Question 1

Employers:

Accepted Answer

A) Pay FICA taxes equal to the amount of FICA taxes withheld from the employees. 
B) Withhold employees' FICA taxes. 
C) Pay unemployment taxes to the federal government. 
D) Pay unemployment taxes to both the state and federal governments. 
E) All of the choices are correct. 
A) Pay FICA taxes equal to the amount of FICA taxes withheld from the employees. 
B) Withhold employees' FICA taxes. 
C) Pay unemployment taxes to the federal government. 
D) Pay unemployment taxes to both the state and federal governments. 
E) All of the choices are correct. E

Question 2

Define liabilities and explain the difference between current and long-term liabilities.

Accepted Answer

Liabilities are probable future payments of assets or services a company is presently obligated to make as a result of past transactions or events. Current liabilities are obligations due within one year or the company's operating cycle,whichever is longer. Long-term liabilities are obligations due beyond one year or the company's operating cycle,whichever is longer.

Question 3

Liabilities:

Accepted Answer

A) Must be certain. 
B) Must sometimes be estimated. 
C) Must be for a specific amount. 
D) Must always have a definite date for payment. 
E) Must involve an outflow of cash. 
A) Must be certain. 
B) Must sometimes be estimated. 
C) Must be for a specific amount. 
D) Must always have a definite date for payment. 
E) Must involve an outflow of cash. B

Question 4

On December 1,Martin Company signed a 90-day,6% note payable,with a face value of $5,000.What amount of interest expense is accrued at December 31 on the note?

Accepted Answer

A) $0 
B) $25 
C) $50 
D) $75 
E) $300 
A) $0 
B) $25 
C) $50 
D) $75 
E) $300

Question 5

Obligations not due within one year or the company's operating cycle,whichever is longer,are reported as current liabilities.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Fixed expenses:

Accepted Answer

A) Create risk. 
B) Can be an advantage when a company is growing. 
C) Include interest expense. 
D) Do not fluctuate with changes in sales. 
E) All of the choices are correct. 
A) Create risk. 
B) Can be an advantage when a company is growing. 
C) Include interest expense. 
D) Do not fluctuate with changes in sales. 
E) All of the choices are correct.

Question 8

During August,Arena Company sells $356,000 in product that has a one year warranty.Experience shows that warranty expenses average about 5% of the selling price.The warranty liability account has a balance of $12,800 before adjustment.Customers returned product for warranty repairs during the month that used $9,400 in parts for repairs.The entry to record the customer warranty repairs is:

Accepted Answer

A) Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800. 
B) Debit Warranty Expense $9,400; credit Estimated Warranty Liability $9,400. 
C) Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400. 
D) Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400. 
E) Debit Estimated Warranty Liability $17,800; credit Parts Inventory $17,800. 
A) Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800. 
B) Debit Warranty Expense $9,400; credit Estimated Warranty Liability $9,400. 
C) Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400. 
D) Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400. 
E) Debit Estimated Warranty Liability $17,800; credit Parts Inventory $17,800.

Question 9

A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

Accepted Answer

A) True 
 B)False

Question 10

The Federal Insurance Contributions Act (FICA)requires that each employer file a:

Accepted Answer

A) W-4. 
B) Form 941. 
C) Form 1040. 
D) Form 1099. 
E) All of the choices are correct. 
A) W-4. 
B) Form 941. 
C) Form 1040. 
D) Form 1099. 
E) All of the choices are correct.

Question 11

Accounts payable:

Accepted Answer

A) Are amounts owed to suppliers for products and/or services purchased on credit. 
B) Are long-term liabilities. 
C) Are estimated liabilities. 
D) Do not include specific due dates. 
E) Must be paid within 30 days. 
A) Are amounts owed to suppliers for products and/or services purchased on credit. 
B) Are long-term liabilities. 
C) Are estimated liabilities. 
D) Do not include specific due dates. 
E) Must be paid within 30 days.

Question 12

Required payroll deductions result from laws and include income taxes,Social Security taxes,pension and health contributions,union dues,and charitable giving.

Accepted Answer

A) True 
 B)False

Question 13

A high value for the times interest earned ratio means that a company is a higher risk borrower.

Accepted Answer

A) True 
 B)False

Question 14

__________ are obligations due within one year or the company's operating cycle,whichever is longer.

Accepted Answer

The answer of __________ are obligations due within one year...

Question 15

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000.Its times interest earned ratio is .4.

Accepted Answer

A) True 
 B)False

Question 16

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. 
D) The amount owed cannot be reasonably estimated. 
E) All of the choices are correct. 
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. 
D) The amount owed cannot be reasonably estimated. 
E) All of the choices are correct.

Question 17

The annual Federal Unemployment Tax Return is:

Accepted Answer

A) Form 940. 
B) Form 1099. 
C) Form 104. 
D) Form W-2. 
E) Form W-4. 
A) Form 940. 
B) Form 1099. 
C) Form 104. 
D) Form W-2. 
E) Form W-4.

Question 18

On November 1,Bob's Skateboards 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 Bob's Skateboards report on year-end December 31?
b.Prepare Bob's journal entry to record the issuance of the note payable.
c.Prepare Bob'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,Bob's Skateboards signed a $12,000,90-day,5%...

Question 19

Frado Company provides you with following information related to payroll transactions for the month of May.Prepare journal entries to record the transactions for May.
   a.Recorded the March payroll using the payroll register information given above.
b.Recorded the employer's payroll taxes resulting from the March payroll.The company had a merit rating that reduces its state unemployment tax rate to 3.5% of the first $7,000 paid each employee.Only $42,000 of the current months salaries are subject to unemployment taxes.The federal rate is .8%.
c.Issued a check to Swift Bank in payment of the May FICA and employee taxes.
d.Issued a check to the state for the payment of the SUTA taxes for the month of May.
e.Issued a check to Swift Bank in payment of the employer's quarterly FUTA taxes for the first quarter in the amount of $1,360.

Accepted Answer

The answer of Frado Company provides you with following information...

Question 20

A bank that is authorized to accept deposits of amounts payable to the federal government is a:

Accepted Answer

A) Credit union. 
B) FDIC insured bank. 
C) Federal depository bank. 
D) National bank. 
E) Federal Reserve Bank. 
A) Credit union. 
B) FDIC insured bank. 
C) Federal depository bank. 
D) National bank. 
E) Federal Reserve Bank.

Exam 11: Current Liabilities and Payroll Accounting

Employers:

Define liabilities and explain the difference between current and long-term liabilities.

Liabilities:

On December 1,Martin Company signed a 90-day,6% note payable,with a face value of $5,000.What amount of interest expense is accrued at December 31 on the note?

Obligations not due within one year or the company's operating cycle,whichever is longer,are reported as current liabilities.

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?

Fixed expenses:

A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

The Federal Insurance Contributions Act (FICA)requires that each employer file a:

Accounts payable:

Required payroll deductions result from laws and include income taxes,Social Security taxes,pension and health contributions,union dues,and charitable giving.

A high value for the times interest earned ratio means that a company is a higher risk borrower.

__________ are obligations due within one year or the company's operating cycle,whichever is longer.

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000.Its times interest earned ratio is .4.

Contingent liabilities must be recorded if:

The annual Federal Unemployment Tax Return is:

A bank that is authorized to accept deposits of amounts payable to the federal government is a:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

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 Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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