Exam 11: Current Liabilities and Payroll

Establishing controls for efficiency of the payroll process is one of the two key controls for payroll.

Felix Sales offers warranties on all their electronic goods. Warranty expense is estimated at 3.5% of sales revenue. In 2015, Felix had $333,000 of sales. In the same year, Felix paid out $8,750 of warranty payments. Provide the journal entry to record the warranty expense.

Which of the following is the proper treatment for a liability that exists, but the exact amount of which is not known? Assume the probability of loss is probable and the amount of the loss can be estimated.

Only contingencies that are probable and can be estimated are recorded as a liability and an expense.

Which of the following are extra compensation items that are not paid directly to an employee?

Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?

Ferro Inc. signed a 200-day, 5%, $5,000 note on April 1, 2014, and that this was the only note payable for the company. Calculate the times-interest-earned ratio of Ferro Inc. if its operating income for the year ending December 31, 2014, amounts to $4,300. Assume a tax rate of 20%.

Which of the following is a reason that many companies require a photo ID when employees pick up their paychecks?

Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. Provide the journal entry to record the employer's payroll taxes. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

The expense for warranty costs is recorded in the period:

Synergy Appliances sells dishwashers with a 4-year warranty. In 2013, sales revenue for dishwashers is $85,000. The company estimates warranty expense at 4.5% of revenues. What is the total estimated warranty payable of Synergy Appliances in 2013?

________ is a schedule that summarizes the earnings, withholdings, and net pay for each employee.

A $35,000, two-month, 7% note payable was issued on December 1, 2015. What is the amount of interest expense recorded in the year 2016?

On July 1, 2013, Ferrero Inc. purchased merchandise inventory for $500,000 by signing a note payable. The note is for 6 months and bears interest at a rate of 8%. Provide the journal entry at the end of December for payment of the note.

Isabelle's gross pay for the week is $850. Her deduction for federal income tax is based on a rate of 19%. She has voluntary deductions of $135. Her yearly pay is under the limit for OASDI. What is the amount of her net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

FUTA, Federal unemployment compensation tax, is paid by the employer only and is not deducted from an employee's gross pay.

Berkley's gross pay for this month is $8,750. His gross pay year-to-date, prior to this month totaled $102,500. What is the amount of FICA withheld from Berkley's pay for this month? (Assume an OASDI rate of 4.2%, applicable on the first $110,100 earnings, and a Medicare rate of 1.45%, applicable on all earnings.)

Celia's had sales of $8,421. The state sales tax rate is 8%. Sales are for cash. What amount will be credited to the Sales Revenue account?

The journal entry in the payroll cycle to record employer's payroll tax expense will include a debit to Employee Income Taxes Payable.

Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. He is also subject to federal income tax at a rate of 18%. Art has a deduction of $320 for health insurance and $80 for United Way. Which of the following is included in the entry in the payroll cycle to record the liability of payroll withholding deductions?