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Exam 9: Reporting and Analyzing Current Liabilities

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Question 111

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Companies with many employees rarely use a special payroll bank account from which to pay employees.

A) True
B) False

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Question 112

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Victory Auto Sales, a used car dealership, offers a one-year or 12,000 mile warranty covering parts on all vehicles it sells. The dealer's experience shows that warranty expense averages about 3% of a car's selling price. During July, Victory sold 7 cars for a total of $105,000. The entry to record the estimated expense and liability related to its July sales is:

A) Debit Warranty Expense $3,150; credit Sales $3,150.
B) Debit Warranty Expense $3,150; credit Estimated Warranty Liability $3,150.
C) Debit Sales $450; credit Estimated Warranty Liability $450.
D) Debit Warranty Expense $450; credit Estimated Warranty Liability $450.
E) Debit Sales Returns and Allowances $22,050; credit Parts Inventory $22,050.

F) B) and E)
G) A) and D)

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Question 113

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A known obligation of an uncertain amount that can at least be reasonably estimated is reported as an estimated liability.

On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as replacement of an account payable with Erikson Company. What amount of interest expense is accrued at December 31, the company's year-end, on the note?

When a company is obligated for sales taxes payable, it is reported as a(n) :

In the accounting records of a defendant, lawsuits:

A company has three employees. Total salaries for the month of January were $8,000. The federal income tax rate for all employees is 15%. The FICA-social security tax rate is 6.2% of the first $118,500 of earnings each calendar year and the FICA-Medicare tax rate is 1.45% of all earnings. Calculate the amount of employee taxes withheld and prepare the company's journal entry to record the January payroll assuming these were the only deductions.

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 4.4%. 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?

A company has 90 employees and a weekly payroll of $117,000. The FICA-social security tax withheld totals $7,254 and the FICA-Medicare tax withheld totals $1,696.50. The total withholding for federal income tax is $16,500. Prepare the journal entry to accrue this week's salaries expense and withholdings, assuming no employees have exceeded the maximum taxable earnings for FICA-Social Security.

On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. What amount of interest expense is accrued at December 31, the company's year end, on the note?

Richardson Fields receives $31,680 cash in advance ticket sales for 11 home soccer games. Record the advance ticket sales on March 31. Record the revenue earned for the first game played on August 17.

The times interest earned ratio reflects:

To compute the amount of tax withheld from an employee's pay, employers can use a __________________________ table.

General Co. entered into the following transactions involving short-term notes payable. On May 14, General purchased $40,000 merchandise from Steller Co., terms are 2/15, n/30. General uses the perpetual inventory system. On May 29, General replaced the May 14 account payable with a 60-day, $36,000 note bearing 8% annual along with paying $4,000 in cash. On July 28, General paid the amount due on the note at maturity. Prepare journal entries for all the preceding transactions and events.

A _______________________ is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

A company borrowed $60,000 by signing a 60-day, 5% note payable from its bank. Compute the total cash payment due on the note's maturity date.

Debt guarantees are usually disclosed as a contingent liability.

If a company uses a special payroll bank account:

A company sold $12,000 worth of bicycles with an extended warranty. It estimates that 2% of these sales will result in warranty work. The current period's entry to record the warranty expense is: