Question 1

If the times interest earned ratio:

Accepted Answer

A) Increases, then risk increases. 
B) Increases, then risk decreases. 
C) Is greater than 1.5, the company is in default. 
D) Is less than 1.5, the company is carrying too little debt. 
E) Is greater than 3.0, the company is likely carrying too much debt.

Question 2

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 3

A company sells sofas with a 6-month warranty. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. In January, the company sold 100,000 sofas at $1,750 each; and 500 sofas needed repairs during that same month. The total repairs amounted to $85,000 costs from the upholstery materials inventory. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January.

Accepted Answer

The answer of A company sells sofas with a 6-month...

Question 4

FUTA taxes are:

Accepted Answer

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

Question 5

Gross pay less all deductions is called ____________________.

Accepted Answer

The answer of Gross pay less all deductions is called...

Question 6

Even if the end of an accounting period occurs between the signing of a note payable and its maturity date, the matching principle requires that interest expense not be accrued on a note payable until the note is paid.

Accepted Answer

A) True 
 B)False

Question 7

The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $2,900 in the current period and had cumulative pay for prior periods of $5,800. What is the amount of unemployment taxes the employer must pay on this employee's wages for the current period?

Accepted Answer

A) $420.00. 
B) $348.00. 
C) $72.00. 
D) $174.00. 
E) $0.00.

Question 8

An estimated liability:

Accepted Answer

A) Is an unknown liability of a certain amount. 
B) Is a known obligation of an uncertain amount that can be reasonably estimated. 
C) Is a liability that may occur if a future event occurs. 
D) Can be the result of a lawsuit. 
E) Is not recorded until the amount is known for certain.

Question 9

Athena Company's salaried employees earn two weeks of vacation per year. It pays $858,000 in total employee salaries for 52 weeks but its employees work only 50. Record Athena Company's weekly journal entry to record the vacation expense:

Accepted Answer

A) Debit Vacation Benefits Expense $16,500; credit Vacation Benefits Payable $16,500. 
B) Debit Vacation Benefits Expense $660; credit Vacation Benefits Payable $660. 
C) Debit Vacation Benefits Expense $17,160; credit Vacation Benefits Payable $17,160. 
D) Debit Vacation Benefits Payable $660; credit Vacation Benefits Expense $660. 
E) Debit Vacation Benefits Payable $16,500; credit Vacation Benefits Expense $16,500.

Question 10

Accounts payable are:

Accepted Answer

A) Amounts owed to suppliers for products and/or services purchased on credit. 
B) Long-term liabilities. 
C) Estimated liabilities. 
D) Not usually due on specific dates. 
E) Always payable within 30 days.

Question 11

On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as replacement of an account payable with Erikson Company. What is the journal entry that should be recorded upon signing the note?

Accepted Answer

A) Debit Accounts Receivable $24,000; credit Notes Receivable $24,000 
B) Debit Accounts Payable $24,000; credit Notes Payable $24,000 
C) Debit Accounts Payable $24,160; credit Notes Payable $24,160 
D) Debit Notes Payable $24,000; debit Interest Expense $160; credit Accounts Payable $24,160 
E) Debit Notes Payable $24,000; debit Interest Expense $160; credit Cash $24,160

Question 12

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 13

Employees earn vacation pay at the rate of one day per month. During the month of 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

Question 14

Explain how to calculate times interest earned and how it is used to analyze a company's risk.

Accepted Answer

The answer of Explain how to calculate times interest earned...

Question 15

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, 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?

Accepted Answer

A) $420.75 
B) $464.75 
C) $602.75 
D) $841.50 
E) $695.75

Question 16

Banks authorized to accept deposits of amounts payable to the federal government, including amounts due for payroll taxes are _________________________________.

Accepted Answer

The answer of Banks authorized to accept deposits of amounts...

Question 17

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

Accepted Answer

The answer of On December 1, Williams Company borrowed $45,000...

Question 18

Cardinal Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is $12,300). The sales tax law requires Cardinal to collect 8.5% sales tax on every dollar of merchandise sold. Record the entry for the sale and its applicable sales tax.

Accepted Answer

The answer of Cardinal Company sells merchandise for $24,000 cash...

Question 19

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

Accepted Answer

A) Current earnings for the pay period and number of withholding allowances the employee claims. 
B) The employer's merit rating. 
C) The amount of social security taxes withheld. 
D) Multiplying the gross pay by 6.2%. 
E) Tax tables provided by the state in which the employee works.

Question 20

On November 1, Casey's Snowboards signed a $12,000, 90-day, 5% note payable to cover a past due account payable.
a. What amount of interest expense on this note should Casey's Snowboards report on year-end December 31?
b. Prepare Casey's journal entry to record the issuance of the note payable.
c. Prepare Casey's adjusting journal entry at the end of the year.
d. Prepare Casey's journal entry to record the payment of the note on February 1 of the following year.

Accepted Answer

The answer of On November 1, Casey's Snowboards signed a...

Exam 9: Reporting and Analyzing Current Liabilities