Exam 10: Current Liabilities and Fair Value Accounting

Jeffrey Gray is paid $6 per hour,plus double-time for hours worked on weekends.During the two-week period ending February 5,Jeffrey 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,Jeffrey's employer must pay Social Security taxes of 6.2 percent,Medicare taxes of 1.45 percent,federal unemployment taxes of 0.8 percent,and state unemployment taxes of 5.4 percent.Calculate (a)Jeffrey's gross earnings, (b)Jeffrey's net pay, (c)the employer's payroll taxes expense,and (d)the total cost of employing Jeffrey for the two-week period.Round all amounts to the nearest penny.

Which of the following is a tax borne by the employer but not the employee?

Dividends Payable is an example of a(n)

When compound interest is used,interest accumulates less quickly than when simple interest is used.

Fergus Company is considering the purchase of a machine that will save the company $4,000 per year in operating costs for a period of seven years.The most it should pay for the machine is equal to

The proposed purchase price of an asset should be compared to the present value of the benefits it will generate over its useful life.

If the present value of the net cash flows expected from a machine is less than its purchase price,the investment should not be made.

If a state unemployment tax is imposed,then the federal unemployment tax is not imposed.

Potential vacation pay should be accounted for as a commitment.

Lease agreements are

Which of the following statements is true regarding the time value of money?

When a company discounts a note receivable at the bank,it has a contingent liability.

During May,Phone Mart sold 150 iPhones for $200 each.Each iPhone had cost Phone Mart $108 to purchase and carried a one-year warranty.If 4 percent typically need to be replaced over the warranty period and two actually are replaced during May,the entry to record the Product Warranty Expense is

Calculate answers to the following scenarios using present value tables: a.If $100 is deposited into an account paying 8 percent simple interest,what will be the value of the account in 5 years? b.If an accumulation of $8,000 is desired at the end of 4 years,what amount must be deposited now to accomplish that goal,assuming 12 percent interest compounded annually? c.What is the present value of $300 received at the end of each year for 4 years,assuming 9 percent interest compounded annually? d.What amount must be deposited at the bank today to grow to $10,000 in 5 years,assuming 14 percent interest compounded semiannually?

Decision makers rely on the future values,rather than on the present values of future cash flows.

Interest on a promissory note is recognized when the note is issued.

Product warranties are an expense of the period in which the related product is sold.

A contingent liability is recorded in the accounting records

Company A's current assets = $10,000,total assets = $26,000,current liabilities = $7,000 and total liabilities = $47,000.What is Company A's working capital?

Assume that a company received $1,200 in advance for one year membership fee in the fitness center.The entry that would be made to record the recognition of revenue at the end of first month is