Exam 11: Current Liabilities and Payroll Accounting

Rich Harvest Company sells a product that includes a one-year warranty on parts and labor. During the year 10000 units are sold. Rich Harvest expects that 3% of the units will be defective and that the average warranty cost will be $50 per unit. Actual warranty costs incurred during the year were $14000. Instructions Prepare the journal entries to record (a) the estimated warranty costs and (b) the actual costs incurred.

Most companies pay current liabilities

If a liability is dependent on a future event it is called a

A cash register tape shows cash sales of $3000 and sales taxes of $240. The journal entry to record this information is

From a liquidity standpoint it is more desirable for a company to have current

Assuming a FICA tax rate of 7.65% on the first $117000 in wages 1.45% on amounts in excess of $117000 and a federal income tax rate of 20% on all wages what would be an employee's net pay for the year if he earned $180000 for the year?

Obligations in written form are called ______________ and usually require the borrower to pay interest.

Rhode Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $81900. If the sales tax rate is 5% what amount must be remitted to the state for October's sales taxes?

Working capital is current assets divided by current liabilities.

Marilou Wheeler's regular hourly wage rate is $14 and she receives a wage of 1 1/2 times her regular rate for work in excess of 40 hours. During a June pay period Marilou worked 46 hours. Marilou's federal income tax withholding is $68 and her only voluntary deduction is $25 for group hospitalization insurance. The FICA tax rate is 7.65%. Instructions Compute Marilou's (a) gross earnings and (b) net pay for the pay period.

Dunlin Development Company had the following transactions involving notes payable. Nov. 1, 2016 $\quad$ Borrows $\$ 120,000$ from Merchants and Marine Bank by signing a 3 month, $10 \%$ note. Dec. 31,2016 $\quad$ Prepares the adjusting entry. Feb. 1,2017 $\quad$ Pays principal and interest to Merchants and Marine Bank. Instructions Prepare journal entries for each of the transactions.

Kellog Industries is a manufacturing company that makes various industrial components out of aluminum. Kellog is located in a large city in the northeastern United States. Various labor disputes have occurred in the city some with acrimonious public debate concerning the honesty of management. During one of Kellog's routine employee meetings Colin Ross a production worker brought up the issue of the cost of a worker as reported in the company's annual report. The cost was given as $32000 per year. Colin points out that the average wage rate of $12 per hour is at most around $25000 in gross wages. He asks whether the company is adding in overtime because if so the figures are misleading because the employees are not allowed to work overtime. Required: Prepare a note explaining to Mr. Ross how Kellog might calculate a cost per employee that is greater than gross wages. Explain in general terms only. Do not use any calculations.

The record that provides a cumulative summary of each employee's gross earnings payroll deductions and net pay during the year and is required to be maintained to comply with state and local federal law is the

Metropolitan Symphony sells 200 season tickets for $100000 that represents a five concert season. The amount of Unearned Ticket Revenue after the second concert is $40000.

The accounting for warranty cost is based on the expense recognition principle which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

The higher the sales tax rate the more profit a retailer can earn.

In February gross earnings in Napoli Company totaled $75000. All earnings are subject to 7.65% FICA taxes 5.4% state unemployment taxes and 0.8% federal unemployment taxes. Prepare the entry to record February payroll tax expense.

Examples of provisions include each of the following except provisions for

Faulkner Company has the following selected accounts after posting adjusting entries: Accounts Payable \ 45,000 Notes Payable, 3-month 70,000 Accumulated Depreciation-Equipment 14,000 FlCA Taxes Payable 27,000 Notes Payable, 5-year, 8\% 30,000 Warranty Liability 29,000 Payroll Tax Expense 6,000 Interest Payable 3,000 Mortgage Payable 200,000 Sales Taxes Payable 16,000 Instructions (a) Prepare the current liability section of Faulkner Company's balance sheet assuming $25000 of the mortgage is payable next year. (List liabilities in magnitude order with largest first.) (b) Comment on Faulkner 's liquidity assuming total current assets are $450000.