Exam 8: Current and Contingent Liabilities

Grady Company's hourly employees earned $55,600 in the pay period ending March 31. Assume further that federal and state income taxes withheld are $9,452 and $2,224, respectively. In addition, social security and medicare taxes are applicable at rates of 6.2% and 1.45%, respectively, and federal and state unemployment taxes are applicable at rates of 4.5% and 3%, respectively. All wages are subject to these taxes.

If no reasonable estimate of the loss can be made, then a contingent liability should be recognized in the ____________________.

A flour mill orders grain sacks from a local farmer. When the company places an order for grain on account, the corresponding journal entry includes a debit to Supplies and a credit to ____________________.

Selected information from the firm's consolidated balance sheet is provided below. Assume that all of the account balances on the balance sheet are normal balances. -Refer to the partial balance sheet presented above for Glass Doctor. Compute the total current liabilities for December 31, 2014, and December 31, 2013.

Geiss Motorsports sold 50 motorbikes for $1,000 each. The bikes carry a 2-year warranty for repairs. Estimates indicate that repair costs will average 2% of the total selling price. What is the amount that would be recorded in the estimated warranty liability account as a result of selling the bikes?

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 unemployment taxes to be recorded?

Interest on a note payable can be calculated by multiplying the amount owed by the interest rate by the fraction of year that represents the time elapsed since borrowing.

Employers withhold taxes from their employees' gross pay and later pay these amounts withheld to the taxing authority.

On April 1, 2013, Guyton Sails accepted a $12,000 advance payment for maintaining a customer's fleet of sail boats. The contract is for a twelve month period. In May 2013, the company performed $1,200 worth of repairs. What is the remaining liability that would appear on the company's balance sheet at the end of May?

Long-term assets are $5,000, current liabilities are $700, and long-term liabilities are $3,000 and the operating cash flow ratio is 1.1, then the company's cash flows from operating activities will be

"You Decide" Essay You are the owner of small chain of sporting goods. Currently, you pay a media company to maintain the company's website and Internet sales processing software system. You are considering bringing that operation in-house by hiring an Information Technology (IT)employee.What factors should you consider in making this decision?

Match the following terms with the appropriate definition. a.Accrued liabilities f.Payroll taxes b.Contingent liabilities g.Sales taxes c.Current liabilities h.Warranty d.Interest rate i.Withholdings e.Liabilities -Liabilities created by adjusting entries

An example of a current liability is a note payable that is due in 2 years.

An example of a current liability is the current maturity of a long-term debt.

A current liability includes obligations which must be repaid

Discuss your ability to repay your existing short-term debt and the short-term loan for which you are applying. Do this by pointing how that you have a very strong current ratio. Specifically, you have $4.40 in current assets available to repay each dollar of your short-term debt.

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 -Social security taxes

General Lighting During the first quarter of 2013, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. -Refer to General Lighting. What is the amount of the accounts receivable as a result of this transaction?

Your sales increased by 10% over the two years but your income increased by 120%.This is an indication that you controlled your expenses quite well.

What is the impact on the accounting equation of recording the issuance of a short-term note payable?