Exam 8: Current and Contingent Liabilities

General Lighting ​ During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. -Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. Which of the following records the sale of the batteries?

Match each of the following current liabilities with its meaning. -Social security taxes

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. -Refer to Gainesville Truck Center. Assuming December 31st falls on a Thursday, the year-end adjusting entry would

A company whose fiscal year ends December 31, has a weekly payroll of $100,000. Employees work 5 days per week, Monday through Friday and payday is every Friday. How much wages expense will be recorded on the Friday, January 3 payday?

Match the following terms with the appropriate definition. -Taxes paid to the government by both employees and employers

Georgia's Salon ? The salon sells $50,000 of gift cards in May 2019. These gift cards may be used anytime before their expiration on May 31, 2020. -Refer to Georgia's Salon. On May 31, 2020, all but $1,500 of the gift cards had been redeemed for salon services. What is the impact on the accounting equation of recording the expired gift cards?

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. -Refer to Gainesville Truck Center. Which of the following statements is true regarding the FICA taxes that must be recorded?

A(n) ____________________ usually guarantees the repair or replacement of defective goods during a period ranging from a few days to several years following the sale.

An example of a current liability is a note payable that is due in 8 months.

If no reasonable estimate of the loss can be made, then a contingent liability should be recognized in the ____________________.

General Lighting ​ During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. -Refer to General Lighting. The price of each battery includes a $1.95 federal excise tax. Any taxes collected must be paid to the appropriate governmental units at the end of the quarter. Which of the following is the proper journal entry to record for the sale of the batteries?

The proceeds from advance ticket sales for a concert to be held next month should be recorded as a current liability.

An example of a current liability is a note payable that is due in 2 years.

During January, Gaston Wholesalers experienced some difficulties with cash flow so it approached one of its vendors about a payment extension. The vendor agreed to the extension on the condition that the company sign a 30-day note that includes 9% interest. What journal entry is needed to record the retirement of the note on the maturity date?

Federal income taxes payable is not a current liability.

____________________ refers to the ability of a company to meet its short-term obligations.

Match the following terms with the appropriate definition. -Taxes levied by state and local governments

General Lighting ​ During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. -Refer to General Lighting. When the company records this transaction, what is the impact on the accounting equation?

Every month, Glacier Distributors orders shipping supplies from a particular vendor. On February 13, 2019, the company orders supplies amounting to $21,000 on account, payable on March 15, 2019. Due to an unexpected decline in business, the company is unable to pay its vendor on March 15th, and so asked for a payment extension. The vendor granted the extension but requires the company to sign a note that specifies 7.5% interest beginning March 15, 2019, with a due date of July 15, 2019. The company pays the amount in full on July 15, 2019. ​ Prepare the necessary journal entries for Glacier Distributors on February 13th, March 15th, and July 15th.

Liquidity relates to a company's ability to sell its assets for amounts that exceed the assets' book values.