Question 1

Which of the following is NOT a liability that must be estimated?

Accepted Answer

A)  warranties 
B)  vacation pay 
C)  bonus plans 
D)  promissory notes 
A)  warranties 
B)  vacation pay 
C)  bonus plans 
D)  promissory notes

Question 2

A company has been sued for product failures allegedly resulting in injuries to the individuals bringing the lawsuit.The company's lawyers believe it is more than remote,but less than probable,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 liability should be estimated and recorded as an expense. 
B)  The situation should be described in a note to the financial statements. 
C)  The possible liability should be ignored. 
D)  Management should consider resigning. 
A)  The liability should be estimated and recorded as an expense. 
B)  The situation should be described in a note to the financial statements. 
C)  The possible liability should be ignored. 
D)  Management should consider resigning.

Question 3

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

Accepted Answer

A)  It creates a present obligation for future payment of cash or services. 
B)  It cannot be settled with services. 
C)  It is an avoidable obligation. 
D)  It occurs because of a future transaction or event. 
A)  It creates a present obligation for future payment of cash or services. 
B)  It cannot be settled with services. 
C)  It is an avoidable obligation. 
D)  It occurs because of a future transaction or event.

Question 4

Hank earns $24.00 per hour with time-and-a-half for hours in excess of 40 per week.He worked 50 hours at his job during the first week of March 2018.Hank pays income taxes at 15% and 7.65% for OASDI and Medicare.All of his income is taxable under FICA.Determine Hank's net pay for the week.(Do not round any intermediate calculations,and round your final answer to the nearest cent.)

Accepted Answer

A)  $1122.00 
B)  $1021.02 
C)  $835.80 
D)  $799.80 
A)  $1122.00 
B)  $1021.02 
C)  $835.80 
D)  $799.80

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

State unemployment compensation tax (SUTA)is not withheld from employees' gross earnings.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Josh Baker works for Jones Restaurant Supply all year and earns a monthly salary of $8,000.There is no overtime pay and Jones withholds income taxes at 12% of gross pay.Jones deducts $200 monthly for the co-payment of the health insurance premium.Employees are paid on the fifth day of each month.As of October,31,Josh had $80,000 of cumulative earnings.Journalize the accrual of salaries expense on October 31.Omit explanations.

Accepted Answer

None

Question 9

________ is pay stated as a percentage of a sale amount.

Accepted Answer

A)  Salary 
B)  Wage 
C)  Commission 
D)  Bonus 
A)  Salary 
B)  Wage 
C)  Commission 
D)  Bonus

Question 10

Because a company usually does not know the amount of the year-end bonus at year-end,no liability is recorded.

Accepted Answer

A) True 
 B)False

Question 11

Management Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2019,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2019 to September 30,2020.Prepare the December 31,2019 adjusting entry.Round to two decimal places.Omit explanation.

Accepted Answer

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Question 12

Which of the following is included in the entry to record the employer's payroll taxes?

Accepted Answer

A)  a debit to State Unemployment Tax Payable 
B)  a credit to Payroll Tax Expense 
C)  a credit to FICA-OASDI Tax Payable 
D)  a credit to Salaries Payable 
A)  a debit to State Unemployment Tax Payable 
B)  a credit to Payroll Tax Expense 
C)  a credit to FICA-OASDI Tax Payable 
D)  a credit to Salaries Payable

Question 13

Mountain Valley Sales Company has gross pay for March of $45,000.Which of the following is included in the journal entry to record salaries expense?

Accepted Answer

A)  credit Salaries and Wages Expense 
B)  debit Cash 
C)  debit Salaries and Wages Payable 
D)  debit Salaries and Wages Expense 
A)  credit Salaries and Wages Expense 
B)  debit Cash 
C)  debit Salaries and Wages Payable 
D)  debit Salaries and Wages Expense

Question 14

A Plus Appliances sells dishwashers with a four-year warranty.In 2019,sales revenue for dishwashers is $94,000.The company estimates warranty expense at 4.5% of revenues.What is the total estimated warranty payable of A Plus Appliances as of December 31,2019? A Plus Appliances began operating in 2019.(Round your final answer to the nearest dollar.)

Accepted Answer

A)  $4230 
B)  $1058 
C)  $1548 
D)  $3318 
A)  $4230 
B)  $1058 
C)  $1548 
D)  $3318

Question 15

The times-interest-earned ratio is calculated as ________.

Accepted Answer

A)  earnings before interest and tax divided by interest expense 
B)  profit before tax divided by interest expense 
C)  net income divided by interest expense 
D)  income tax expense plus interest expense divided by interest expense 
A)  earnings before interest and tax divided by interest expense 
B)  profit before tax divided by interest expense 
C)  net income divided by interest expense 
D)  income tax expense plus interest expense divided by interest expense

Question 16

If a contingency that is probable can be reasonably estimated,a liability is recorded and an expense is accrued.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is TRUE of a contingent liability?

Accepted Answer

A)  It is a potential liability that depends on a future event. 
B)  It is an actual liability that is difficult to estimate. 
C)  It is an actual liability that depends on a past event. 
D)  It is a liability resulting from a lawsuit settled in court. 
A)  It is a potential liability that depends on a future event. 
B)  It is an actual liability that is difficult to estimate. 
C)  It is an actual liability that depends on a past event. 
D)  It is a liability resulting from a lawsuit settled in court.

Question 18

________ is a pay amount stated at an hourly rate.

Accepted Answer

A)  Salary 
B)  Wage 
C)  Commission 
D)  Bonus 
A)  Salary 
B)  Wage 
C)  Commission 
D)  Bonus

Question 19

A pension plan is a plan that provides benefits to retired employees.

Accepted Answer

A) True 
 B)False

Question 20

The journal entry to record the employer's payroll tax expense will include a debit to Employee Income Taxes Payable.

Accepted Answer

A) True 
 B)False

Exam 11: Current Liabilities and Payroll

Which of the following is NOT a liability that must be estimated?

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.

State unemployment compensation tax (SUTA)is not withheld from employees' gross earnings.

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.

________ is pay stated as a percentage of a sale amount.

Because a company usually does not know the amount of the year-end bonus at year-end,no liability is recorded.

Which of the following is included in the entry to record the employer's payroll taxes?

Mountain Valley Sales Company has gross pay for March of $45,000.Which of the following is included in the journal entry to record salaries expense?

The times-interest-earned ratio is calculated as ________.

If a contingency that is probable can be reasonably estimated,a liability is recorded and an expense is accrued.

Which of the following is TRUE of a contingent liability?

________ is a pay amount stated at an hourly rate.

A pension plan is a plan that provides benefits to retired employees.

The journal entry to record the employer's payroll tax expense will include a debit to Employee Income Taxes Payable.

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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