Exam 11: Current Liabilities and Payroll

Sunset Company has a policy of accruing $2300 for every employee as a vacation benefit.Sarah,an employee,took a vacation.Which of the following is the correct journal entry for the vacation benefit paid?

The current period earnings column of the payroll register only includes regular and overtime earnings.

Analyze the following independent situations. Required: For each situation,state the likelihood of a future event and state how the contingency will be reported. a.Company A estimates it will have to pay $85,000 in warranty repairs next year. b.Company B is being sued by a customer.Company B's attorneys feel that this is a frivolous lawsuit and there is very little chance that the customer will win. c.Company C co-signed a note payable for Company D.Company D is having serious financial problems and it is reasonably possible that Company C will have to pay the note. d.Company E is being sued for a patent infringement.Company E's attorney feels that Company E will be found liable for damages caused by the patent infringement.However,the attorney states it is not possible to estimate the amount of the award.

Regarding gross and net pay,which of the following statements is correct?

The following transactions of Windsor Enterprises occurred in 2018 and 2019: Journalize the transactions in Windsor's general journal.Explanations are not required.Round to the nearest dollar.

A high interest-coverage ratio indicates a company has difficulty in paying interest expense.

Which of the following correctly describes the accounting treatment for interest payable?

FICA tax is paid by the employee only and is deducted from gross earnings.

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

David,an employee of Cecil,Inc.,has gross salary for March of $5,900.The entire amount is under the OASDI limit of $118,500,and thus subject to FICA.He is also subject to federal income tax at a rate of 30%.His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA.The journal entry to record the employer's payroll tax expense includes a credit to FICA-OASDI Taxes Payable for $365.80.(Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

Jupiter Services sells service plans for commercial computer maintenance.The price for each service plan is $1,650 per year,paid in advance.On October 1,2018,a service plan was sold to a new customer for cash.Prepare the journal entry to record this transaction.Omit explanation.

Modern Age Company made total cash sales in February of $666,000,which are subject to 7.5% sales tax.Prepare the summary entry to record the transaction.Omit explanation.

The current portion of notes payable is the amount of the principal that is payable more than one year from the balance sheet date.

Federal income taxes are ________.

Rock Music Company signed a 200-day,5%,$5,000 note on April 1,2018,and this was the only note payable for the company.Calculate the times-interest-earned ratio of Rock Music Company if its earnings before interest and taxes for the year ending December 31,2018,is $4,300.Round all calculations to two decimal places.(Use a 360-day year.)

Which of the following deductions is paid by both the employer and employee?

Current liabilities must be paid either in cash or with goods and services within one year or within the entity's operating cycle,if the cycle is longer than a year.

Medicare taxes are a required column in a payroll register.

Maywood Company withholds $720 from Steve's paycheck for federal income tax.This amount is part of the company's payroll tax expense.

Superior Sales Company offers warranties on all its electronic goods.Warranty expense is estimated at 3.5% of sales revenue.In 2018,Superior had sales of $333,000.In the same year,Superior replaced defective goods with merchandise inventory costing $8,750.Prepare the journal entry to record the warranty expense.Omit explanation.