Exam 11: Current Liabilities and Payroll

On December 31, 2014, Ferrero Inc. borrowed $500,000 by signing a note payable. The note is for 5 years and bears interest at the rate of 8%. The note is payable in 5 yearly installments of $125,219 due at the end of every year beginning on December 31, 2015. Which portion is classified as the long-term portion of Notes Payable at December 31, 2014?

Which of the following is a control procedure to prevent fictitious persons cashing paychecks?

Which of the following accounts will be credited by the borrower when a promissory note is issued?

Where does unearned revenue to be earned in six months appear on the balance sheet?

The old age, survivors, and disability insurance portion of FICA taxes is imposed on all of an individual employee's earnings.

Bison Company reported sales revenue for 2013 of $900,000. The products were sold with a nine-month warranty. Members of Bison's management estimate the cost of the warranty will be equal to 5% of sales revenue. Which of the following will be included in the entry to record the actual amounts paid out as a result of warranty claims?

Tom's gross pay for the month is $2,400. Tom's deduction for federal income tax is based on a rate of 20%. Tom has no voluntary deductions. Tom's yearly pay is under the limit for OASDI. What is the amount of FICA withheld from Tom's pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Bike World offers warranties on all their bikes. They estimate warranty expense at 3.5% of sales. At the beginning of 2013, the Estimated Warranty Payable account had a credit balance of $1,200. During the year, Bike World had $295,000 of sales, and had to pay out $5,300 in warranty payments. How much Warranty Expense will be reported on the 2013 income statement?

Which of the following is an important aspect of control over payroll?

Which of the following is a characteristic of a current liability?

The Social Security system is funded by contributions from both the employer and employee.

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

It is mandatory for both the employer and employee to pay:

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. Provide the Provide the journal entry to record salaries expense and payroll withholdings. (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Gross pay is the total amount of salary, wages, commissions, and bonuses earned by an employee during a pay period, after taxes or any other deductions.

Employer FICA tax is a tax paid by the employer and is added to the employee's pay.

Which of the following are required to be deducted from employees' paychecks?

The entry to accrue warranty payable includes a credit to Warranty Expense.

A certain contingent liability was evaluated at year-end, and considered to have a reasonable possibility of becoming an actual liability. If the accountant decided not to report it in the notes to the financial statement, what effect would this have on the financial reporting of the company?

Which of the following is an example of an estimated probable contingency?