Exam 10: Liabilities: Current, Installment Notes, and Contingencies

Below are two independent sets of transactions for Welcott Company: (a) Welcott provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation pay is $78,000. Journalize the adjusting entry required on January 31, the end of the first month of the year, to record the accrued vacation pay.​ (b) Welcott maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Northern Trust, by the fifteenth of the month following the end of each quarter. Assuming that the pension cost is $119,600 for the quarter ended December 31, journalize entries to record (1) the accrued pension liability on December 31 and (2) the payment to the funding agent on January 15.

The following totals for the month of June were taken from the payroll register of Young Company: The entry to record the accrual of employer's payroll taxes would include a debit to

A current liability is a debt that is reasonably expected to be paid

The journal entry a company uses to record accrued vacation privileges for its employees at the end of the year is

Federal income taxes withheld increase the employer's payroll tax expense.

The payroll register of Seaside Architecture Company indicates $870 of social security and $217 of Medicare tax withheld on total salaries of $14,500 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $5,250 at the federal rate of 0.8% and state rate of 5.4%. Prepare the journal entry to record the payroll tax expense for the period.

Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings?

Proper payroll accounting methods are important for a business for all the reasons below except

An unfunded pension liability is reported on the balance sheet as

Most employers are required to withhold federal unemployment taxes from employee earnings.

Excel Products Inc. pays its employees semimonthly. The summary of the payroll for December 31, indicated the following: Salary expense $120,000 Federal income tax withheld 20,000 Payroll is subject to social security tax of 6% and Medicare tax of 1.5%, with no maximum earnings; $10,000 is subject to state unemployment tax of 5.4% and federal unemployment tax of 0.8%. Prepare the journal entries for payroll tax expense if the employees are paid on December 31 of the current year.

Roseland Design borrowed $700,000 on a 90-day note from CorpOne Funding Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for interest calculations.)(a)Journalize Roseland's entries to record: a.The issuance of the note. a.The receipt of the note. b.The payment of the note at maturity. (b)Journalize CorpOne's entries to record: b.The receipt of the payment of the note at maturity.

Use the following key (a-d) to identify the proper treatment of each contingent liability.a.Record only b.Record and disclose c.Disclose only d.Do not record or disclose -Event is probable but amount is not estimable

Several months ago, Jones Company experienced a spill of hazardous materials into the White River from one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $405,000. The company contested the fine. In addition, an employee is seeking $180,000 damages related to the spill. Finally, a homeowner has sued the company for $260,000. Although the homeowner lives 30 miles downstream from the plant, he believes that the spill has reduced his home's resale value by $260,000.Jones' legal counsel believes the following will happen in relationship to these incidents: (a)It is probable that the EPA fine will stand.(b)An out-of court-settlement for $165,000 has recently been reached with the employee, with the final papers to be signed next week.(c)Counsel believes that the homeowner's case is weak and will be decided in favor of Jones Company.(d)Other litigation related to the spill is possible, but the damage amounts are uncertain.​ (1)Based on this information, journalize the contingent liabilities associated with the spill. Use the account "Damage Awards and Fines" to recognize the expense for the period.(2)Prepare any note disclosure related to the spill.

Lamar Industries warrants its products for one year. The estimated product warranty expense is 3% of sales. Sales for June were $190,000. In July, a customer received warranty repairs requiring $185 of parts and $50 of labor.(a)Journalize the adjusting entry required at June 30, the end of the first month of the current year, to record the estimated product warranty expense.(b)Journalize the entry to record the warranty work provided in July.

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31 of the current year. The December 31, Year 1 carrying amount in the allocation of periodic payments table for this installment note will be equal to:

An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and the federal income tax to be withheld was $614.​ (a) Determine the gross pay for the week.(b) Determine the net pay for the week.

Wilson Cafeteria issues gift cards, which are very popular in the small town where the restaurant is located. In a recent month, Wilson issued $4,000 in gift cards. Experience indicates that 80 percent of the cards will be redeemed before they expire. What is the entry to record the estimated gift card expense?

During the first year of operations, a company granted warranties on its products at an estimated cost of $8,500. The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

A defined contribution plan promises employees a fixed annual pension benefit.