Exam 11: Current Liabilities and Payroll

For the month of September,Countrywide Sales,Inc.recorded gross pay of $66,000.The net pay for the month amounted to $62,500.The salaries are paid on October 5.Which of the following is the journal entry for the payment of salaries?

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

Rocco earns $19.00 per hour for straight time (40 hours),and the company pays him time-and-a-half for overtime.He worked 49 hours at his job during the first week of March 2017.What was Rocco's gross pay for the week?

Jack,an employee of Desert Sky,Inc. ,has gross salary for May of $6,000.The entire amount is under the OASDI limit of $117,000 and thus subject to FICA.He is also subject to federal income tax at a rate of 20%.Which of the following is a part of the journal entry for accrual of the employer payroll taxes? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. )Jack's income to date exceeds the FUTA and SUTA tax income limits.

On July 1,2017,Ferrero,Inc.purchased merchandise inventory for $350,000 by signing a note payable.The note is for 6 months and bears interest at a rate of 8%.Prepare the journal entry for this transaction,using a perpetual inventory system.

If the likelihood of a future event is probable and the amounts of the expense can be estimated,how should the company report the contingency?

A contingency was evaluated at year-end.Management felt it was probable that this would become an actual liability and the amount could be reasonably estimated.If this was not reported on the balance sheet or in the notes to the financial statements,what is the effect on the financial reporting of the company?

Unearned revenues are current liabilities until they are earned.

Karl,an employee of Smith Electric,Inc. ,has gross salary for March of $4,000.The entire amount is under the OASDI limit of $117,000 and thus subject to FICA.He is also subject to federal income tax at a rate of 18%.Karl has a deduction of $320 for health insurance and $80 for United Way.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%. )

FICA tax is a tax that is paid both by the employer and the employee.

Since a company usually does not know the amount of the year-end bonus at year-end,the company estimates the amount of the bonus based on a percentage.

The employee federal and state income tax and Social Security tax are optional payroll deductions.

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

A ________ is a schedule that summarizes the earnings,withholdings,and net pay for each employee.

Which of the following is paid by the employer only?

Which of the following is a control procedure to prevent a dishonest employee from cashing a paycheck that was written to a fictitious person?

Iggy Sales,Inc.offers warranties on all its electronic goods.Warranty expense is estimated at 3.5% of sales revenue.In 2017,Iggy had sales of $333,000.In the same year,Iggy replaced defective goods with merchandise inventory costing $8,750.Prepare the journal entry to record the replacement of defective goods.

Jefferson Enterprises estimates that it will pay a 9% bonus on annual net income.If Jefferson reports net income of $510,000 before the calculation of the bonus,the amount of the bonus is $45,900.

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.

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