Exam 8: Current and Contingent Liabilities

Good Time Carts offers a one-year warranty on all its golf carts. Estimates suggest that two percent of carts sold will require warranty service and that the average warranty claim will cost $215. During 2013, the company sold 450 golf carts.

For each of the types of payroll taxes and other payroll-related items listed, indicate whether it is paid by the employee through a paycheck withholding, by the employer, or both. (Choices may be used more than once.) a.Employee b.Employer c.Both -Federal income taxes

Georgia's Salon The salon sells $50,000 of gift cards in May 2013. These gift cards may be used anytime before their expiration on May 31, 2014. -Refer to Georgia's Salon. During May 2013, $10,000 of the gift cards were redeemed for salon services. Which of the following is the correct journal entry to record the redemption of the gift cards?

The cash ratio is calculated by dividing cash flows from operating activities by current liabilities.

Match each of the ratios named with the proper formula for computation. a.Current Ratio b.Quick Ratio c.Cash Ratio d.Operating Cash Flow Ratio -(Cash + Marketable Securities)/ Current Liabilities

For each of the types of payroll taxes and other payroll-related items listed, indicate whether it is paid by the employee through a paycheck withholding, by the employer, or both. (Choices may be used more than once.) a.Employee b.Employer c.Both -Unemployment taxes

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. -Refer to Gainesville Truck Center. When the company journal entry is recorded for the payment of these wages and related liabilities, which of the following statements is true regarding the impact on the accounting equation?

Why are unearned revenues considered current liabilities?

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. -Refer to Gainesville Truck Center. Assuming December 31st falls on a Thursday, the year-end adjusting entry would

An example of a current liability that must be accrued is

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. -Refer to Gainesville Truck Center. Which of the following expense accounts will be recorded as a result of this payroll transaction?

Assume a company has a current ratio of 0.75. The purchase of inventory on account would cause the current ratio to

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. -Refer to Gainesville Truck Center. What is the impact on the accounting equation of the journal entry for the employer's tax expenses and related liabilities for this payroll transaction?

GTO Division has $14,000 in current assets, $2,000 in accounts payable, and $2,000 in unearned sales revenue. What is the division's current ratio?

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. -Refer to Gainesville Truck Center. Which of the following statements is true regarding the FICA taxes that must be recorded?

Current liabilities require a transfer of assets or performance of services within the longer of ____________________ or one operating cycle.

During 2013, Great Adventures sold 150 dune buggies for $4,000 each. The dune buggies carry a 5-year warranty for defects. Estimates suggest that repair costs will average 4% of the total selling price. The estimated warranty liability at the beginning of the year was $14,000, and $20,000 in claims was actually incurred during 2013 to honor the warranty. What was the warranty expense for 2013?

Refer to Goldberg Financials. What type of liability is presented in this disclosure?

Groovy Swing is a retail store specializing in golf equipment and apparel. On February 1, 2014, the company borrows $250,000 cash from the bank with a six-month, 6% note payable. The note is used to finance the acquisition of inventory for the spring selling season. Prepare the company's necessary journal entries on February 1st and the note's maturity date.

Which of the following statements about current liabilities is true?