Question 1

Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as:

Accepted Answer

A)  Current assets. 
B)  Current liabilities. 
C)  Long-term liabilities. 
D)  Operating cycle liabilities. 
E)  Bills. 
A)  Current assets. 
B)  Current liabilities. 
C)  Long-term liabilities. 
D)  Operating cycle liabilities. 
E)  Bills.

Question 2

A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is longer.

Accepted Answer

A) True 
 B)False

Question 3

Debt guarantees are not usually disclosed as a contingent liability.

Accepted Answer

A) True 
 B)False

Question 4

The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.

Accepted Answer

A) True 
 B)False

Question 5

Accrued vacation benefits are a form of estimated liability for an employer.

Accepted Answer

A) True 
 B)False

Question 6

Employees earn vacation pay at the rate of one day per month. During July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense to be recorded for the month of July?

Accepted Answer

A)  $25 
B)  $100 
C)  $250 
D)  $2,500 
E)  $25,000 
A)  $25 
B)  $100 
C)  $250 
D)  $2,500 
E)  $25,000

Question 7

Known liabilities are obligations set by agreements, contracts, or laws, and are measurable and definitely determinable.

Accepted Answer

A) True 
 B)False

Question 8

On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note?

Accepted Answer

A)  Debit interest expense, $0; credit interest payable, $0. 
B)  Debit interest expense, $100; credit interest payable, $100. 
C)  Debit interest expense, $150; credit interest payable, $150. 
D)  Debit interest expense, $200; credit interest payable, $200. 
E)  Debit interest expense, $300; credit interest payable, $300. 
A)  Debit interest expense, $0; credit interest payable, $0. 
B)  Debit interest expense, $100; credit interest payable, $100. 
C)  Debit interest expense, $150; credit interest payable, $150. 
D)  Debit interest expense, $200; credit interest payable, $200. 
E)  Debit interest expense, $300; credit interest payable, $300.

Question 9

A company had fixed interest expense of $6,000, its income before interest expense and any income taxes is $18,000, and its net income is $8,400. The company's times interest earned ratio equals:

Accepted Answer

A)  0.33. 
B)  0.71. 
C)  1.40. 
D)  3.00. 
E)  12,000. 
A)  0.33. 
B)  0.71. 
C)  1.40. 
D)  3.00. 
E)  12,000.

Question 10

FICA taxes include:

Accepted Answer

A)  Social Security taxes. 
B)  Charitable giving. 
C)  Employee income taxes. 
D)  Unemployment taxes. 
E)  All of these. 
A)  Social Security taxes. 
B)  Charitable giving. 
C)  Employee income taxes. 
D)  Unemployment taxes. 
E)  All of these.

Question 11

FUTA taxes are:

Accepted Answer

A)  Social Security taxes. 
B)  Medicare taxes. 
C)  Employee income taxes. 
D)  Unemployment taxes. 
E)  Employee deductions. 
A)  Social Security taxes. 
B)  Medicare taxes. 
C)  Employee income taxes. 
D)  Unemployment taxes. 
E)  Employee deductions.

Question 12

A special bank account used solely for the purpose of paying employees, by depositing in the account each pay period an amount equal to the total employees' net pay and drawing the employees' payroll checks on the account, is a(n):

Accepted Answer

A)  Federal depository bank account. 
B)  Employee's Individual Earnings account. 
C)  Employees' bank account. 
D)  Payroll register account. 
E)  Payroll bank account. 
A)  Federal depository bank account. 
B)  Employee's Individual Earnings account. 
C)  Employees' bank account. 
D)  Payroll register account. 
E)  Payroll bank account.

Question 13

The deferred income tax liability:

Accepted Answer

A)  Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. 
B)  Is a contingent liability. 
C)  Can result in a deferred income tax asset. 
D)  Is never recorded. 
E)  Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary. 
A)  Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. 
B)  Is a contingent liability. 
C)  Can result in a deferred income tax asset. 
D)  Is never recorded. 
E)  Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary.

Question 14

Recording employee payroll deductions may involve:

Accepted Answer

A)  Liabilities to individual employees. 
B)  Liabilities to federal and state governments. 
C)  Liabilities to insurance companies. 
D)  Liabilities to labor unions. 
E)  All of these. 
A)  Liabilities to individual employees. 
B)  Liabilities to federal and state governments. 
C)  Liabilities to insurance companies. 
D)  Liabilities to labor unions. 
E)  All of these.

Question 15

All of the following statements regarding uncertainty in liabilities are true except:

Accepted Answer

A)  Liabilities can involve uncertainty in whom to pay. 
B)  A company can create a known amount when issuing a note even though the holder of the note may not be known until the maturity date. 
C)  A company can have an obligation of a known amount to a known creditor but not know when it must be paid. 
D)  A company only records liabilities when it knows whom to pay, when to pay, and how much to pay. 
E)  A company can be aware of an obligation but not know how much will be required to settle it. 
A)  Liabilities can involve uncertainty in whom to pay. 
B)  A company can create a known amount when issuing a note even though the holder of the note may not be known until the maturity date. 
C)  A company can have an obligation of a known amount to a known creditor but not know when it must be paid. 
D)  A company only records liabilities when it knows whom to pay, when to pay, and how much to pay. 
E)  A company can be aware of an obligation but not know how much will be required to settle it.

Question 16

Calco had income before interest expense and income taxes of $5,698 million and interest expense of $399 million. Calculate Calco's times interest earned.

Accepted Answer

The answer of Calco had income before interest expense and...

Question 17

A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 6% of sales. During the month of June, the company performed warranty work and used $12,000 of parts to perform the warranty work. Sales for June were $450,000.
1. Record the warranty expense for the month of June.
2. Record the costs of the warranty work completed in June.
3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the account balance at June 30?

Accepted Answer

The answer of A company sells its product subject to...

Question 18

A company has 2 employees. The company's total salaries for the month of January were $8,000. The federal income tax rate for both employees is 15%. The FICA-social security tax rate is 6.2% and the FICA-Medicare tax rate is 1.45%. Calculate the amount of employee taxes withheld and prepare the company's journal entry to record the January payroll assuming these were the only deductions.

Accepted Answer

The answer of A company has 2 employees. The company's...

Question 19

A company's employees had the following earnings records at the close of the current payroll period:   The company's payroll taxes expense on each employee's earnings includes: FICA Social Security taxes of 6.2% on the first $106,800 of earnings plus 1.45% FICA Medicare on all wages; 0.8% federal unemployment taxes on the first $7,000; and 2.5% state unemployment taxes on the first $7,000. Compute the employer's total payroll taxes expense for the current pay period.

Accepted Answer

The answer of A company's employees had the following earnings...

Question 20

An employer's federal unemployment taxes (FUTA) are reported:

Accepted Answer

A)  Annually. 
B)  Semiannually. 
C)  Quarterly. 
D)  Monthly. 
E)  Weekly. 
A)  Annually. 
B)  Semiannually. 
C)  Quarterly. 
D)  Monthly. 
E)  Weekly.

Exam 11: Current Liabilities and Payroll Accounting

Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as:

A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is longer.

Debt guarantees are not usually disclosed as a contingent liability.

The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.

Accrued vacation benefits are a form of estimated liability for an employer.

Employees earn vacation pay at the rate of one day per month. During July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense to be recorded for the month of July?

Known liabilities are obligations set by agreements, contracts, or laws, and are measurable and definitely determinable.

On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note?

A company had fixed interest expense of $6,000, its income before interest expense and any income taxes is $18,000, and its net income is $8,400. The company's times interest earned ratio equals:

FICA taxes include:

FUTA taxes are:

A special bank account used solely for the purpose of paying employees, by depositing in the account each pay period an amount equal to the total employees' net pay and drawing the employees' payroll checks on the account, is a(n):

The deferred income tax liability:

Recording employee payroll deductions may involve:

All of the following statements regarding uncertainty in liabilities are true except:

Calco had income before interest expense and income taxes of $5,698 million and interest expense of $399 million. Calculate Calco's times interest earned.

An employer's federal unemployment taxes (FUTA) are reported:

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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