Exam 11: Current Liabilities and Payroll

On December 31, 2014, Ferrero Inc. borrowed $500,000 by signing a note payable. The note is for 5 years and bears interest at the rate of 8%. The note is payable in 5 yearly installments of $125,219 due at the end of every year beginning on December 31, 2015. Which portion is classified as the long-term portion of Notes Payable at December 31, 2014?

Art Panache, the sole employee of Panache Sales, has gross salary for May of $6,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. He is also subject to federal income tax at a rate of 20%. Which of the following is a part of the journal entry to record the disbursement of his net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

The times-interest-earned ratio is calculated as:

Katie Pereira and Ferro Schwartz are the only two employees of Free Star Company. In February, 2013, Katie's gross pay was $5,500 and Ferro's gross pay was $5,900. All earnings are subject to FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%. Which of the following would be included in the entry to record the salary expense for February?

Amounts owed for products or services purchased on account are called:

A certain contingent liability was evaluated at year-end; the company felt it was probable that it would become an actual liability, and the amount could be reasonably estimated. If the accountant decided not to report it on the balance sheet or in the notes to the financial statement, what effect would it have on the financial reporting of the company?

Which of the following is included in the entry to record the employer's payroll taxes?

On April 10, 2013, Peter Services received $4,800 in advance from a customer for one month's service, to be provided April 10, 2013 to May 10, 2013. What would be the journal entry to adjust the accounts at the end of April?

The old age, survivors, and disability insurance portion of FICA taxes is imposed on all of an individual employee's earnings.

On August 31, 2013, Peter Services received $3,500 in advance from a customer. Which of the following would be the journal entry to record the receipt of cash?

Synergy Appliances sells dishwashers with a 4-year warranty. In 2013, sales revenue for dishwashers is $85,000. The company estimates warranty expense at 4.5% of revenues. What is the 2013 warranty expense?

Steve's gross pay for the week is $980. His yearly pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is 6.2%, and that Steve's pay year-to-date has previously exceeded the $7,000 cap. His yearly pay is under the limit for OASDI. How much is the total amount of payroll taxes that Steve'e employer must record as payroll tax expenses? (Do not round your intermediate calculations. Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

SUTA, State unemployment compensation tax, is not withheld from an employees' gross earnings.

A $40,000, four-month, 6.5% note payable was issued on October 1, 2015. Which of the following would be included in the journal entry required on the note's maturity date by the borrower?

Sara Digital starts the year with $2,500 in its Estimated Warranty Payable account. During the year, there were $210,000 of sales and $4,500 of warranty repair payments. Sara Digital estimates warranty expense at 2% of sales. At the end of the year, what was the balance in the Estimated Warranty Payable account?

Gross pay is the total amount of salary, wages, commissions, and bonuses earned by an employee during a pay period, after taxes or any other deductions.

Which of the following is true of good internal controls over payroll?

Synergy Appliances sells dishwashers with a 4-year warranty. In 2013, sales revenue for dishwashers is $85,000. The company estimates warranty expense at 4.5% of revenues. What is the total estimated warranty payable of Synergy Appliances in 2013?

Which of the following is included in the entry to record accrual of warranty expense?

Jade signs a $6,500, 8.5%, six-month note dated November 1, 2013. The interest expense recorded for this note in 2013 will be: