Question 1

Sales taxes payable is credited and cash is debited when companies send sales taxes collected from customers to the government.

Accepted Answer

A) True 
 B)False  False

Question 2

A contingent liability:

Accepted Answer

A)  Is always of a specific amount. 
B)  Is a potential obligation that depends on a future event arising from a past transaction or event. 
C)  Is an obligation not requiring future payment. 
D)  Is an obligation arising from the purchase of goods or services on credit. 
E)  Is an obligation arising from a future event. 
A)  Is always of a specific amount. 
B)  Is a potential obligation that depends on a future event arising from a past transaction or event. 
C)  Is an obligation not requiring future payment. 
D)  Is an obligation arising from the purchase of goods or services on credit. 
E)  Is an obligation arising from a future event. B

Question 3

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is:

Accepted Answer

A)  0.40 
B)  2.50 
C)  1:2.5 
D)  2.5:1 
E)  0.50 
A)  0.40 
B)  2.50 
C)  1:2.5 
D)  2.5:1 
E)  0.50 B

Question 4

A company sells computers with a 6-month warranty. In January, the company sold 100,000 computers at $1,750 each; and 1,500 computers were turned in for repairs during that same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January.

Accepted Answer

The answer of A company sells computers with a 6-month...

Question 5

Describe employer responsibilities for reporting payroll taxes. (To the extent possible, reference the form to be filed for each tax.)

Accepted Answer

Employers are required to report FICA ta

Question 6

Short-term notes payable:

Accepted Answer

A)  Can replace an account payable. 
B)  Can be issued in return for money borrowed from a bank. 
C)  Are negotiable. 
D)  Are an unconditional promise to pay. 
E)  All of these. 
A)  Can replace an account payable. 
B)  Can be issued in return for money borrowed from a bank. 
C)  Are negotiable. 
D)  Are an unconditional promise to pay. 
E)  All of these.

Question 7

All expected future payments are liabilities.

Accepted Answer

A) True 
 B)False

Question 8

During August, Arena Company sells $356,000 in product that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a balance of $12,800 before adjustment. Customers returned product for warranty repairs during the month that used $9,400 in parts for repairs. The entry to record the estimated warranty expense for the month is:

Accepted Answer

A)  Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800. 
B)  Debit Warranty Expense $5,000; credit Estimated Warranty Liability $5,000. 
C)  Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400. 
D)  Debit Estimated Warranty Liability $9,400; credit Warranty Expense $9,400. 
E)  Debit Estimated Warranty Liability $17,800; credit Warranty Expense $17,800. 
A)  Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800. 
B)  Debit Warranty Expense $5,000; credit Estimated Warranty Liability $5,000. 
C)  Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400. 
D)  Debit Estimated Warranty Liability $9,400; credit Warranty Expense $9,400. 
E)  Debit Estimated Warranty Liability $17,800; credit Warranty Expense $17,800.

Question 9

A company's payroll information for the month of May follows:   On May 31 the company issued Check No. 335 payable to the Payroll Bank Account to pay for the May payroll. It issued payroll checks to the employees after depositing the check.
(1) Prepare the journal entry to record (accrue) the employer's payroll for May. (2) Prepare the journal entry to record payment of the May payroll. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. The wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record the employer's payroll taxes.

Accepted Answer

The answer of A company's payroll information for the month...

Question 10

A merit rating:

Accepted Answer

A)  Is assigned by the state. 
B)  Reflects a company's stability or instability in employing workers. 
C)  Adjusts the employer's SUTA tax rate. 
D)  Affects state unemployment taxes paid by an employer. 
E)  All of these. 
A)  Is assigned by the state. 
B)  Reflects a company's stability or instability in employing workers. 
C)  Adjusts the employer's SUTA tax rate. 
D)  Affects state unemployment taxes paid by an employer. 
E)  All of these.

Question 11

The times interest earned computation is:

Accepted Answer

A)  (Net income + Interest expense + Income taxes)/Interest expense. 
B)  (Net income + Interest expense - Income taxes)/Interest expense. 
C)  (Net income - Interest expense - Income taxes)/Interest expense. 
D)  (Net income - Interest expense + Income taxes)/Interest expense. 
E)  Interest expense/(Net income + Interest expense + Income taxes expense). 
A)  (Net income + Interest expense + Income taxes)/Interest expense. 
B)  (Net income + Interest expense - Income taxes)/Interest expense. 
C)  (Net income - Interest expense - Income taxes)/Interest expense. 
D)  (Net income - Interest expense + Income taxes)/Interest expense. 
E)  Interest expense/(Net income + Interest expense + Income taxes expense).

Question 12

A short-term note payable:

Accepted Answer

A)  Is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer. 
B)  Is a contingent liability. 
C)  Is an estimated liability. 
D)  Is not a liability until the due date. 
E)  Cannot be used to extend the payment period for an account payable. 
A)  Is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer. 
B)  Is a contingent liability. 
C)  Is an estimated liability. 
D)  Is not a liability until the due date. 
E)  Cannot be used to extend the payment period for an account payable.

Question 13

Starling Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is $12,300). The sales tax law requires Starling to collect 8.25% sales tax on every dollar of merchandise sold. Record the entry for the sale and its applicable sales tax.

Accepted Answer

The answer of Starling Company sells merchandise for $24,000 cash...

Question 14

Define liabilities and explain the difference between current and long-term liabilities.

Accepted Answer

Liabilities are probable future payments

Question 15

Employer payroll taxes are an added employee _______________ beyond the wages and salaries earned by the employees.

Accepted Answer

The answer of Employer payroll taxes are an added employee...

Question 16

A single liability can be divided between current and noncurrent liabilities.

Accepted Answer

A) True 
 B)False

Question 17

Contingent liabilities must be recorded if:

Accepted Answer

A)  The future event is probable and the amount owed can be reasonably estimated. 
B)  The future event is remote. 
C)  The future event is reasonably possible. 
D)  The amount owed cannot be reasonably estimated. 
E)  All of these. 
A)  The future event is probable and the amount owed can be reasonably estimated. 
B)  The future event is remote. 
C)  The future event is reasonably possible. 
D)  The amount owed cannot be reasonably estimated. 
E)  All of these.

Question 18

Times interest earned is calculated by:

Accepted Answer

A)  Multiplying interest expense times income. 
B)  Dividing interest expense by income before interest expense. 
C)  Dividing income before interest expense and income taxes by interest expense. 
D)  Multiplying interest expense by income before interest expense. 
E)  Dividing income before interest expense by interest expense and income taxes. 
A)  Multiplying interest expense times income. 
B)  Dividing interest expense by income before interest expense. 
C)  Dividing income before interest expense and income taxes by interest expense. 
D)  Multiplying interest expense by income before interest expense. 
E)  Dividing income before interest expense by interest expense and income taxes.

Question 19

A company borrowed $60,000 by signing a 60-day, 10% note payable from its bank. Compute the total cash payment due on the note's maturity date.

Accepted Answer

The answer of A company borrowed $60,000 by signing a...

Question 20

On June 1, Martin Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable.
a. What is the total amount of interest to be paid on this note?
b. Prepare Martin Company's general journal entry to record the issuance of the note payable.
c. Prepare Martin Company's general journal entry to record the payment of the note on September 29.

Accepted Answer

The answer of On June 1, Martin Company signed a...

Exam 11: Current Liabilities and Payroll Accounting

Sales taxes payable is credited and cash is debited when companies send sales taxes collected from customers to the government.

A contingent liability:

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is:

Describe employer responsibilities for reporting payroll taxes. (To the extent possible, reference the form to be filed for each tax.)

Short-term notes payable:

All expected future payments are liabilities.

A merit rating:

The times interest earned computation is:

A short-term note payable:

Starling Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is $12,300). The sales tax law requires Starling to collect 8.25% sales tax on every dollar of merchandise sold. Record the entry for the sale and its applicable sales tax.

Define liabilities and explain the difference between current and long-term liabilities.

Employer payroll taxes are an added employee _______________ beyond the wages and salaries earned by the employees.

A single liability can be divided between current and noncurrent liabilities.

Contingent liabilities must be recorded if:

Times interest earned is calculated by:

A company borrowed $60,000 by signing a 60-day, 10% note payable from its bank. Compute the total cash payment due on the note's maturity date.

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 Resources, and Intangibles

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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