Question 1

All of the following are employer payroll taxes except:

Accepted Answer

A)  Federal income tax equal to that withheld from employees. 
B)  Medicare tax equal to that withheld from employees. 
C)  State unemployment tax. 
D)  Social Security tax equal to that withheld from employees. 
E)  Federal unemployment tax. 
A)  Federal income tax equal to that withheld from employees. 
B)  Medicare tax equal to that withheld from employees. 
C)  State unemployment tax. 
D)  Social Security tax equal to that withheld from employees. 
E)  Federal unemployment tax.

Question 2

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

Accepted Answer

A) True 
 B)False

Question 3

The chief executive officer earns $20,000 per month. As of May 31, her gross pay was $100,000. The tax rate for Social Security is 6.2% of the first $118,500 earned each 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 FICA-Social Security withheld from this employee for the month of June?

Accepted Answer

A)  $290.00 
B)  $268.25 
C)  $1,147.00 
D)  $7,347.00 
E)  $1,240.00 
A)  $290.00 
B)  $268.25 
C)  $1,147.00 
D)  $7,347.00 
E)  $1,240.00

Question 4

Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities.

Accepted Answer

A) True 
 B)False

Question 5

Debt guarantees are:

Accepted Answer

A)  A bad business practice. 
B)  Considered to be current liabilities. 
C)  Recorded as liabilities even though it is highly unlikely that the original debtor will default. 
D)  Considered to be contingent liabilities. 
E)  Never disclosed in the financial statements. 
A)  A bad business practice. 
B)  Considered to be current liabilities. 
C)  Recorded as liabilities even though it is highly unlikely that the original debtor will default. 
D)  Considered to be contingent liabilities. 
E)  Never disclosed in the financial statements.

Question 6

Drake Company pays its employees for two weeks of vacation each year. The total annual cost of the vacation benefit is $109,920. Prepare the journal entry to record the monthly accrued vacation expense.

Accepted Answer

None

Question 7

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 $118,500 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? (Round your intermediate calculations to two decimal places.)

Accepted Answer

A)  $420.00 
B)  $2,009.21 
C)  $2,506.48 
D)  $1,131.31 
E)  $1,054.04 
A)  $420.00 
B)  $2,009.21 
C)  $2,506.48 
D)  $1,131.31 
E)  $1,054.04

Question 8

Interest expense is not:

Accepted Answer

A)  Likely to stay the same when sales change. 
B)  A fixed expense. 
C)  A factor in determining a company's borrowing risk. 
D)  Incurred on current liabilities. 
E)  Likely to fluctuate when sales change. 
A)  Likely to stay the same when sales change. 
B)  A fixed expense. 
C)  A factor in determining a company's borrowing risk. 
D)  Incurred on current liabilities. 
E)  Likely to fluctuate when sales change.

Question 9

Which of the following do not apply to unearned revenues?

Accepted Answer

A)  Also called collections in advance. 
B)  Amounts received in advance from customers for future delivery of products or services. 
C)  Also called prepayments. 
D)  Also called deferred revenues. 
E)  Amounts to be received in the future from customers for delivery of products or services in the current period. 
A)  Also called collections in advance. 
B)  Amounts received in advance from customers for future delivery of products or services. 
C)  Also called prepayments. 
D)  Also called deferred revenues. 
E)  Amounts to be received in the future from customers for delivery of products or services in the current period.

Question 10

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned each 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. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)

Accepted Answer

A)  $4,672.25 
B)  $4,430.25 
C)  $4,386.25 
D)  $4,827.00 
E)  $4,628.25 
A)  $4,672.25 
B)  $4,430.25 
C)  $4,386.25 
D)  $4,827.00 
E)  $4,628.25

Question 11

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 settle the customer warranties is:

Accepted Answer

A)  Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500. 
B)  Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000. 
C)  Debit Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500. 
D)  Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000. 
E)  Debit Estimated Warranty Liability $25,500; credit Warranty Expense $25,500. 
A)  Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500. 
B)  Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000. 
C)  Debit Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500. 
D)  Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000. 
E)  Debit Estimated Warranty Liability $25,500; credit Warranty Expense $25,500.

Question 12

All of the following statements regarding liabilities are true except:

Accepted Answer

A)  Unearned future wages to be paid to employees should be recorded as liabilities. 
B)  For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services. 
C)  Information about liabilities is more useful when the balance sheet identifies them as either current or long term. 
D)  Liabilities can involve uncertainty in whom to pay. 
E)  A liability is a probable future payment of assets or services. 
A)  Unearned future wages to be paid to employees should be recorded as liabilities. 
B)  For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services. 
C)  Information about liabilities is more useful when the balance sheet identifies them as either current or long term. 
D)  Liabilities can involve uncertainty in whom to pay. 
E)  A liability is a probable future payment of assets or services.

Question 13

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note.
- What is the journal entry needed to record the transaction by Jarrett Company?

Accepted Answer

A)  Debit Cash $7,500; credit Notes Payable $7,500. 
B)  Debit Notes Receivable $7,500; credit Cash $7,500. 
C)  Debit Cash $7,650; credit Notes Payable $7,650. 
D)  Debit Accounts Payable $7,500; credit Notes Payable $7,500. 
E)  Debit Cash $7,500; credit Accounts Payable $7,500. 
A)  Debit Cash $7,500; credit Notes Payable $7,500. 
B)  Debit Notes Receivable $7,500; credit Cash $7,500. 
C)  Debit Cash $7,650; credit Notes Payable $7,650. 
D)  Debit Accounts Payable $7,500; credit Notes Payable $7,500. 
E)  Debit Cash $7,500; credit Accounts Payable $7,500.

Question 14

Experience shows that the default rate on 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.

Accepted Answer

A) True 
 B)False

Question 15

Match between columns
                        Premises:  A measure provided by a state to employers that reflects a company's stability in employing workers.
 Taxes that fund Social Security and Medicare, assessed on both employer and employees under the Federal Insurance Contributions Act.
 Known obligations of an uncertain amount that can be reasonably estimated.
 Obligations of a company requiring payment in more than one year or operating cycle.
 Gross pay less all tax and voluntary deductions.
 A table of amounts of income tax to be withheld from employees' wages.
 A potential obligation that depends on a future event arising from a past transaction.
 A seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period.
 A number indicated on an employee's Form W-4 that is used to reduce the amount of federal income tax withheld from an employee's pay.
 Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program.

Accepted Answer

The Answer of FUTA taxes and Contingent liability and Merit is...

Question 16

Debt guarantees are usually disclosed as a contingent liability.

Accepted Answer

A) True 
 B)False

Question 17

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

Accepted Answer

A) True 
 B)False

Question 18

Describe contingent liabilities and how to account for and/or report them.

Accepted Answer

Contingent liabilities are uncertain obl

Question 19

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:

Accepted Answer

A)  Interest. 
B)  Principal. 
C)  Accounts Payable. 
D)  Cash. 
E)  Face Value. 
A)  Interest. 
B)  Principal. 
C)  Accounts Payable. 
D)  Cash. 
E)  Face Value.

Question 20

Carson Company faces a probable loss on a pending lawsuit where the amount of the loss is estimated to be $500,000. The journal entry to recognize the potential loss is:

Accepted Answer

A)  Debit Lawsuit Payable $500,000, credit Contingent Legal Liability $500,000. 
B)  Debit Legal Expense $500,000; credit Lawsuit Payable $500,000. 
C)  Debit Contingent Legal Expense $500,000, credit Contingent Legal Liability $500,000. 
D)  Debit Prepaid Legal Expense $500,000; credit Contingent Legal Liability $500,000. 
E)  No journal entry is required. 
A)  Debit Lawsuit Payable $500,000, credit Contingent Legal Liability $500,000. 
B)  Debit Legal Expense $500,000; credit Lawsuit Payable $500,000. 
C)  Debit Contingent Legal Expense $500,000, credit Contingent Legal Liability $500,000. 
D)  Debit Prepaid Legal Expense $500,000; credit Contingent Legal Liability $500,000. 
E)  No journal entry is required.

Exam 11: Current Liabilities and Payroll Accounting

All of the following are employer payroll taxes except:

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities.

Debt guarantees are:

Drake Company pays its employees for two weeks of vacation each year. The total annual cost of the vacation benefit is $109,920. Prepare the journal entry to record the monthly accrued vacation expense.

Interest expense is not:

Which of the following do not apply to unearned revenues?

All of the following statements regarding liabilities are true except:

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. - What is the journal entry needed to record the transaction by Jarrett Company?

Experience shows that the default rate on 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.

Debt guarantees are usually disclosed as a contingent liability.

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

Describe contingent liabilities and how to account for and/or report them.

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:

Carson Company faces a probable loss on a pending lawsuit where the amount of the loss is estimated to be $500,000. The journal entry to recognize the potential loss is:

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

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