Exam 9: Accounting for Current Liabilities

On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry that Indigo Company would make,when it records payment of the note on the maturity date? (Use 360 days a year.)

Identify and discuss the factors involved in computing federal income taxes withheld from employees.

Sparks Company entered into the following transactions involving short-term notes payable.On June 18,Sparks purchased $25,000 merchandise from EquipCo.,terms 2/10,n/30.Sparks uses the perpetual inventory system.On July 19,Sparks replaced the June 18 account payable with a 60-day,$12,000 note bearing 4% annual interest in addition to paying $13,000 in cash.Sparks paid the amount due on the note at maturity. 1.Determine the maturity date for the note. 2.Prepare journal entries for all the preceding transactions and events.

A company sold $12,000 worth of bicycles with an extended warranty.The company's experience is that warranty expense averages 2% of sales.The company should:

A company's employees had the following earnings records at the close of the current payroll period: The company's payroll taxes expense on each employee's earnings includes: FICA Social Security taxes of 6.2% on the first $128,400 of earnings plus 1.45% FICA Medicare on all wages; 0.6% federal unemployment taxes on the first $7,000; and 5.4% state unemployment taxes on the first $7,000.Compute the employer's total payroll taxes expense for the current pay period.

The amount of federal income taxes withheld from an employee's paycheck is determined by:

Employers' responsibilities for payroll do not include:

An employee earns $8,500 for the current period.The cumulative earnings of previous pay periods is $100,900.Social security tax applies to the first $128,400 of employee earnings.Calculate the total and individual amounts to be withheld for social security (6.2%),Medicare (1.45%)and federal income tax (15%).

The employer should record deductions from employee pay as:

An employer has an employee benefit package that includes employer-paid health insurance and an employer-paid retirement program.The March payroll included contributions of $5,500 for health insurance,and 10% of the employees' $120,000 gross salaries for the employee retirement program.Prepare the journal entry to record these employee benefits.

During June,Vixen Company sells $850,000 in merchandise that has a one year warranty.Experience shows that warranty expenses average about 3% of the selling price.Customers returned $14,000 of merchandise for warranty replacement during the month.The entry to record the estimated warranty liability at the end of the month is:

Companies with many employees often use a special ________ account to pay employees.

Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay.

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

A potential lawsuit claim is disclosed in the notes when the claim cannot be reasonably estimated and it is reasonably possible.

Gary Marks is paid on a monthly basis.For the month of January of the current year,he earned a total of $8,288.FICA tax for Social Security is 6.2% on the first $128,400 of earnings each calendar year and the FICA tax for Medicare is 1.45% of all earnings.The FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The amount of Federal Income Tax withheld from his earnings was $1,375.17.What is the amount of the employer's payroll taxes expenses for this employee? $\underline{\text{(Round your intermediate calculations to two decimal places.)}}$

The risk of a company not being able to pay its liabilities increases sharply when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods.

The difference between the amount borrowed and the amount repaid is referred to as ________.

When the number of withholding allowances claimed on Form W-4 increases,the amount of income tax withheld decreases.