Exam 11: Current Liabilities and Payroll Accounting

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.

Phil Phoenix is paid monthly. For the month of January of the current year, he earned a total of $8,288. The FICA tax rate for social security is 6.2% and the FICA tax rate for Medicare is 1.45%. The FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The amount of Federal Income Tax withheld from his earnings was $1,375.17. What is the total amount of taxes withheld from the Phoenix's earnings?

Employee vacation benefits:

The difference between the amount received from issuing a note payable and the amount repaid is referred to as:

On January 31, Hale Company's payroll register showed that its employers earned $30,320 of office salaries and $82,750 of sales salaries. Withholdings from the employees' salaries include FICA Social Security taxes as the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $16,960 of federal income taxes, $2,350 of medical insurance deductions (which represents 50% of the total cost of the employee medical insurance), and $4,210 of 401(k) retirement contribution deductions. Hale Company pays the other 50% of the employee insurance cost and matches the employee 401(k) contributions. Several employees earned more than $7,000 for the period which reduced salaries subject to unemployment to $110,000. No employees exceeded the FICA-Social Security taxable wage base. 1. Prepare the journal entry to record Hale Company's January 31 payroll expenses and liabilities. 2. Prepare the journal entry to record Hale Company's employer payroll taxes resulting from the January 31 payroll. Hale's merit rating reduces its state unemployment to 4% of the first $7,000 paid each employee. The federal unemployment tax rate is .8%. 3. Prepare the journal entry to record Hale's additional employee expenses.

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

Match each of the following terms with the appropriate definitions.

A company's income before interest expense and income taxes in 2010 and 2011 is $395,000 and $427,000, respectively. Its fixed interest expense was $125,000 for both years. Calculate the company's times interest earned ratio, and comment on its level of risk.

Estimated liabilities commonly arise from:

What is a short-term note payable? Explain the accounting issues related to notes payable.

A short-term note payable:

______________ are amounts owed to suppliers for products or services purchased on credit.

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

In the accounting records of a defendant, lawsuits:

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.

Classify each of the following items as either:

An estimated liability:

ZMart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. XMart had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned for each company and comment on the results.

A company's fixed interest expense is $8,000, its income before interest expense and income taxes is $32,000. Its net income is $9,600. The company's times interest earned ratio equals:

All Star Sports receives $48,000,000 cash in advance ticket sales for 12 home games. Record the advance ticket sales on April 30. Record the revenue earned for the first home game played on August 14.