Exam 11: Current Liabilities and Payroll Accounting

The following totals for the month of June were taken from the payroll register of Ford Company. The entry to record the payment of net payroll would include a

Post-retirement benefits consist of payments by employers to retired employees for health care, life insurance, and pensions.

A current liability is a debt that can be expected to be paid within ______________ year or the ______________, whichever is longer.

Match the items below by entering the appropriate code letter in the space provided. 1. Levied against employees' wages without limit. 2. An obligation in the form of a written promissory note. 3. An agreement whereby an employer provides benefits to employees after they retire. 4. A payroll tax expense levied only against the employer based on employees' wages. 5. A measure of a company's liquidity. 6. A debt than can reasonably be expected to be paid from current assets. 7. A form showing gross earnings and income taxes withheld. 8. Levied against employees' wages with a maximum limit. 9. Payments by employers to retired employees. 10. A potential liability that may become an actual liability in the future.

During the month, a company sells goods for a total of $108,000, which includes sales taxes of $8,000; therefore, the company should recognize $100,000 in Sales Revenues and $8,000 in Sales Tax Expense.

Which of the following items would not be identified if a contingent liability were disclosed in a financial statement footnote?

Shaw Company sells 2,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 40 units for a total cost of $2,000. What amount should Shaw Company accrue on December 31 for estimated warranty costs?

Which of the following is usually not an accrued liability?

Pam Norman had earned (accumulated) salary of $96,000 through November 30. Her December salary amounted to $8,500. Sam Hall began employment on December 1 and will be paid his first month's salary of $5,000 on December 31. Income tax withholding for December for each employee is as follows: The following payroll tax rates are applicable: *Less a credit equal to the state unemployment contribution Instructions Record the payroll for the two employees at December 31 and record the employer's share of payroll tax expense for the December 31 payroll.

Interest expense is reported under Other Expenses and Losses in the income statement.

Mehring's 2010 financial statements contained the following data (in millions). Instructions Compute these values: (a) Working capital. (b) Current ratio.

Post-retirement benefits consist of payments by employers to retired employees for

FICA taxes do not provide workers with

Internal control over payroll is not necessary because employees will complain if they do not receive the correct amount on their payroll checks.

A $30,000, 8%, 9-month note payable requires an interest payment of $1,800 at maturity.

A payroll tax expense which is borne entirely by the employer is the federal _______________ tax.

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

Working capital is current assets divided by current liabilities.

Maddox Company sells televisions with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be $50 per unit. During 2010, 7,000 units were sold at an average price of $400. During the year, repairs were made on 55 units at a cost of $2,400. Instructions Prepare journal entries to record the repairs made under warranty and estimated warranty expense for the year.

Gary Dittman, an employee of Hopkins Company, has gross earnings for the month of October of $8,000. FICA taxes are 8% of gross earnings, federal income taxes amount to $1,270 for the month, state income taxes are 2% of gross earnings, and authorizes voluntary deductions of $20 per month to the United Way. What is the net pay for Gary?