Q: Which formula correctly calculates the accounts payable turnover ratio?

$$ \text{Accounts Payable Turnover} = \frac{\text{COGS}}{\text{Average Accounts Payable}} $$

Question 1

Which of the following best describes a current liability?

Accepted Answer

A debt payable in cash within one year or one operating cycle.

Question 2

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

Accepted Answer

$$ \600$$ $

Question 3

Which formula correctly calculates the accounts payable turnover ratio?

Accepted Answer

$$ 	ext{Accounts Payable Turnover} = \frac{	ext{COGS}}{	ext{Average Accounts Payable}} $$

Question 4

If a company’s accounts payable turnover ratio is 8, how many days on average does it take to pay its accounts payable?

Accepted Answer

$$ \frac{365}{8} = 45.625 $$ days

Question 5

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

Accepted Answer

A bond payable due in 5 years.

Question 6

Amazon.com collects $3 million for 1-year memberships to Amazon Prime on June 30, 2024. By December 31, how much revenue should be recognized as earned?

Accepted Answer

$$ \1$$,500,000 $

Question 7

Which journal entry correctly records payroll liabilities for a $$10,000 salary expense, 1$$,200 employee income tax payable, and $800 employee FICA payable?

Accepted Answer

Debit Salary Expense $$10,000; Credit Employee Income Tax Payable 1$$,200; Credit Employee FICA Payable $$800; Credit Salary Payable 8$$,000.

Question 8

Black & Decker estimates that 3% of $100,000 sales will require warranty replacement. What is the estimated warranty expense for the year?

Accepted Answer

$$ \3$$,000 $

Question 9

Which of the following best describes a contingent liability?

Accepted Answer

A potential liability that depends on the future outcome of past events.

Question 10

According to FASB guidelines, when should a company accrue a contingent liability?

Accepted Answer

When it is probable the loss will occur and the loss can be reasonably estimated.

Question 11

Which of the following is an example of unearned revenue?

Accepted Answer

Cash received from customers for services to be provided in the future.

Question 12

A company has a long-term debt of $$100,000, with 20$$,000 due within the next year. How should the $20,000 be classified at year-end?

Accepted Answer

As a current liability.

Question 13

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

Accepted Answer

No errors occur when invoices are entered into the system.

Question 14

If a company estimates warranty expense at $$3,000 but only 2$$,800 of actual defects occur, what is the correct accounting treatment for the $2,800?

Accepted Answer

Reduce the accrued warranty liability by $2,800 when the replacements are made.

Question 15

Which of the following is NOT a payroll liability?

Accepted Answer

Accounts receivable.

Question 16

A company borrows $10,000 on a short-term note payable at 12% interest, due in one year. What is the total amount to be paid at maturity?

Accepted Answer

$$ \11$$,200 $

Question 17

Which operating activity is most likely to result in an accrued warranty payable?

Accepted Answer

Fulfilling warranty claims.

Question 18

Which step is NOT typically performed by an accounts payable bot?

Accepted Answer

Manually entering invoice data into the system.

Question 19

Which of the following is TRUE regarding the classification of liabilities?

Accepted Answer

Debts due after one year are classified as long-term liabilities.

Chapter 8: Current and Contingent Liabilities – Financial Accounting Study Notes

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