Chapter 10 Flashcards
(23 cards)
The two different types of interest are:
simple and compound
The basic interest formula is I = P x R x T (what I refer to in the video as the “I Party” formula). What does I = P x R x T stand for?
Interest = Principal x Rate x Time
The information needed to record payments made on a long-term installment note comes from the —— table.
amortization
For an installment note, the payment a borrow makes regularly includes:
both interest and a repayment of the original loan amount
A business issued a $5,000, 2 month, 12% note to the bank. The amount due at maturity (principal and interest) is:
$5,100
Which of the following taxes are employers usually not required to withhold from employee pay?
Federal unemployment tax
An employee’s rate of pay is $36/hour. If the employee works 30 hours during the week, how much should be withheld for Social Security Tax? (Assume all wages are taxable).
$66.96
Which of the following is the journal entry to record a periodic payment on an installment note?
Account DR CR
Notes Payable $XXX
Interest Expense $XXX
Cash $XXX
A note was issued on November 1 for $1,000 at 6%. Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year?
Interest on a 4-month note is calculated as: $1,000 x 6% x 2/12
Chucky’s Knife Sharpeners, Inc. had gross salaries and wages of $24,000. It withheld $3,600 for income taxes and $1,836 for FICA taxes (Social Security & Medicare). The journal entry to record the employees’ pay should include a:
credit to Wages Payable for $18,564
Employees’ gross pay differs from their net pay because of:
payroll deductions
Bilbo Baggins is the only employee of Hobbiton Trinkets, Inc. During the first week of January, Baggins earned $800.00 and had federal income tax withholdings of $40. Social Security (6.2%) and Medicare Taxes (1.45%) were also withheld from his pay. State and Federal unemployment taxes related to Baggin’s earnings were $50 and $8, respectively. What amount would Baggin’s receive in his first paycheck?
$698.80
On October 1, 2025, Goonies, Inc. negotiates with its bank to borrow $18,000 cash on a one-year note. The bank charges 5% interest. Interest payments are to be made in two installments, on March 31 and September 30. The principal is to be repaid on September 30, 2026, the maturity date. What adjusting entry needs to be recorded December 31, 2025?
Debit to Interest Expense and credit to Interest Payable for $225.
Jedi World began its business on November 1 and sold contracts to twelve students for lightsaber lessons that day. The lessons cost $375 per person for a three-month period and the students are required to pay in advance. The journal entry to record this transaction would include a debit to cash and a credit to:
Deferred Revenue
Burlingame Company is purchasing a new forklift to be used in its warehousing operations. Burlingame borrowed $120,000 from its bank in return for an installment note with 8% interest. Burlingame will make 6 equal annual payments of $25,958. Which of the following is correct regarding this note?
Each payment includes both principal and interest.
Burlingame Company is purchasing a new forklift to be used in its warehousing operations. Burlingame borrowed $120,000 from its bank in return for an installment note with 8% interest. Burlingame will make 6 equal annual payments of $25,958. Interest expense for the first period equals
$9,600.
Hardtack Industries borrowed $336,000 from its bank in return for an installment note with 8% interest. Hardtack will make 6 annual payments of $72,682. At the end of the first period, Hardtack will report a note payable on its balance sheet of:
$290,198.
As an installment loan approaches maturity, the portion of each cash payment that is applied to the repayment (principal) of the loan:
gets larger
Employers must match the amount of ____________employees’ pay.
FICA Taxes
To determine the amount of interest and principal included in a payment on an installment note, one must prepare a(n):
amortization schedule.
Interest on an obligation is recorded:
as time passes.
Current liabilities could include all of the following except:
a bank loan due in 18 months.
