Current Assets Chapter 9

The Kelly Company purchased a building for $75,000 in cash. What is the effect on current assets?

  1. Increase in current assets
  2. Decrease in current assets
  3. No effect on current assets
  4. Unable to determine

Effect on the Current Ratio Chapter 9

A company had $250,000 of current assets and $90,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on the amount of the company’s current ratio?

  1. No effect
  2. Increase
  3. Decrease
  4. Cannot be determined

Liability Classification Chapter 9

Listed below are selected items from the financial statements of a company for the year ended December 31, Year 1.

Salaries Payable 63,000
Accounts payable 35,000
Current Maturity of Long-Term Debt 25,000
Bonds payable, due December 31, Year 20 2,200,000
Premium on Bonds Payable 14,000
Estimated Warranty Liability 10,000
Note Payable, due Dec. 31, Year 4 75,000
Unearned Revenue 25,000
Note Payable, due June 1, Year 2 8,000
Discount on Note Payable due June 1, Year 2 500
  1. Determine the Total Current Liabilities to be on a classified balance sheet at December 31, Year 1.
  2. Determine the Total Long-Term Liabilities to be reported on a classified balance sheet at December 31, Year 1.
  1. Total Current Liabilities - 165,500
  2. Total Long-Term Liabilities - 2,289,000

Contingent Liabilities Chapter 9

A company estimates the cost of products warranties to be 3% of sales. The beginning balance in Estimated Warranty Liability account is $15,000. Sales for the period was $795,000. During the period, $32,600 was actually paid for warranty related costs. What is the ending balance in the Warranty Liability account?

  1. $6,250
  2. $23,850
  3. $23,750
  4. $17,600
  5. $38,850

Contingent Liabilities - Warranties Chapter 9

A company provides a warranty on its products that it sells to customers. The warranty liability account had $1,200 balance on April 1. The company had sales of $67,000 in April and estimated warranty repairs at 3% of sales. During the month, the company actually paid out $2,400 for warranty repairs.

Determine the April 30 balance in the estimated warranty liability account.

The ending balance is $810.

Account Classifications Chapter 9

Accounts payable $12,000 Accounts Receivable 20,900
Furniture 5,000 Accumulated Depreciation 6,500
Building 82,000 Cash 21,500
Common Stock ? Sales Revenue 90,700
Cost of Goods Sold 51,500 Depreciation Expense 1,450
Dividends 6,600 Note Payable (due 3/1 Year 4) 20,000
Marketable Securities 1,400 Prepaid Expenses 18,000
Salaries Payable 2,800 Land 38,000
Note Payable (due 5/30 Year 2) 12,400 Service Revenue 22,550
Retained Earnings (1/1 Year 1 ) 39,700 Salary Expense 18,000
Accrued Expenses Payable 1,500 Unearned Revenue 30,500
Utilities Expense 5,400
  1. Determine Total assets on December 31, Year 1
  2. Determine Current Liabilities on December 31, Year 1
  3. Determine Net Income for the year ended December 31, Year 1
  4. Determine the total amount of Common Stock on December 31, Year 1
  1. Total Assets - 180,300
  2. Current Liabilities - 59,200
  3. Net Income - 36,900
  4. Common Stock - 31,100