21) The current ratio is current assets:
A) minus current liabilities.
B) divided by current liabilities.
C) plus current liabilities.
D) multiplied by current liabilities.
22) On December 31, 2015, Estimated Warranty Payable is reported on the balance sheet for White Decker Company. The liability pertains to products sold in 2015 with five year warranties. How should the Estimated Warranty Payable be reported on the balance sheet at December 31, 2015?
A) stockholders' equity.
B) a long-term liability only.
C) a current liability only.
D) a current liability and a long-term liability.
23) The accounting principle that requires a company to record warranty expense in the same period that it records sales revenue is the:
A) going concern principle.
B) expense recognition principle.
C) conservatism principle.
D) consistency principle.
24) Madison Bank lends Neenah Paper Company $100,000 on January 1, 2014. Neenah Paper Company signs a $100,000, 8%, 6-month note. The journal entry made by Neenah Paper Company on January 1, 2014 is:
A) debit Cash for $92,000 and credit Note Payable for $92,000.
B) debit Interest Expense for $8,000 and credit Cash for $8,000.
C) debit Cash for $100,000 and credit Notes Payable for $100,000.
D) debit Interest Expense for $8,000 and credit Interest Payable for $8,000.
25) Monthly sales are $500,000. Warranty costs are estimated at 4% of monthly sales. Warranties are honored with replacement products. No defective products are returned during the month. At the end of the month, the company should record a journal entry with a credit to:
A) Estimated Warranty Payable for $20,000.
B) Warranty Expense for $20,000.
C) Sales for $20,000.
D) Inventory for $20,000.
26) Aisha Company paid $1,500 cash to replace a wheel on equipment sold under a two-year warranty in the prior year. The entry to record the payment would be to:
A) debit Warranty Expense and credit Cash.
B) debit Repair Expense and credit Cash.
C) debit Estimated Warranty Payable and credit Cash.
D) debit Operating Expense and credit Cash.
27) Mariano Corporation sells 10,000 units of inventory during the first year of operations for $500 each. The selling price includes a one-year warranty on parts. It is estimated that 3% of the units will be defective and that repair costs are estimated to be $50 per unit. In the year of sale, warranty contracts are honored on 80 units for a total cost of $4,000. What amount will be reported as Estimated Warranty Liability at the end of the year?
A) $4,000
B) $6,000
C) $11,000
D) $15,000
28) Wisconsin Bank lends Local Furniture Company $100,000 on November 1. Local Furniture Company signs a $100,000, 8%, 4-month note. The fiscal year end of Local Furniture Company is December 31. The journal entry made by Local Furniture Company on December 31 is:
A) debit Interest Expense and credit Interest Payable for $1,333.
B) debit Interest Payable and credit Interest Expense for $1,333.
C) debit Interest Expense and credit Cash for $1,333.
D) debit Interest Payable and credit Cash for $1,333.
29) Michigan Bank lends Detroit Furniture Company $100,000 on December 1. Detroit Furniture Company signs a $100,000, 9%, 4-month note. The total cash paid for interest (only) at maturity of the note is:
A) $1,000.
B) $3,000.
C) $6,000.
D) $9,000
30) Illinois Bank lends Lisle Furniture Company $100,000 on December 1. Lisle Furniture Company signs a $100,000, 9%, 4-month note. The total cash paid at maturity of the note is:
A) $100,000.
B) $103,000.
C) $104,500.
D) $109,000.