Exam 11: Current Liabilities and Payroll Accounting

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The current FUTA tax rate is 0.8%, and the SUTA tax rate is 4.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January?

The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2.

Accounts payable:

_________________ are probable future payments of assets or services that a company is presently obligated to make as a result of past transactions or events.

A _____________________ is a seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period.

FUTA requires employers to pay a federal unemployment tax on the first $7,000 in salary or wages paid to each employee.

A company sells personal computers for $2,300 each. The price includes a two-year warranty. During the current year, the company sells 400 computers. On the basis of past experience, the warranty costs are estimated to be $250 per computer. The actual warranty costs (paid in cash) by the company during the current year were $65,000. Prepare general journal entries to record the (a) estimated warranty expense and (b) warranty repair costs during current year.

What are known current liabilities? Cite at least two examples of known current liabilities.

A company has 90 employees and a weekly payroll of $117,000. The FICA-social security tax rate is 6.2% and the FICA-Medicare tax rate is 1.45%. The total withholding for federal income tax is $16,500 for the current week. Calculate the amount of FICA taxes owed (assuming no employee's salary is over the FICA limit) and prepare the journal entry to accrue this week's salaries expense and withholdings.

On December 1, Gates Company borrowed $45,000 cash from FirstBank by signing a 90-day, 9% note payable. a. Prepare Gate's journal entry to record the issuance of the note payable. b. Prepare Gate's journal entry to record the accrued interest due at December 31. c. Prepare Gate's journal entry to record the payment of the note on March 1 of the next year.

Frado Company provides you with following information related to payroll transactions for the month of May. Prepare journal entries to record the transactions for May. a. Recorded the March payroll using the payroll register information given above. b. Recorded the employer's payroll taxes resulting from the March payroll. The company had a merit rating that reduces its state unemployment tax rate to 3.5% of the first $7,000 paid each employee. Only $42,000 of the current months salaries are subject to unemployment taxes. The federal rate is .8%. c. Issued a check to Swift Bank in payment of the May FICA and employee taxes. d. Issued a check to the state for the payment of the SUTA taxes for the month of May. e. Issued a check to Swift Bank in payment of the employer's quarterly FUTA taxes for the first quarter in the amount of $1,360.

Employers must pay FICA taxes equal in amount to the FICA taxes withheld from their employees.

A company had income before interest expense and income taxes of $176,000, and its interest expense is $55,000. Calculate the company's times interest earned ratio.

Experience shows that when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods, the default rate on liabilities increases sharply.

__________ are obligations due within one year or the company's operating cycle, whichever is longer.

The amount of federal income taxes withheld from an employee's paycheck is determined by:

The payroll records of a company provided the following data for the current weekly pay period ended March 7. Assume that the Social Security portion of the FICA taxes is 6.2% on the first $106,800 and the Medicare portion is 1.45% of all wages paid to each employee for this pay period. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Calculate the net pay for each employee.

The employer should record payroll deductions as:

A table that shows the amount of federal income tax to be withheld from an employee's pay is the:

Uncertainties such as natural disasters: