Business > EXAM > MGMT 200 Exam 3| 170 QUESTIONS (WITH ANSWERS)| Purdue University (All)

MGMT 200 Exam 3| 170 QUESTIONS (WITH ANSWERS)| Purdue University

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Woodcrest, Inc. borrowed $50,000 from a local bank and signed a promissory note. What entry should Woodcrest record? a) debit Cash, $50,000; credit Notes Receivable, $50,000 b) debit Notes Receivab... le, $50,000; credit Cash, $50,000 c) debit Cash, $50,000; credit Notes Payable, $50,000 d) debit Notes Payable, $50,000; credit Cash, $50,000 Correct Answer: debit Cash, $50,000; credit Notes Payable, $50,000 We record interest expense in the period in which we pay it, rather than in the period we incur it. a) true b) false Correct Answer: false (Interest expense is recorded in the period incurred, not in the period in which we pay it) On November 1, 2018, Knomark, Inc. signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. Knomark should report interest payable at December 31, 2018, in the amount of a) $0 b) $1,000 c) $2,000 d) $3,000 Correct Answer: $1,000 [($100,000 x 6%) x 2/12] = $1,000 On November 1, 2018, Boiler Bakery signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. Boiler Bakery records the appropriate adjusting entry for the note on December 31, 2018. What amount of cash will be needed to pay back the note payable plus any accrued interest on May 1, 2019? a) $200,000 b) $202,000 c) $204,000 d) $206,000 Correct Answer: $206,000 $200,000 + ($200,000 x 6% x 6/12) = $206,000 A contingency is best described as a(n) a) current liability b) probable liability c) potential liability d) estimated liability Correct Answer: potential liability If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood [Show More]

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