1. Which of the following statements about the initial recording of a liability is true?

Multiple Choice

• It is measured in terms of current cash equivalent.

• It is only recorded if it must be paid within the current operating cycle or one year, whichever is longer.

• It is reported as current.

• It is reported as long-term.

2. Lopez Company has a single employee, who earns a salary of $2,500 per pay period (or $60,000 per year). The employees paycheck, dated January 15 of the current year, included withholdings of $400 for employee federal and state income taxes, $155 for FICASocial Security Taxes, and $36.25 for FICAMedicare Taxes. FUTA specifies a federal tax rate of 6.0% on taxable wages up to the first $7,000 for each employee. Complete the necessary journal entry to record the employer payroll tax. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3. On June 30 a designer received a check in the amount of $7,500 from a customer for design services to be provided after the customer chooses a color scheme for the first floor of her house. Complete the necessary journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

4.

Carboy, Inc., has a December 31 year-end. On November 1, Year 1, the company borrows $120,000 from Third National Bank. The annual interest rate is 9%. The note is due in one year on October 31, Year 2. Interest is payable at maturity on October 31, Year 2.

Prepare the adjusting entry dated December 31, Year 1. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)