Exam 9: Reporting and Analyzing Current Liabilities

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?

Employers' responsibilities for payroll do not include:

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:

Accounting for contingent liabilities depends on the likelihood that a future event will occur.

An employee earned $4,600 in February working for an employer.The FICA tax rate for Social Security is 6.2% of the first $127,200 earned during each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The employee has $644 in federal income taxes withheld and has voluntary deductions for health insurance of $50 and contributes 10% of gross pay to a retirement plan each month.The employer pays the $200 remainder of the health insurance premium and an equal amount of contribution to the retirement fund.What is the amount of net pay for the employee for the month of February?

A company's employees had the following earnings records at the close of the current payroll period: The company's payroll taxes expense on each employee's earnings includes: FICA Social Security taxes of 6.2% on the first $127,200 of earnings plus 1.45% FICA Medicare on all wages; 0.6% federal unemployment taxes on the first $7,000; and 2.5% state unemployment taxes on the first $7,000.Compute the employer's total payroll taxes expense for the current pay period.

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 $127,200 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:

A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

Uncertainties from the development of new competing products are not contingent liabilities.

FUTA requires employers to pay a federal unemployment tax on all salary or wages paid to each employee.

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

If a company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers,the receipt of cash would be journalized as:

Gross pay less all deductions is called ________.

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

During June,Vixen Company sells $850,000 in merchandise that has a one year warranty.Experience shows that warranty expenses average about 3% of the selling price.Customers returned $14,000 of merchandise for warranty replacement during the month.The entry to record the estimated warranty provision at the end of the month is:

Contingent liabilities must be recorded if:

A company's payroll information for the month of May follows: On May 31 the company issued Check No.4625 payable to the Payroll Bank Account to pay for the May payroll.It issued payroll checks to the employees after depositing the check. (1)Prepare the journal entry to record (accrue)the employer's payroll for May.(2)Prepare the journal entry to record payment of the May payroll.The federal and state unemployment tax rates are 0.6% and 5.4%,respectively,on the first $7,000 paid to each employee.The wages and salaries subject to these taxes were $6,000.(3)Prepare the journal entry to record the employer's payroll taxes.

Debt guarantees are:

All of the following statements regarding FICA taxes are true except:

An employee earns $5,500 per month working for an employer.The FICA tax rate for Social Security is 6.2% of the first $127,200 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?