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Exam 11: Current Liabilities and Payroll Accounting

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Question 61

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A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:

A) Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400
B) Debit Warranty Expense $7,400; credit Sales $7,400.
C) Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
D) Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E) No entry is recorded until the items are returned for warranty repairs.

F) A) and B)
G) C) and E)

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Question 62

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Sales Taxes Payable is debited and Cash is credited when companies send sales taxes collected from customers to the government.

A) True
B) False

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Question 63

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A company had income before interest expense and income taxes of $186,000, and its interest expense is $55,000. Calculate the company's times interest earned ratio.

Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax for social security is 6.2% of the first $118,500 of employee earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of .6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,325.17. Her net pay for the month is: (Round your intermediate calculations to two decimal places.)

An employee earned $62,500 during the year working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of employee earnings per calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. What is the amount of total unemployment taxes the employee must pay?

Kelso had income before interest expense and income taxes of $570 million and interest expense of $37 million. Calculate Kelso' times interest earned.

Vacation benefits is an example of a known liability.

A potential lawsuit claim is disclosed when the claim can be reasonably estimated and it is reasonably possible.

FICA taxes include:

When the number of withholding allowances claimed on Form W-4 increases, the amount of income tax withheld decreases.

An employee earnings report is a cumulative record of each employee's hours worked, gross earnings, deductions, and net pay.

All expected future payments are liabilities.

On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value of the note on March 1? (Use 360 days a year.)

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

All of the following statements regarding liabilities are true except:

Employees earn vacation pay at the rate of one day per month. During the month of June, 10 employees qualify for one vacation day each. Their average daily wage is $150 per day. Which of the following is the necessary adjusting journal entry to record the June vacation benefits?

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January?

Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $118,500 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. His net pay for the month is:

On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account. What is the journal entry needed to record the transaction by Indigo Company?

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)