Exam 9: Accounting for Current Liabilities and Payroll

What is the purpose of the Federal W-4 form?

Independent contractors must be individuals who are employed by another company.

Jackson Company is preparing to repay a one-year note on May 1, 2013. The first step in this process is to accrue eight months of interest expense.

What accounting principle requires a company to accrue interest expense on a note payable?

The party who borrows money in a note payable is known as the

Indicate whether each of the following statements is true or false. _____ a) The amount of warranty expense is an estimate that is based on the amount of merchandise sold. _____ b) A warranty obligation only occurs if a buyer purchases an extended warranty. _____ c) When a warranty claim is made, the seller's equity decreases. _____ d) When a warranty claim is settled, the seller's liabilities decrease. _____ e) Product warranties usually represent legal liabilities that must be reported in the financial statements.

Which of the following answers indicates the effect of the February 12, 2014 entry on the financial statements of Lucky Corporation?

All lawsuits in which a company has been named a defendant should be either disclosed in the company's footnotes or recognized as a liability on its balance sheet.

Which of the following is not an item deducted from salary expense to arrive at net pay?

Wayne Company received proceeds of $145,920 from discounting a $152,000, one year, discount note at Gotham Bank. a) What discount rate did the bank use? b) Prepare the journal entry to record the proceeds of the loan.

When do the effects of product warranties appear on the statement of cash flow?

If a company is located in an area where floods or earthquakes are deemed to be possible, the company should record a contingent liability.

Belize Company borrowed $25,000 from First National Bank on July 1, 2013. The note carried a 5% interest rate with a one-year term to maturity. Required: 1) Show the effects of borrowing the money and the December 31, 2013 adjustment on the accounting equation. 2) What is the amount of interest expense for 2013? 3) Prepare a statement of cash flows for the Belize Company for 2013.

Francisco Company began 2013 with a balance of $320 in Sales Tax payable. During the year, the company recorded taxable sales of $82,500. The ending balance in Sales Tax payable was $345 Francisco's sales tax rate is 5%. a) How much sales tax did Francisco collect during 2013? b) How much sales tax did Francisco pay during 2013?

The current ratio is computed as follows:

Carnegie Company experienced an accounting event that is recorded in the following T-accounts: Which of the following choices accurately reflects how this event would affect Carnegie's financial statements.

Monthly remittance of sales tax:

Blankenship Company estimated that its warranty expense would be $4,250 for the current year. During the year Blankenship paid $920 to repair merchandise that was returned by customers. a) What is the amount of warranty expense for the current year? b) If this is the first year of operations, what is the amount of warranty liability that will be shown on the balance sheet at the end of the year?

On October 1, 2012, Haywood Company borrowed money by issuing a $12,000 face value discount note to its bank. The note had an 8% discount rate and had a term of 1 year. On that date, Haywood recorded a Discount on Notes Payable in the amount of $960.

The trial balance of Madison Company at December 31, 2013 is as follows: Required: Use the trial balance of Madison Company to prepare the current assets and current liabilities sections of Madison's balance sheet at December 31, 2013. Calculate the current ratio at December 31, 2013. Show all calculations and round the ratio to two decimal places.