Question 1

Which of the following is included in the entry to record estimated warranty payable?

Accepted Answer

A) a credit to Estimated Warranty Payable 
B) a credit to Merchandise Inventory 
C) a credit to Warranty Expense 
D) a debit to Estimated Warranty Payable 
A) a credit to Estimated Warranty Payable 
B) a credit to Merchandise Inventory 
C) a credit to Warranty Expense 
D) a debit to Estimated Warranty Payable

Question 2

Dan Jones and Pat Smith are the only two employees of Lone Star Company. In January, 2012, Dan's gross pay was $5,500 and Pat's gross pay was $5,900. All earnings are subject to FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Which of the following would be included in the entry to record the payroll tax expense to be paid out by Lone Star Company for January?

Accepted Answer

A) a debit to Salary payable to employees for $165.30 
B) a debit to FICA-OASDI for $165.30 
C) a credit to FICA-Medicare Tax payable for $165.30 
D) a credit to Salary expense for $165.30 
A) a debit to Salary payable to employees for $165.30 
B) a debit to FICA-OASDI for $165.30 
C) a credit to FICA-Medicare Tax payable for $165.30 
D) a credit to Salary expense for $165.30

Question 3

Firewood Company signed a three-year note payable for $45,000 at 7% annual interest. What is the interest expense for 2013 if the note was signed on August 1, 2013?

Accepted Answer

A) $1,575 
B) $1,313 
C) $9,450 
D) $3,150 
A) $1,575 
B) $1,313 
C) $9,450 
D) $3,150

Question 4

Unearned revenues relating to a one-year service contract are current liabilities until they are earned.

Accepted Answer

A) True 
 B)False

Question 5

Jane Services sells a service plan for commercial computer maintenance. The price is $1,650 per year, paid in advance. On October 1, 2013, Jane sells a service plan to a new customer for cash. Provide the journal entry to record this transaction on October 1.

Accepted Answer

The answer of Jane Services sells a service plan for...

Question 6

The times-interest-earned ratios of four companies are given below:   Which of the above companies have the highest debt-paying ability?

Accepted Answer

A) Forge Corp. 
B) Fellow Inc. 
C) Stacy Corp. 
D) Bennett Inc. 
A) Forge Corp. 
B) Fellow Inc. 
C) Stacy Corp. 
D) Bennett Inc.

Question 7

Investors use the times-interest-earned ratio to evaluate a business's ability to pay interest expense.

Accepted Answer

A) True 
 B)False

Question 8

The liability section of the balance sheet does not include Warranty Expense.

Accepted Answer

A) True 
 B)False

Question 9

A contingent liability that has a remote possibility of becoming an actual loss is not included in a note to the financial statements.

Accepted Answer

A) True 
 B)False

Question 10

The times-interest- earned ratios of Benin Inc. are 20.56 and 7.35 for the years 2013 and 2014, respectively. Which of the following can be the possible reason for such a change?

Accepted Answer

A) Benin Inc. incurred less debt specifically in its revolving line of credit. 
B) Benin Inc. incurred more debt specifically in its revolving line of credit. 
C) Benin Inc. paid less interest in its revolving line of credit. 
D) Benin Inc.'s debt-paying ability increased. 
A) Benin Inc. incurred less debt specifically in its revolving line of credit. 
B) Benin Inc. incurred more debt specifically in its revolving line of credit. 
C) Benin Inc. paid less interest in its revolving line of credit. 
D) Benin Inc.'s debt-paying ability increased.

Question 11

Art Panache, the sole employee of Panache Sales, has gross salary for May of $6,000. 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 20%. Which of the following is a part of the journal entry for accrual of the employer payroll taxes? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)Art's income to date exceeds the FUTA and SUTA tax income limits.

Accepted Answer

A) credit to Salary payable for $6,000 
B) debit to Cash for $4,461 
C) debit to Employee income tax payable of $1,200 
D) credit to FICA-Medicare tax payable of $87 
A) credit to Salary payable for $6,000 
B) debit to Cash for $4,461 
C) debit to Employee income tax payable of $1,200 
D) credit to FICA-Medicare tax payable of $87

Question 12

Warranty Expense would be included in the operating expense section of the income statement.

Accepted Answer

A) True 
 B)False

Question 13

Berkley's gross pay for this month is $8,750. His gross pay year-to-date, prior to this month totaled $102,500. Berkley's rate for federal income tax is 20%. His voluntary deductions total $950. What is the amount of Berkley's net pay? (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.)

Accepted Answer

A) $6,553.92 
B) $6050.00 
C) $7,000.00 
D) $5,603.92 
A) $6,553.92 
B) $6050.00 
C) $7,000.00 
D) $5,603.92

Question 14

Which of the following is included in the entry to record accrual of warranty expense?

Accepted Answer

A) a debit to Warranty Expense 
B) a credit to Merchandise Inventory 
C) a credit to Warranty Expense 
D) a debit to Estimated Warranty Payable 
A) a debit to Warranty Expense 
B) a credit to Merchandise Inventory 
C) a credit to Warranty Expense 
D) a debit to Estimated Warranty Payable

Question 15

The information related to Stereo Music is given below:   Calculate the times-interest-earned ratio for each year and also state the percentage change in the ratio.

Accepted Answer

The answer of The information related to Stereo Music is...

Question 16

Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. The total amount of employee FICA tax is $565. (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Accepted Answer

A) True 
 B)False

Question 17

A restaurant has been sued because a customer claims to have found a bug in her chili. The company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability. Which of the following actions should be taken by the company's management?

Accepted Answer

A) The situation should be described in a note to the financial statements. 
B) The possible liability should not be shown in the financial statements. 
C) The liability should be estimated and recorded as an expense. 
D) Management should consider resigning. 
A) The situation should be described in a note to the financial statements. 
B) The possible liability should not be shown in the financial statements. 
C) The liability should be estimated and recorded as an expense. 
D) Management should consider resigning.

Question 18

Taurus's gross pay for the week is $980. His yearly pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is 6.2%, and that Taurus's pay year-to-date has previously exceeded the $7,000 cap. How much is the amount of state and federal unemployment tax that his employer must record as payroll tax expense and pay to the federal and state governments?

Accepted Answer

A) $0 
B) $14.21 
C) $74.97 
D) $60.76 
A) $0 
B) $14.21 
C) $74.97 
D) $60.76

Question 19

Which of the following occurs when a company records accrued interest expense on a note payable?

Accepted Answer

A) Interest Expense is credited. 
B) Note Payable is credited. 
C) Cash is debited. 
D) Interest Payable is credited. 
A) Interest Expense is credited. 
B) Note Payable is credited. 
C) Cash is debited. 
D) Interest Payable is credited.

Question 20

Amounts owed for products or services purchased on account are called:

Accepted Answer

A) accounts payable. 
B) unearned revenue. 
C) accrued expense. 
D) warranty payable. 
A) accounts payable. 
B) unearned revenue. 
C) accrued expense. 
D) warranty payable.

Exam 11: Current Liabilities and Payroll

Which of the following is included in the entry to record estimated warranty payable?

Firewood Company signed a three-year note payable for $45,000 at 7% annual interest. What is the interest expense for 2013 if the note was signed on August 1, 2013?

Unearned revenues relating to a one-year service contract are current liabilities until they are earned.

Jane Services sells a service plan for commercial computer maintenance. The price is $1,650 per year, paid in advance. On October 1, 2013, Jane sells a service plan to a new customer for cash. Provide the journal entry to record this transaction on October 1.

The times-interest-earned ratios of four companies are given below: Which of the above companies have the highest debt-paying ability?

Investors use the times-interest-earned ratio to evaluate a business's ability to pay interest expense.

The liability section of the balance sheet does not include Warranty Expense.

A contingent liability that has a remote possibility of becoming an actual loss is not included in a note to the financial statements.

The times-interest- earned ratios of Benin Inc. are 20.56 and 7.35 for the years 2013 and 2014, respectively. Which of the following can be the possible reason for such a change?

Warranty Expense would be included in the operating expense section of the income statement.

Which of the following is included in the entry to record accrual of warranty expense?

The information related to Stereo Music is given below: Calculate the times-interest-earned ratio for each year and also state the percentage change in the ratio.

Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. The total amount of employee FICA tax is $565. (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

A restaurant has been sued because a customer claims to have found a bug in her chili. The company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability. Which of the following actions should be taken by the company's management?

Which of the following occurs when a company records accrued interest expense on a note payable?

Amounts owed for products or services purchased on account are called:

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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