Exam 9: Reporting and Analyzing Current Liabilities

An employee earns $9,450 for the current period. The cumulative earnings of previous pay periods is $110,000. Social security tax of 6.2% applies to the first $118,500 of employee earnings per calendar year and Medicare tax of 1.45% applies to all earnings. Calculate the total and individual amounts to be withheld for social security, Medicare and federal income tax (15% of earnings).

An employee earnings report is a cumulative record of each employee's hours worked, gross earnings, deductions, and net pay.

A company's income before interest expense and income taxes is $302,400, and its interest expense is $62,000. Calculate the company's times interest earned ratio.

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 transaction by Jarrett Company?

Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as:

Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $118,500 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. What is the total amount of taxes withheld from the Trey's earnings?

Payroll is an example of a contingent liability for the employer.

During June, Vixen Fur Company sells $850,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. Customers returned $14,000 of merchandise for warranty replacement during the month. The entry to record the estimated warranty provision at the end of the month is:

Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,288. FICA tax for Social Security is 6.2% on the first $118,500 of earnings each calendar year and the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The amount of Federal Income Tax withheld from his earnings was $1,375.17. What is the amount of the employer's payroll taxes expenses for this employee?

What are estimated liabilities? Cite at least two examples and explain why they are classified as estimated liabilities.

The entry to accrue payroll expenses and liabilities for employees will not include:

Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay.

A company's income before interest expense and income taxes is $350,000 and its interest expense is $100,000. Its times interest earned ratio is:

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

All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:

Vacation benefits are a type of _______________ liability.

The payroll records of a company provided the following data for the current weekly pay period ended March 12. Assume that the Social Security portion of the FICA taxes is 6.2% on the first $118,500 of earnings per calendar year and the Medicare portion is 1.45% of all wages paid to each employee for this pay period. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Calculate the net pay for each employee.

Freedom Air collected $165,000 in February for charter flights booked for March and April and properly recorded the amount collected as Unearned Charter Revenue. The flights provided during March earned revenue of $83,400. The correct entry to record the revenue earned in March is:

The annual Federal Unemployment Tax Return is:

A company's payroll information for the month of May follows: On May 31 the company issued Check No. 4625 payable to the Payroll Bank Account to pay for the May payroll. It issued payroll checks to the employees after depositing the check. (1) Prepare the journal entry to record (accrue) the employer's payroll for May. (2) Prepare the journal entry to record payment of the May payroll. The federal and state unemployment tax rates are 0.6% and 5.4%, respectively, on the first $7,000 paid to each employee. The wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record the employer's payroll taxes.