more value-added activities.

Question 14

Which process is most suitable for RPA implementation?

Accepted Answer

A rule-based, repetitive task with high volume and structured data.

Question 15

A company’s fiscal year ends September 30. It has a $8,000 note payable at 10% interest issued January 1. What is the total interest paid at maturity on January 1 of the following year?

Accepted Answer

$800

Question 16

Which of the following is NOT a step performed by an accounts payable bot?

Accepted Answer

Making human decisions on exceptions

Question 17

If a company pays off a short-term note payable and related interest at maturity, which accounts are affected?

Accepted Answer

Note Payable, Interest Payable, Interest Expense, Cash

Question 18

Which of the following is an example of unearned revenue?

Accepted Answer

Cash received in advance for a 1-year membership

Question 19

When should a company disclose a contingent liability in a financial statement note?

Accepted Answer

If it is reasonably possible that a loss will occur

Current and Contingent Liabilities: Financial Accounting Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards