Question 1

With an interest-bearing note, a borrower must pay the ________________ of the note plus _________________ at maturity.

Accepted Answer

face value

Question 2

Nick Dent, an employee of Spottswood Company, has gross earnings for the month of October of $6,000. FICA taxes are 8% of gross earnings, federal income taxes amount to $952 for the month, state income taxes are 2% of gross earnings, and Nick authorizes voluntary deductions of $15 per month to the United Fund. What is the net pay for Nick Dent?

Accepted Answer

A)  $4,442 
B)  $4,433 
C)  $4,448 
D)  $4,452 
A)  $4,442 
B)  $4,433 
C)  $4,448 
D)  $4,452

Question 3

As interest is recorded on an interest-bearing note, the Interest Expense account is

Accepted Answer

A)  increased; the Notes Payable account is increased. 
B)  increased; the Notes Payable account is decreased. 
C)  increased; the Interest Payable account is increased. 
D)  decreased; the Interest Payable account is increased. 
A)  increased; the Notes Payable account is increased. 
B)  increased; the Notes Payable account is decreased. 
C)  increased; the Interest Payable account is increased. 
D)  decreased; the Interest Payable account is increased.

Question 4

Which of the following statements concerning current liabilities is incorrect?

Accepted Answer

A)  Current liabilities include unearned revenues. 
B)  A company that has more current liabilities than current assets is usually the subject of some concern. 
C)  Current liabilities include prepaid expenses. 
D)  A current liability is a debt that can reasonably be expected to be paid out of existing current assets or result in the creation of other current liabilities. 
A)  Current liabilities include unearned revenues. 
B)  A company that has more current liabilities than current assets is usually the subject of some concern. 
C)  Current liabilities include prepaid expenses. 
D)  A current liability is a debt that can reasonably be expected to be paid out of existing current assets or result in the creation of other current liabilities.

Question 5

Foster Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December, Foster Company sold 2,000 units of a product that carries a 60-day warranty. The sales for this product totaled $100,000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $15.
2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200,000 in damages.
3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
4. Employees earn vacation pay at a rate of 1 day per month. During December, ten employees qualify for vacation pay. Their average daily wage is $90 per employee.
Instructions
Prepare adjusting entries, if required, for each of the four items.

Accepted Answer

1. 2,000 units × 4% = 80 units expected

Question 6

A company receives $174, of which $14 is for sales tax. The journal entry to record the sale would include a

Accepted Answer

A)  debit to Sales Tax Expense for $14. 
B)  debit to Sales Tax Payable for $14. 
C)  debit to Sales for $174. 
D)  debit to Cash for $174. 
A)  debit to Sales Tax Expense for $14. 
B)  debit to Sales Tax Payable for $14. 
C)  debit to Sales for $174. 
D)  debit to Cash for $174.

Question 7

FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

Accepted Answer

A) True 
 B)False

Question 8

In most companies, current liabilities are paid within

Accepted Answer

A)  one year through the creation of other current liabilities. 
B)  the operating cycle through the creation of other current liabilities. 
C)  one year out of current assets. 
D)  the operating cycle out of current assets. 
A)  one year through the creation of other current liabilities. 
B)  the operating cycle through the creation of other current liabilities. 
C)  one year out of current assets. 
D)  the operating cycle out of current assets.

Question 9

A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $315,000, what is the amount of the sales taxes owed to the taxing agency?

Accepted Answer

A)  $300,000 
B)  $315,000 
C)  $15,750 
D)  $15,000 
A)  $300,000 
B)  $315,000 
C)  $15,750 
D)  $15,000

Question 10

Unearned Rental Revenue is

Accepted Answer

A)  a contra account to Rental Revenue. 
B)  a revenue account. 
C)  reported as a current liability. 
D)  debited when rent is received in advance. 
A)  a contra account to Rental Revenue. 
B)  a revenue account. 
C)  reported as a current liability. 
D)  debited when rent is received in advance.

Question 11

Eve Trek's regular hourly wage is $14 an hour. She receives overtime pay at the rate of time and a half. The FICA tax rate is 8%. Eve is paid every two weeks. For the first pay period in January, Eve worked 86 hours of which 6 were overtime hours. Eve's federal income tax withholding is $300 and her state income tax withholding is $100. Eve has authorized that $50 be withheld from her check each pay period for savings bonds.
Instructions
Compute Eve Trek's gross earnings and net pay for the pay period showing each payroll deduction in arriving at net pay.

Accepted Answer

The answer of Eve Trek's regular hourly wage is $14...

Question 12

All of the following are reported as current liabilities except

Accepted Answer

A)  accounts payable. 
B)  bonds payable. 
C)  notes payable. 
D)  unearned revenues. 
A)  accounts payable. 
B)  bonds payable. 
C)  notes payable. 
D)  unearned revenues.

Question 13

Selected data from a February payroll register for Cheney Company are presented below. Some amounts are intentionally omitted.   
FICA taxes are 8%. State income taxes are 4% of gross earnings.
Instructions
(a) Fill in the missing amounts.
(b) Journalize the February payroll and the payment of the payroll.

Accepted Answer

The answer of Selected data from a February payroll register...

Question 14

Which of the following employees would likely receive a salary instead of wages?

Accepted Answer

A)  Store clerk 
B)  Factory employee 
C)  Sales manager 
D)  Manual laborer 
A)  Store clerk 
B)  Factory employee 
C)  Sales manager 
D)  Manual laborer

Question 15

On December 1, Gilman Corporation borrowed $5,000 on a 90-day, 6% note. Prepare the entries to record the issuance of the note, the accrual of interest at year end, and the payment of the note.

Accepted Answer

The answer of On December 1, Gilman Corporation borrowed $5,000...

Question 16

Julie Norman, earns $20 per hour for a 40 hour work week and $30 per hour for overtime work. If Julie works 44 hours, her gross earnings are:

Accepted Answer

A)  $880. 
B)  $920. 
C)  $1,045. 
D)  $1,320. 
A)  $880. 
B)  $920. 
C)  $1,045. 
D)  $1,320.

Question 17

FICA taxes are a deduction from employee earnings and are also imposed upon employers as an expense.

Accepted Answer

A) True 
 B)False

Question 18

Employee payroll deductions include each of the following except

Accepted Answer

A)  federal unemployment taxes. 
B)  federal income taxes. 
C)  FICA taxes. 
D)  insurance, pension plans, and union dues. 
A)  federal unemployment taxes. 
B)  federal income taxes. 
C)  FICA taxes. 
D)  insurance, pension plans, and union dues.

Question 19

The following totals for the month of April were taken from the payroll register of Kirk Company.   The entry to record the accrual of federal unemployment taxes would include a

Accepted Answer

A)  credit to Federal Unemployment Taxes Payable for $64. 
B)  debit to Federal Unemployment Taxes Expense for $64. 
C)  credit to Payroll Tax Expense for $64. 
D)  debit to Federal Unemployment Taxes Payable for $64 
A)  credit to Federal Unemployment Taxes Payable for $64. 
B)  debit to Federal Unemployment Taxes Expense for $64. 
C)  credit to Payroll Tax Expense for $64. 
D)  debit to Federal Unemployment Taxes Payable for $64

Question 20

Two federal taxes which are levied against employees' wages that must be deducted in arriving at net pay are (1)______________ taxes and (2)______________ taxes.

Accepted Answer

FICA, fede

Exam 11: Current Liabilities and Payroll Accounting

With an interest-bearing note, a borrower must pay the ________________ of the note plus _________________ at maturity.

As interest is recorded on an interest-bearing note, the Interest Expense account is

Which of the following statements concerning current liabilities is incorrect?

A company receives $174, of which $14 is for sales tax. The journal entry to record the sale would include a

FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

In most companies, current liabilities are paid within

A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $315,000, what is the amount of the sales taxes owed to the taxing agency?

Unearned Rental Revenue is

All of the following are reported as current liabilities except

Which of the following employees would likely receive a salary instead of wages?

On December 1, Gilman Corporation borrowed $5,000 on a 90-day, 6% note. Prepare the entries to record the issuance of the note, the accrual of interest at year end, and the payment of the note.

Julie Norman, earns $20 per hour for a 40 hour work week and $30 per hour for overtime work. If Julie works 44 hours, her gross earnings are:

FICA taxes are a deduction from employee earnings and are also imposed upon employers as an expense.

Employee payroll deductions include each of the following except

The following totals for the month of April were taken from the payroll register of Kirk Company. The entry to record the accrual of federal unemployment taxes would include a

Two federal taxes which are levied against employees' wages that must be deducted in arriving at net pay are (1)______________ taxes and (2)______________ taxes.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

With an interest-bearing note, a borrower must pay the of the note plus _ at maturity.

Two federal taxes which are levied against employees' wages that must be deducted in arriving at net pay are (1) taxes and (2) taxes.