Accounting 2036-Chapter 10 Final
Exam with Solved Solutions 2025-2026
Updated.
Liabilities are created when a company: - Answer -buys goods and services on credit
-obtains short-term loans
-issues long-term debt
***current liabilities are short-term obligations that will be paid with current assets within the
company's current operating cycle or within one year of the balance sheet date, whichever is
longer
Measuring liabilities - Answer initial amount of the liability =cash equivalent
additional liability amounts= increase liability
payments made =decrease liability
accounts payable - Answer increases (credited)=when a company receives goods or services
on credit
decreases (debited)= when a company pays on its account
accrued liabilities - Answer liabilities that have been incurred but not yet paid
payroll deductions - Answer -are either required by law or voluntarily requested by
employees and create a current liability for the company
-examples: income tax, FICA tax, Other deductions (charitable donations, union dues, etc.)
JOURNAL ENTRY:
Adam Palmer earned gross pay of $600 in the current payroll period. General Mills withheld
$60.90 in Federal income taxes, $45.90 for FICA, and $10 for united way, resulting in net pay of
$483. 20. Let's assume that general mills has 1,000 workers just like Adam. - Answer Debit:
Salaries and Wages Expense 600,000 ($600 x 1000 workers)
Credit: withheld income taxes payable 60,900
Credit: FICA payable 45,900
Credit: United Way payable 10,000
, Assume General Mills was required to contribute $45,900 for FICA, and an additional $4,750 of
federal and state unemployment tax. - Answer Debit: Payroll tax expense 50,650
Credit: FICA tax payable 45, 900
Credit: unemployment tax payable 4,750
JOURNAL ENTRY:
Lets assume Vernal Mills calculated taxable income to be $1,000,000, and is subject to a 35% tax
rate, so income taxes owed are $350,000 ($1,000,000 x 35%)
***Corporations calculate taxable income by subtracting tax-allowed expenses from revenues.
This taxable income is then multiplied by a tax rate, which ranges for corporations from about
15 to 35 percent - Answer Debit: income tax expense 350,000 (+L)
Credit: income tax payable 350,000 (+E)
Four key events occur with any note payable: - Answer -establishing the note
-accruing interest incurred but not paid
-recording interest paid
-recording principal paid
JOURNAL ENTRY:
Assume that on November 1, 2015, General Mills borrowed $100,000 cash on a one-year note
that required General Mills to pay 6 percent interest and $100,000 principal, both on October
31, 2016 - Answer Debit: Cash 100,000
Credit: note Payable 100,000
JOURNAL ENTRY:
accrue interest owed but not paid on December 31, 2012 - Answer Interest (I) = principal (p)
x interest rate (R) x time (t)
1,000 = 100,000 x 6% x 2/12
Debit: interest expense 1,000
Credit: interest payable 1,000
JOURNAL ENTRY:
record interest paid on October 31, 2016 - Answer jan-oct.
Exam with Solved Solutions 2025-2026
Updated.
Liabilities are created when a company: - Answer -buys goods and services on credit
-obtains short-term loans
-issues long-term debt
***current liabilities are short-term obligations that will be paid with current assets within the
company's current operating cycle or within one year of the balance sheet date, whichever is
longer
Measuring liabilities - Answer initial amount of the liability =cash equivalent
additional liability amounts= increase liability
payments made =decrease liability
accounts payable - Answer increases (credited)=when a company receives goods or services
on credit
decreases (debited)= when a company pays on its account
accrued liabilities - Answer liabilities that have been incurred but not yet paid
payroll deductions - Answer -are either required by law or voluntarily requested by
employees and create a current liability for the company
-examples: income tax, FICA tax, Other deductions (charitable donations, union dues, etc.)
JOURNAL ENTRY:
Adam Palmer earned gross pay of $600 in the current payroll period. General Mills withheld
$60.90 in Federal income taxes, $45.90 for FICA, and $10 for united way, resulting in net pay of
$483. 20. Let's assume that general mills has 1,000 workers just like Adam. - Answer Debit:
Salaries and Wages Expense 600,000 ($600 x 1000 workers)
Credit: withheld income taxes payable 60,900
Credit: FICA payable 45,900
Credit: United Way payable 10,000
, Assume General Mills was required to contribute $45,900 for FICA, and an additional $4,750 of
federal and state unemployment tax. - Answer Debit: Payroll tax expense 50,650
Credit: FICA tax payable 45, 900
Credit: unemployment tax payable 4,750
JOURNAL ENTRY:
Lets assume Vernal Mills calculated taxable income to be $1,000,000, and is subject to a 35% tax
rate, so income taxes owed are $350,000 ($1,000,000 x 35%)
***Corporations calculate taxable income by subtracting tax-allowed expenses from revenues.
This taxable income is then multiplied by a tax rate, which ranges for corporations from about
15 to 35 percent - Answer Debit: income tax expense 350,000 (+L)
Credit: income tax payable 350,000 (+E)
Four key events occur with any note payable: - Answer -establishing the note
-accruing interest incurred but not paid
-recording interest paid
-recording principal paid
JOURNAL ENTRY:
Assume that on November 1, 2015, General Mills borrowed $100,000 cash on a one-year note
that required General Mills to pay 6 percent interest and $100,000 principal, both on October
31, 2016 - Answer Debit: Cash 100,000
Credit: note Payable 100,000
JOURNAL ENTRY:
accrue interest owed but not paid on December 31, 2012 - Answer Interest (I) = principal (p)
x interest rate (R) x time (t)
1,000 = 100,000 x 6% x 2/12
Debit: interest expense 1,000
Credit: interest payable 1,000
JOURNAL ENTRY:
record interest paid on October 31, 2016 - Answer jan-oct.
