Question 1

Drake Company pays its employees for two weeks of vacation each year.The total annual cost of the vacation benefit is $109,920.Prepare the journal entry to record the monthly accrued vacation expense.

Accepted Answer

The answer of Drake Company pays its employees for two...

Question 2

Times interest earned is computed by dividing income before interest expense and income taxes by _______________________.

Accepted Answer

The answer of Times interest earned is computed by dividing...

Question 3

The more _______________________ allowances an employee claims,the less federal income tax the employer will deduct from pay.

Accepted Answer

The answer of The more _______________________ allowances an employee claims,the...

Question 4

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 but not estimable. 
D) The amount owed cannot be reasonably estimated. 
E) The future event is probable but not estimable.

Question 5

A company's had fixed interest expense of $5,000,its income before interest expense and income taxes is $17,000,and its net income is $9,400.The company's times interest earned ratio equals:

Accepted Answer

A) 0.5. 
B) 1.8. 
C) 1.9. 
D) 3.4. 
E) 0.3.

Question 6

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

Accepted Answer

A) Interest. 
B) Principle. 
C) Face Value. 
D) Cash. 
E) Accounts Payable.

Question 7

Estimated liabilities commonly arise from all of the following except:

Accepted Answer

A) Warranties. 
B) Vacation benefits. 
C) Income taxes. 
D) Employee benefits. 
E) Unearned revenues.

Question 8

All of the following statements regarding long-term liabilities are true except?

Accepted Answer

A) Liabilities not expected to be paid within the longer of one year or the company's operating cycle are reported as long-term liabilities. 
B) Long-term liabilities include long-term notes payable,warranty liabilities,lease liabilities,and bonds payable. 
C) Liabilities that do not have a fixed due date,but are payable on demand,are reported as long-term liabilities. 
D) Long-term liabilities can be reported on the balance sheet in a single total or in multiple categories. 
E) A single long-term liability can be divided between current and noncurrent sections on the balance sheet.

Question 9

Portia Grant is an employee who is paid monthly.For the month of January of the current year,she earned a total of $8,260.The FICA tax for social security is 6.2% and the FICA tax rate for Medicare is 1.45%.The FUTA tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay.The amount of federal income tax withheld from her earnings was $1,325.17.What is the total amount of taxes withheld from the Portia's earnings?

Accepted Answer

A) $3,097.17 
B) $2,443.21 
C) $1,957.06 
D) $1,722.00 
E) $1,495.36

Question 10

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:

Accepted Answer

A) 0.25. 
B) 0.30. 
C) 0.83. 
D) 3.33. 
E) 4.0.

Question 11

All of the following statements related to recording warranty expense are true except:

Accepted Answer

A) Recording estimated warranty expense complies with the full disclosure principle. 
B) Warranty expense should be recorded in the period when the warranty service is performed. 
C) Recording estimated warranty expense complies with the matching principle. 
D) The seller reports a warranty obligation as a liability. 
E) Warranty costs are probable and the amount can be estimated.

Question 12

A company has a selling price of $1,800 each for its printers.Each printer has a 2 year warranty that covers replacement of defective parts.It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $150 each.During November,the company sold 30,000 printers,and 400 printers were serviced under the warranty at a total cost of $55,000.The balance in the Estimated Warranty Liability account at November 1 was $29,000.What is the company's warranty expense for the month of November?

Accepted Answer

A) $26,000 
B) $45,000 
C) $55,000 
D) $60,000 
E) $90,000

Question 13

Employees earn vacation pay at the rate of one day per month.During the month of June,10 employees qualify for one vacation day each.Their average daily wage is $150 per day.Which of the following is the necessary adjusting journal entry to record the June vacation benefits?

Accepted Answer

A) Debit Vacation Benefits Expense $1,500;credit Prepaid Vacation Benefits $1,500. 
B) Debit Vacation Benefits Expense $1,500;credit Vacation Benefits Payable $1,500. 
C) Debit Payroll Tax Expense $1,500;credit Payroll Taxes Payable $1,500. 
D) Debit Prepaid Vacation Benefits $1,500;credit Vacation Benefits Payable $1,500. 
E) Debit Vacation Benefits Payable;credit Vacation Benefits Expense $1,500.

Question 14

Companies may use a special bank account solely for the purpose of paying employees,by depositing an amount equal to the total employees' net pay into the account each pay period and drawing the employees' payroll checks on the account.This 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.

Question 15

Cantrell Company is required by law to collect and remit sales taxes to the state.If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax,what is the journal entry to record the cash sales?

Accepted Answer

A) Debit Cash $8,000;credit Sales $7,360;credit Sales Taxes Payable $640. 
B) Debit Sales Taxes Payable $640;debit Cash $7,360;credit Sales $8,000. 
C) Debit Cash $8,000;credit Sales $8,000;and record the taxes when paid. 
D) Debit Cash $8,640;credit Sales $8,000;credit Sales Taxes Payable $640. 
E) Debit Accounts Receivable $8,640;credit Sales $8,000;credit Sales Taxes Payable $640.

Question 16

On November 1,Alan Company signed a 120-day,8% note payable,with a face value of $9,000.Alan made the appropriate year-end accrual.What is the journal entry as of March 1 to record the payment of the note assuming no reversing entry was made?

Accepted Answer

A) Debit Notes Payable $9,000;debit Interest Payable $120;credit Cash $9,120. 
B) Debit Cash $9,240;credit Notes Payable $9,240. 
C) Debit Notes Payable $9,240;credit Interest Payable $120;credit Interest Expense $120;credit Cash $9,000. 
D) Debit Notes Payable $9,000;debit Interest Payable $120;debit Interest Expense $120;credit Cash $9,240. 
E) Debit Notes Payable $9,000;debit Interest Expense $240;credit Cash $9,240.

Question 17

On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?

Accepted Answer

A) Debit Notes Payable $7,500;credit Interest Expense $150;credit Cash $7,350. 
B) Debit Notes Payable $7,500;credit Cash $7,500. 
C) Debit Notes Payable $7,650;credit Cash $7,650. 
D) Debit Notes Payable $7,500;debit Interest Expense $150;credit Cash $7,650. 
E) Debit Cash $7,650;credit Interest Revenue $150;credit Notes Receivable $7,500.

Question 18

A company sold $12,000 worth of bicycles with an extended warranty.It estimates that 2% of these sales will result in warranty work.The company should:

Accepted Answer

A) Consider the warranty expense a remote liability since the rate is only 2%. 
B) Recognize warranty expense at the time the warranty work is performed. 
C) Recognize warranty expense and liability in the year of the sale. 
D) Consider the warranty expense a contingent liability. 
E) Recognize warranty liability when the company purchases the bicycles.

Question 19

In order to be reported,liabilities must:

Accepted Answer

A) Be certain. 
B) Sometimes be estimated. 
C) Be for a specific amount. 
D) Always have a definite date for payment. 
E) Involve an outflow of cash.

Question 20

Employers' responsibilities for payroll do not include:

Accepted Answer

A) Providing each employee with an annual report of his or her wages subject to FICA and federal income taxes along with the amount of these taxes withheld. 
B) Filing Form 941,the Employer's Quarterly Federal Tax Return. 
C) Filing Form 940,the Annual Federal Unemployment Tax Return. 
D) Maintaining individual earnings records for each employee. 
E) Recording an expense for the employee Federal Income Tax withholding.

Exam 11: Current Liabilities and Payroll Accounting