Exam 10: Current Liabilities and Fair Value Accounting

Jim Janney is paid $6 per hour, plus double-time for hours worked on weekends. During the two-week period ending February 5, Janney worked 70 hours on weekdays and 8 hours on weekends. Social security taxes are 6.2 percent, Medicare taxes are 1.45 percent, $65 is withheld for federal taxes, $18 is withheld for state income taxes, and $24 is withheld for charities. In addition, Janney's employer must pay social security taxes of 6.2 percent, Medicare taxes of 1.45 percent, federal unemployment taxes of .8 percent, and state unemployment taxes of 5.4 percent. Calculate (a) Janney's gross earnings, (b) Janney's net pay, (c) the employer's payroll taxes expense, and (d) the total cost of employing Janney for the two-week period. Round all amounts to the nearest penny.

On January 2, 2010 , Lester Company, a calendar-year company, issued $40,000 of notes payable, of which $10,000 is due on January 2 for each of the next four years. The proper balance sheet presentation on December 31, 2010 7, is

A business accepts a 12 percent, $47,000 note due in three years. Assuming simple interest, how much will the business receive when the note falls due?

A contingent liability is best described as a(n)

The payables turnover is the number of times, on average, that a company pays its accounts payable in an accounting period.

Under what circumstances is a contingent liability reflected in the accounting records as though an actual liability exists?

Seacrest Company purchased a machine on January 2, 2010. Under the terms of the purchase agreement, the company is required to make 14 quarterly installment payments of $23,000 each, beginning April 1, 2010. Assuming that the interest rate is 16 percent compounded quarterly, determine the purchase price of the machine. Use future value and/or present value tables in calculating your answer.

Use this information to answer the following question. The following totals for the month of November were taken from the payroll register of Levine Company: Salaries expense $12,000 Social security and Medicare taxes withheld 550 Income taxes withheld 2,500 Medical insurance deductions 250 Life insurance deductions 200 Salaries subject to federal and state unemployment taxes of 6.2 percent 4,000 The entry to record the accrual of federal unemployment tax (assume FUTA tax of .8 percent) would include a

To determine the payables turnover, one first calculates the days' payable.

Use this information to answer the following question. Baker Company has the following information for the pay period of January 1-15, 2010. Payment occurs on January 20. Gross payroll \ 16,000 Federal income taxes withheld \ 1,800 Social security and Medicare rate 7.65\% Federal unemployment tax rate 8\% State unemployment tax rate 5.4\% The entry on January 20 would be a debit to

Commercial paper consists of secured loans that are sold to the public.

Use this information to answer the following question. The following totals for the month of November were taken from the payroll register of Levine Company: The entry to record the accrual of employer's payroll taxes would include a debit to Payroll Taxes and Benefits Expense for

Which of the following typically would not be done to satisfy a current liability?

Future value refers to an amount received or paid now at a given rate of interest that is equivalent to another amount received or paid sometime in the future.

Which of the following most likely is an example of an accrued liability?

Dougan Company manufactures and sells widgets. Each widget costs $60 and sells for $100. Each widget carries a warranty that provides for free replacement if it fails for any reason during the next 36 months. In the past, 4 percent of the widgets have had to be replaced under the warranty. During May, Dougan sold 2,000 widgets and replaced 150 under warranty. Calculate the product warranty expense for the month. Show your computation.

The theoretical value of an asset is the present value of the expected benefits.

Of a company's employees, 75 percent typically qualify to receive two weeks' paid vacation per year (50 weeks). The entry to record the amount of estimated liability for vacation pay for a week in which the total payroll is $9,600 is

The annual interest earned on an amount deposited into a bank account will increase each year when simple interest is used.

The annual interest earned on an amount deposited into a bank account will be the same each year when compound interest is used.