Question 1

Uncertainties from the development of new competing products are not contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 2

All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:

Accepted Answer

A)  The definitions and characteristics of current liabilities are broadly similar for both U.S. GAAP and IFRS. 
B)  Because tax regulatory systems of countries are different, the approach to recording taxes is totally different. 
C)  The term provision is typically used under IFRS to refer to what is titled liability under U.S. GAAP. 
D)  When there is little uncertainty surrounding current liabilities, both require companies to record them in a similar manner. 
E)  When there is a known current obligation that involves an uncertain amount, but one that can be reasonable estimated, both require similar treatment. 
A)  The definitions and characteristics of current liabilities are broadly similar for both U.S. GAAP and IFRS. 
B)  Because tax regulatory systems of countries are different, the approach to recording taxes is totally different. 
C)  The term provision is typically used under IFRS to refer to what is titled liability under U.S. GAAP. 
D)  When there is little uncertainty surrounding current liabilities, both require companies to record them in a similar manner. 
E)  When there is a known current obligation that involves an uncertain amount, but one that can be reasonable estimated, both require similar treatment.

Question 3

A note payable can be used to extend the payment due on an account payable.

Accepted Answer

A) True 
 B)False

Question 4

To compute the amount of tax withheld from an employee's pay, employers can use a ________ table.

Accepted Answer

wage brack

Question 5

During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. 
-The entry to record the estimated warranty expense for the month is:

Accepted Answer

A)  Debit Estimated Warranty Liability $9,400; credit Warranty Expense $9,400. 
B)  Debit Warranty Expense $5,000; credit Estimated Warranty Liability $5,000. 
C)  Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800. 
D)  Debit Estimated Warranty Liability $17,800; credit Warranty Expense $17,800. 
E)  Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400. 
A)  Debit Estimated Warranty Liability $9,400; credit Warranty Expense $9,400. 
B)  Debit Warranty Expense $5,000; credit Estimated Warranty Liability $5,000. 
C)  Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800. 
D)  Debit Estimated Warranty Liability $17,800; credit Warranty Expense $17,800. 
E)  Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.

Question 6

A liability may exist even if there is uncertainty about whom to pay, when to pay, or how much to pay.

Accepted Answer

A) True 
 B)False

Question 7

Payroll is an example of a contingent liability for the employer.

Accepted Answer

A) True 
 B)False

Question 8

A company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers. When the company mails the first quarterly journal to customers, it should record:

Accepted Answer

A)  Debit Unearned Revenue $11,250, credit Sales $11,250. 
B)  Debit Prepaid Subscriptions $33,750; credit Unearned Revenue $33,750. 
C)  Debit Unearned Revenue $45,000; credit Cash $45,000. 
D)  Debit Prepaid Subscriptions $11,250, credit Sales $11,250. 
E)  Debit Cash $11,250, credit Sales $11,250. 
A)  Debit Unearned Revenue $11,250, credit Sales $11,250. 
B)  Debit Prepaid Subscriptions $33,750; credit Unearned Revenue $33,750. 
C)  Debit Unearned Revenue $45,000; credit Cash $45,000. 
D)  Debit Prepaid Subscriptions $11,250, credit Sales $11,250. 
E)  Debit Cash $11,250, credit Sales $11,250.

Question 9

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

Accepted Answer

A)  Debit Accounts Receivable $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680. 
B)  Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680. 
C)  Debit Sales Taxes Payable $4,680; debit Cash $73,220; credit Sales $78,000. 
D)  Debit Cash $78,000; credit Sales $73,320; credit Sales Taxes Payable $4,680. 
E)  Debit Cash $78,000; credit Sales $78,000; and record the taxes when paid. 
A)  Debit Accounts Receivable $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680. 
B)  Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680. 
C)  Debit Sales Taxes Payable $4,680; debit Cash $73,220; credit Sales $78,000. 
D)  Debit Cash $78,000; credit Sales $73,320; credit Sales Taxes Payable $4,680. 
E)  Debit Cash $78,000; credit Sales $78,000; and record the taxes when paid.

Question 10

An employee earned $43,300 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $118,500 maximum per year and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is:

Accepted Answer

A)  $3,312.45. 
B)  $5,638.05. 
C)  $8,950.50. 
D)  $2,684.60. 
E)  $0, since the FICA tax is only deducted from an employee's pay. 
A)  $3,312.45. 
B)  $5,638.05. 
C)  $8,950.50. 
D)  $2,684.60. 
E)  $0, since the FICA tax is only deducted from an employee's pay.

Question 11

In the accounting records of a defendant, lawsuits:

Accepted Answer

A)  Are estimated liabilities. 
B)  Should always be disclosed. 
C)  Should always be recorded. 
D)  Should be recorded if payment for damages is probable and the amount can be reasonably estimated. 
E)  Should never be recorded. 
A)  Are estimated liabilities. 
B)  Should always be disclosed. 
C)  Should always be recorded. 
D)  Should be recorded if payment for damages is probable and the amount can be reasonably estimated. 
E)  Should never be recorded.

Question 12

An employee earned $62,500 during the year working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of employee earnings per calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current 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. What is the amount of total unemployment taxes the employee must pay?

Accepted Answer

A)  $434.00 
B)  $56.00 
C)  $378.00 
D)  $0.00 
E)  $101.50 
A)  $434.00 
B)  $56.00 
C)  $378.00 
D)  $0.00 
E)  $101.50

Question 13

A table that shows the amount of federal income tax to be withheld from an employee's pay is the:

Accepted Answer

A)  W-4. 
B)  Form 941. 
C)  Wage bracket withholding table. 
D)  W-2. 
E)  Tax table. 
A)  W-4. 
B)  Form 941. 
C)  Wage bracket withholding table. 
D)  W-2. 
E)  Tax table.

Question 14

Contingent liabilities are recorded or disclosed unless they are:

Accepted Answer

A)  Possible and estimable. 
B)  Probable and not estimable. 
C)  Probable and estimable. 
D)  Remote. 
E)  Reasonably possible. 
A)  Possible and estimable. 
B)  Probable and not estimable. 
C)  Probable and estimable. 
D)  Remote. 
E)  Reasonably possible.

Question 15

Explain the responsibilities of and the accounting by employers for deductions from employee payroll.

Accepted Answer

Employers are responsible for collecting

Question 16

Early Co. offers its employees a bonus equal to 2% of the company's net income. The estimated net income for the year is expected to be $800,000. Prepare the general journal entry to record the estimated employee bonus plan expense.

Accepted Answer

None

Question 17

Obligations due within one year or the company's operating cycle, whichever is longer, are
________.

Accepted Answer

The answer of Obligations due within one year or the...

Question 18

An estimated liability:

Accepted Answer

A)  Is a liability that may occur if a future event occurs. 
B)  Is not recorded until the amount is known for certain. 
C)  Can be the result of a lawsuit. 
D)  Is an unknown liability of a certain amount. 
E)  Is a known obligation of an uncertain amount that can be reasonably estimated. 
A)  Is a liability that may occur if a future event occurs. 
B)  Is not recorded until the amount is known for certain. 
C)  Can be the result of a lawsuit. 
D)  Is an unknown liability of a certain amount. 
E)  Is a known obligation of an uncertain amount that can be reasonably estimated.

Question 19

Employees earn vacation pay at the rate of one day per month. During the month of June, 10 employees qualify for one vacation day each. Their average daily wage is $150 per day. Which of the following is the necessary adjusting journal entry to record the June vacation benefits?

Accepted Answer

A)  Debit Payroll Tax Expense $1,500; credit Payroll Taxes Payable $1,500. 
B)  Debit Prepaid Vacation Benefits $1,500; credit Vacation Benefits Payable $1,500. 
C)  Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500. 
D)  Debit Vacation Benefits Payable; credit Vacation Benefits Expense $1,500. 
E)  Debit Vacation Benefits Expense $1,500; credit Prepaid Vacation Benefits $1,500. 
A)  Debit Payroll Tax Expense $1,500; credit Payroll Taxes Payable $1,500. 
B)  Debit Prepaid Vacation Benefits $1,500; credit Vacation Benefits Payable $1,500. 
C)  Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500. 
D)  Debit Vacation Benefits Payable; credit Vacation Benefits Expense $1,500. 
E)  Debit Vacation Benefits Expense $1,500; credit Prepaid Vacation Benefits $1,500.

Question 20

A known obligation of an uncertain amount that can at least be reasonably estimated is reported as an estimated liability.

Accepted Answer

A) True 
 B)False

Exam 11: Current Liabilities and Payroll Accounting

Uncertainties from the development of new competing products are not contingent liabilities.

All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:

A note payable can be used to extend the payment due on an account payable.

To compute the amount of tax withheld from an employee's pay, employers can use a ________ table.

A liability may exist even if there is uncertainty about whom to pay, when to pay, or how much to pay.

Payroll is an example of a contingent liability for the employer.

A company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers. When the company mails the first quarterly journal to customers, it should record:

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

An employee earned $43,300 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $118,500 maximum per year and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is:

In the accounting records of a defendant, lawsuits:

A table that shows the amount of federal income tax to be withheld from an employee's pay is the:

Contingent liabilities are recorded or disclosed unless they are:

Explain the responsibilities of and the accounting by employers for deductions from employee payroll.

Early Co. offers its employees a bonus equal to 2% of the company's net income. The estimated net income for the year is expected to be $800,000. Prepare the general journal entry to record the estimated employee bonus plan expense.

Obligations due within one year or the company's operating cycle, whichever is longer, are ________.

An estimated liability:

Employees earn vacation pay at the rate of one day per month. During the month of June, 10 employees qualify for one vacation day each. Their average daily wage is $150 per day. Which of the following is the necessary adjusting journal entry to record the June vacation benefits?

A known obligation of an uncertain amount that can at least be reasonably estimated is reported as an estimated liability.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters