Exam 11: Current Liabilities and Payroll

If the likelihood of a future event is reasonably possible,how should the company report the contingency?

First Street Restaurant incurred salaries expense of $60,000 for 2018.The payroll tax expense includes employer FICA tax,state unemployment tax and federal unemployment tax.Year-to-date earnings do not exceed $118,500.Of the total salaries,$17,000 is subject to unemployment tax.Currently,state unemployment tax is 5.4% and federal unemployment tax is 0.6%.Also,the company provides the following benefits for employees: health insurance (cost to the company,$2,500),life insurance (cost to the company,$700),and retirement benefits (cost to the company,10% of salaries expense).Journalize First Street's expenses for employee benefits and for payroll taxes.Explanations are not required.

Dan Jones and Pat Smith are two employees of Lone Star Company.In January 2019,Dan's gross pay was $11,500,and Pat's gross pay was $15,400.All earnings are subject to FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.Which of the following would be included in the entry to record the payroll tax expense to be paid out by Lone Star Company for January?

Lawrence,an employee of Triple Time,Inc.,has gross salary for March of $4,000.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 18%.Provide the journal entry to record salaries expense and payroll withholdings.(Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)Salaries will be paid at a later date.Omit explanation.

Because amounts owed for products or services on account are typically due in 60 days,they are current liabilities.

Social Security (FICA)tax is withheld from the employees' pay and matched by the employer.

The times-interest-earned ratios of Orlando Company are 20.56 and 7.35 for 2018 and 2019,respectively.Which of the following can be the possible reason for such a change from 2018 to 2019?

The times-interest-earned ratio is also called the short interest ratio.

Ron is an employee of Panache,Inc.Panache pays a portion of his health insurance premium and also contributes to a retirement plan in his name.The company's share of the health insurance premium is $600,and the company's contribution to the retirement plan is $860.The journal entry to record the employee benefits to be paid by the company should include a debit to Employee Health Insurance Payable for $1,460.

Jason,an employee of Fitzgerald,Inc.,has gross salary for March of $4,000.The entire amount is under the OASDI limit of $118,500,and thus subject to FICA.His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA.Which of the following is a part of the journal entry to record the employer's payroll taxes?

The employer is required to directly deposit the employee's take-home pay into the employee's bank account.

A contingency was evaluated at year-end and considered to have a reasonable possibility of becoming an actual liability.If this was not reported on the balance sheet or in the notes to the financial statements,it could be considered a violation of generally accepted accounting principles.

Peter earns $14.50 per hour for straight time (40 hours),and the company pays him time-and-a-half for overtime.He worked 46 hours at his job during the first week of March 2018.What was Peter's gross pay for the week?

A restaurant is being sued because a customer claims to have found a bug in her chili.The company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability.Which of the following actions should be taken by the company's management?

Jamison Enterprises estimates that it will pay a 5% bonus on annual net income after deducting the bonus.If Jamison reports net income of $480,000 before the calculation of the bonus,the amount of the bonus is $24,000.

Establishing controls for efficiency of the payroll process is one of the main key controls for payroll.

A contingency was evaluated at year-end and considered to have a remote possibility of becoming an actual liability.If this was not reported on the balance sheet or in the notes to the financial statements,what effect would this have on the financial reporting of the company?

Mars Company had cash sales of $10,000.The state sales tax rate is 10.8%.What amount is debited to the Cash account?

Which of the following accounts is credited by the seller when tax is collected on retail sales?

The employees of Vintage Clothes achieved all of the sales goals for 2017.Vintage decides to reward the employees with a bonus of 20% on annual net income,after deducting the bonus.The net income before the calculation of the bonus is $312,000.What is the amount of the bonus? (Round your final answer to the nearest dollar.)