Exam 11: Current Liabilities and Payroll Accounting

A company will incur product repair costs in the future if products that it sells currently under warranty are brought in for repair during the warranty period. The company will also incur bad debts expense in the future if customers who buy on credit currently are unable to pay their accounts. Are the accounting procedures for these two contingent costs (warranty expense and bad debt expense) related or guided by the same accounting principle? Briefly explain.

Warranty expenses are reported on the income statement as

In February, gross earnings in Wine Company totaled $50,000. All earnings are subject to 8% FICA taxes, 5.4% state unemployment taxes, and 0.8% federal unemployment taxes. Prepare the entry to record January payroll tax expense.

The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is

A contingency that is remote

Judy Reber's regular hourly wage rate is $12, and she receives an hourly rate of $18 for work in excess of 40 hours. During a March pay period, Judy works 47 hours. Judy's federal income tax withholding is $70, and she has no voluntary deductions. Compute Judy Reber's gross earnings and net pay for the pay period.

The current ratio is current assets divided by ______________.

Most companies involved in interstate commerce are required to compute overtime at

The timekeeping function includes supervisors monitoring hours worked through time cards and time reports.

Hardy Company has current assets of $90,000, current liabilities of $100,000, long-term, assets of $180,000 and long-term liabilities of $80,000. Hardy Company's working capital and its current ratio are:

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

On January 1, 2010, Howard Company, a calendar-year company, issued $600,000 of notes payable, of which $150,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2010, is

Admire County Bank agrees to lend Givens Brick Company $200,000 on January 1. Givens Brick Company signs a $200,000, 8%, 9-month note. What entry will Givens Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

Golf Pro Publications publishes a golf magazine for women. The magazine sells for $3 a copy on the newsstand. Yearly subscriptions to the magazine cost $24 per year (12 issues). During December 2010, Golf Pro Publications sells 9,000 copies of the golf magazine at newsstands and receives payment for 15,000 subscriptions for 2011. Financial statements are prepared monthly. Instructions (a) Prepare the December 2010 journal entries to record the newsstand sales and subscriptions received. (b) Prepare the necessary adjusting entry on January 31, 2011. The January 2011 issue has been mailed to subscribers.

Based on the following information, compute the (1) current ratio and (2) working capital.

Most notes are not interest bearing.

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

Post-retirement benefits include all of the following except

When a company gives employees rights to receive compensation for absences and the payment for such absences is probable and the amount can be reasonably estimated, the company should accrue a liability.

A contingent liability is a liability that may occur if some future event takes place.