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Accounting > Chapter 9 (1) > Flashcards

Chapter 9 (1) Flashcards

1
Q

Amounts owed for inventory, goods, or services acquired in the normal course of business.

A

Accounts payable

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2
Q

A liability that has been incurred but has not yet been paid.

A

Accrued liability

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3
Q

A series of payments of equal amounts.

A

Annuity

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4
Q

Interest calculated on the principal plus previous amounts of interest.

A

Compound interest

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5
Q

An existing condition for which the outcome is not known but by which the company stands to gain.

A

Contingent asset

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6
Q

An existing condition for which the outcome is not known but depends on some future event.

A

Contingent liability

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7
Q

Accounts that will be satisfied within one year or the current operating cycle.

A

Current liability

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8
Q

The portion of a long-term liability that will be paid within one year.

A

Current maturities of long-term debt

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9
Q

A contra liability that represents interest deducted from a loan in advance.

A

Discount on notes payable

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10
Q

A contingent liability that is accrued and reflected on the balance sheet.

A

Estimated liability

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11
Q

Amount accumulated at a future time from a single payment or investment.

A

Future value of a single amount

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12
Q

The amount accumulated in the future when a series of payments is invested and accrues interest.

A

Future value of an annuity

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13
Q

Amounts owed that are represented by a formal contract.

A

Notes payable

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14
Q

The amount at a present time that is equivalent to a payment or an investment at a future time.

A

Present value of a single amount

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15
Q

The amount at a present time that is equivalent to a series of payments and interest in the future.

A

Present value of an annuity

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16
Q

Interest is calculated on the principal amount only.

A

Simple interest

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17
Q

An immediate amount should be preferred over an amount in the future.

A

Time value of money

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18
Q
  1. Omega Company is involved in two unrelated lawsuits, one as the plaintiff and one as the defendant. As a result of the two lawsuits, the company has a contingent asset and a contingent liability. How should Omega record these on its balance sheet?a. Omega should record the contingent liability and the contingent asset on the balance sheet by offsetting the liability against the asset. b. Omega must not record the contingent asset, but Omega must record the contingent liability on the balance sheet if the liability is probable and the amount can be reasonably estimated. c. Omega must record the contingent asset if the realization of the asset is probable and the amount can be reasonably estimated, but Omega must not record the contingent liability on the balance sheet. d. Omega should record the contingent liability and the contingent asset separately on the balance sheet.
A

not d

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19
Q
  1. You want to buy a car costing $20,000 and make loan payments over five years at 10% interest per year. To solve for the amount of the payments, the $20,000 represents:a. a future value. b. a present value. c. the payment amount. d. an annuity.
A

a present value

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20
Q
  1. If you invest money for five years, which will be larger?a. the investments will be the same. b. it depends on how frequently compounding occurs. c. an investment that earns compound interest. d. an investment that earns simple interest.
A

an investment that earns compound interest.

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21
Q
  1. You plan to invest $1,000 and want to determine how much will be accumulated in five years if you earn interest at 8% per year. This is an example of:a. future value of a single amount. b. future value of an annuity. c. present value of an annuity. d. present value of a single amount.
A

Future value of a single amount

22
Q
  1. For users of financial statements, the Current Liabilities classification in the balance sheet is important because it is closely tied to the concept of:a. leverage. b. profitability. c. liquidity. d. materiality
A

liquidity

23
Q
  1. When a liability is accrued, the account debited in the transaction is:a. a stockholders’ equity account. b. another liability account. c. an expense. d. an asset.
A

An expense

24
Q
  1. In the statement of cash flows, an increase in a current liability will appear as a(n):a. increase in the Financing Activities category. b. decrease in the Operating Activities category. c. increase in the Operating Activities category. d. decrease in the Financing Activities category.
A

Increase in operating activities

25
Q
  1. An investment has an annual interest rate of 8%. If the interest is compounded quarterly for 2 years, then the interest factor used in the present value calculation is:a. 2% for 8 periods. b. the interest factor for 8% for 2 years divided by 4. c. twice that for 1 period at 8% multiplied by 2. d. 8% for 2 periods.
A

2% for 8 periods.

26
Q
  1. Accounts payable usually arise from:a. purchases of goods, services, and inventory in the normal course of business. b. purchases of goods or services that require interest payments. c. debts owed employees and government entities. d. long-term discounted liabilities.
A

purchases of goods, services, and inventory in the normal course of business.

27
Q
  1. In the statement of cash flows, a decrease in accounts payable would be shown as a(n):a. increase in the Financing Activities category. b. increase in the Operating Activities category. c. decrease in the Financing Activities category. d. decrease in the Operating Activities category.
A

decrease in the Operating Activities category.

28
Q
  1. You plan to invest $1,000 per year and want to determine how much will be accumulated in five years if you earn interest at 8% per year compounded annually. This is an example of:a. present value of a single amount. b. future value of a single amount. c. present value of an annuity. d. future value of an annuity.
A

future value of an annuity.

29
Q
  1. Alpha Company has current assets of $100,000 and current liabilities of $40,000. How much inventory could it purchase on account and achieve its minimum desired current ratio of 2 to 1?a. $40,000 b. $10,000 c. It cannot purchase any inventory on account and achieve its minimum desired current ratio. d. $20,000
A

$20,000

30
Q
  1. Which of the following accounts would not be classified as a current liability?a. Salaries Payable b. Accounts Payable c. Note Payable, due in 3 years d. Taxes Payable
A

Note Payable, due in 3 years

31
Q
  1. An example of a current liability that must be accrued is:a. current maturity of long-term debt. b. income taxes payable. c. revenue received in advance. d. accounts payable
A

income taxes payable

32
Q
  1. A contingent liability that is probable and where the amount can reasonably be estimated should:a. be recorded as a liability. b. not be recorded as a liability but disclosed in the notes. c. be recorded in the same. d. be neither recorded as a liability nor disclosed in the notes.
A

be recorded as a liability.

33
Q
  1. Assume a firm has signed a $2,000 note payable for which interest and principal are due in three years with interest compounded annually at 15% per year. What would be the total amount of interest due at the end of the third year?a. $300 b. $1,041.75 c. $645 d. $628.75
A

$1,041.75

34
Q
  1. An individual has $5,000 to invest and wants it to become $10,000 at the end of 9 years. Referring to Table 9-1, what interest rate, compounded annually, must be earned on the initial investment?a. 7% b. 6% c. 8% d. 5%
A

8%

35
Q
  1. Which of the following statements regarding contingencies is correct?a. Contingencies that are remote but estimable are disclosed in the notes to the financial statements. b. Contingencies that are probable and not estimable appear on the balance sheet. c. Contingent assets are recorded on the balance sheet, but not in the notes to the financial statements. d. Contingencies that are probable and not estimable are disclosed in the notes to the financial statements.
A

Contingencies that are probable and not estimable are disclosed in the notes to the financial statements.

36
Q
  1. If you are trying to determine the amount of money you will accumulate if you invest in a CD (certificate of deposit), you would use which of the following tables to make this decision?a. future value of a single amount b. present value of a single amount c. present value of an annuity d. future value of an annuity
A

future value of a single amount

37
Q
  1. An invoice received from a supplier for $5,000 on January 1 with terms 3/15, net 30 means that the company should pay:a. either $4,850 before January 16 or $5,000 before the end of the month. b. $4,250 before January 4. c. $4,850 before the end of January. d. $5,000 between January 4 and January 16.
A

either $4,850 before January 16 or $5,000 before the end of the month.

38
Q

What activity does increases and decreases of current liabilities appear on the statement of cash flows?

A

Operating activities

39
Q

What activity does increases and decreases of notes payable appear on the statement of cash flows?

A

Financing activities

40
Q

Calculating interest

A

I=PRT interest equals principle x rate x time in years

41
Q

Calculating compound interest

A

I= P* (1+R)^n Interest = principle x 1+rate raised to the number of years

42
Q

Calculating semi annual compound interest

A

Cut the rate in half and double the years converting it to two periods a yearI = P *(1+ R/2)^n2

43
Q

Calculating quarterly compound interest

A

Cut the rate by 4 and the years *4 converting it to four periods a yearI = P *(1+ R/4)^n4

44
Q

Future value of a single amount FV= p(1+i)^n

A

Amount calculated at a future time form a single payment or investment

45
Q

Present value of a single amountPV =FV(1+I) ^-n

A

The amount at a present time that is equivalent to a payment or an investment at a future time.

46
Q

Annuity

A

A series of payments of equal amounts

47
Q

Which of the following is NOT classified as a long term liability?a. bonds payableb. current portion of long term debt

A

b. current portion of long term debt

48
Q

current assets 350 current liabilities 65 total liabilities 100 current ratio 350/65

A

2.31 to 1

49
Q

land lord records a security deposit as

A

a liability

50
Q

which of the following is an example of a contingent liability?corporate long term liability

A

the liability for future warranty repairs on computers sold during the current perioda lawsuit pending a restaurants

51
Q

to determine if lottery winner would receive a lump sum or an equal amount over a period of years which time value of money calculation

A

Present value of an annuity

Accounting (10 decks)

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