Q: Which equation correctly calculates the total payroll cost to the employer, including employee gross pay and employer payroll taxes?

$$\text{Total Payroll Cost} = \text{Gross Pay} + \text{Employer Payroll Taxes}$$

Q: Which formula correctly calculates the carrying value of bonds issued at a discount?

$$\text{Carrying Value} = \text{Face Value} - \text{Unamortized Discount}$$

Question 1

Which of the following is an example of a current liability that must be estimated rather than being of a known amount?

Accepted Answer

Estimated Warranty Payable

Question 2

A company sells products with a one-year warranty. In December, it estimates warranty costs at $5,000 for the year. Which journal entry should be made at year-end to record this liability?

Accepted Answer

Debit Warranty Expense $$5,000; Credit Estimated Warranty Payable 5$$,000

Question 3

Which equation correctly calculates the total payroll cost to the employer, including employee gross pay and employer payroll taxes?

Accepted Answer

$$	ext{Total Payroll Cost} = 	ext{Gross Pay} + 	ext{Employer Payroll Taxes}$$

Question 4

A company issues a $100,000, 5-year note payable at 8% interest. What is the journal entry to record the first annual interest payment?

Accepted Answer

Debit Interest Expense $$8,000; Credit Cash 8$$,000

Question 5

Which of the following best describes a contingent liability?

Accepted Answer

A liability that depends on the outcome of a future event

Question 6

A company issues $$200,000 of bonds at a discount. The straight-line method is used to amortize the discount over 10 years. If the total discount is 10$$,000, what is the annual amortization amount?

Accepted Answer

$$\frac{\10$$,000}{10} = \$$1,000$$

Question 7

Which of the following is NOT an advantage of the corporate form of business?

Accepted Answer

Double taxation of earnings

Question 8

A company declares a cash dividend of $2 per share on 10,000 shares of common stock. What is the journal entry to record the declaration?

Accepted Answer

Debit Dividends $$20,000; Credit Dividends Payable 20$$,000

Question 9

Which formula correctly calculates the carrying value of bonds issued at a discount?

Accepted Answer

$$	ext{Carrying Value} = 	ext{Face Value} - 	ext{Unamortized Discount}$$

Question 10

A company issues 1,000 shares of $$10 par value common stock for 15 $$per share. What is the correct journal entry?

Accepted Answer

Debit Cash $$15,000; Credit Common Stock 10$$,000; Credit Paid-in Capital in Excess of Par $5,000

Question 11

Which of the following best describes the purpose of the treasury stock account?

Accepted Answer

To record shares repurchased by the company

Question 12

A company has $$50,000 in retained earnings and declares a 10$$,000 cash dividend. What will be the new balance in retained earnings after the dividend is paid?

Accepted Answer

$$\50$$,000 - \$$10,000 = \40$$,000$

Question 13

Which of the following is a characteristic of preferred stock compared to common stock?

Accepted Answer

Preferred stockholders receive dividends before common stockholders

Question 14

A company issues a $500,000 mortgage payable at 6% interest, to be paid over 20 years. What is the formula for calculating the annual interest expense for the first year?

Accepted Answer

$$	ext{Interest Expense} = 	ext{Principal} 	imes 	ext{Interest Rate}$$

Question 15

Which internal control process is most important for preventing payroll fraud?

Accepted Answer

Segregation of duties between payroll preparation and payroll distribution

Question 16

A company declares a 10% stock dividend when its stock is trading at $20 per share. It has 5,000 shares outstanding. What is the value of the stock dividend?

Accepted Answer

$$5,000 	imes 10\% 	imes \20$$ = \$$10,000$$

Question 17

Which of the following transactions would increase the Paid-in Capital account?

Accepted Answer

Issuance of common stock above par value

Question 18

A company issues $$100,000 of bonds at a premium of 5$$,000. What is the formula for the carrying value of the bonds?

Accepted Answer

$$	ext{Carrying Value} = 	ext{Face Value} + 	ext{Unamortized Premium}$$

Question 19

Which of the following best describes a stock split?

Accepted Answer

An increase in the number of shares outstanding with no change in total equity

Question 20

A company has $$300,000 in bonds payable, 50$$,000 in current portion of long-term notes payable, and $20,000 in accounts payable. What is the total amount of current liabilities?

Accepted Answer

$$50,000 + 20$$,000 = $$70,000$$

Liabilities and Stockholders’ Equity: Current Liabilities, Long-Term Debt, and Corporate Equity

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