Deck 11: Current Liabilities and Payroll

Question 1

Which of the following accounts is credited by the seller when tax is collected on retail sales?

A) Accounts Payable
B) Payroll Tax
C) Sales Tax Payable
D) Unearned Revenue

Answer 1

C

Question 2

Which of the following would be included in the journal entry to record the payment of sales tax payable?

A) a debit to Sales Tax Payable
B) a credit to Sales Tax Expense
C) a debit to Sales Tax Expense
D) a credit to Sales Tax Payable

Answer 2

A

Question 3

Gem Corp. had cash sales of $10,000. The state sales tax rate is 9.8%. What amount is debited to the Cash account?

A) $10,000
B) $10,980
C) $980
D) $1,000

Answer 3

B

Question 4

Which of the following liabilities is created when a company receives cash for services to be provided in the future?

A) Unearned Revenue
B) Accrued Liability
C) Accounts Payable
D) Estimated Warranty Payable

Question 5

Applied Foods Corp. had cash sales of $598,000 during the month of August. Sales taxes of 6.5% were collected on the sales. Prepare the journal entry to record the sales revenue and sales tax for the month.

Question 6

Pluto Corp. sold goods, with a selling price of $9,021, for cash. The state sales tax rate is 10%. What amount is credited to the Sales Revenue account?

A) $9,021
B) $9,923
C) $902
D) $8,119

Question 7

Current liabilities must be paid either in cash or with goods and services within one year or within the entity's operating cycle, if the cycle is longer than a year.

Question 8

Unearned revenue, for services to be performed in six months, appears on the balance sheet as ________.

A) long-term investments
B) current liabilities
C) current assets
D) long-term assets

Question 9

Barter, Inc. sold goods for $894,500 on account. The company operates in a state that imposes a 6% sales tax. What is the amount of the sales tax payable to the state?

A) $53,670
B) $26,835
C) $13,418
D) $107,340

Question 10

Cash received in advance of providing goods or performing services is recorded as ________.

A) Unearned Revenue
B) Accrued Revenue
C) Service Revenue
D) Uncollected Revenue

Question 11

Unearned revenues are current liabilities until they are earned.

Question 12

Corrections Services sells service plans for commercial computer maintenance. The price for each plan is $1,350 per year, paid in advance. On October 1, 2016, a service plan was sold to a new customer for cash, and the plan covers the period October 1, 2016 to September 30, 2017. Adjusting entries are made on December 31 of each year. Prepare the journal entry for September 30, 2017.

Question 13

Which of the following is a characteristic of a current liability?

A) It creates a present obligation for future payment of cash or services.
B) It cannot be settled with services.
C) It is an avoidable obligation.
D) It occurs because of a future transaction or event.

Question 14

In regards to corporate income tax, which of the following statements is incorrect?

A) Federal income taxes are calculated on a corporate tax return.
B) Income Tax Expense is recorded when the federal income tax is paid.
C) When the corporation files its federal corporate tax return and makes payment, the account Income Tax Payable is credited.
D) The amount income taxes that the corporation owes but has not yet paid is classified as a current liability.

Question 15

The amount of income taxes ________.

A) required by the federal government for a corporation is calculated on a Form 1120
B) paid by the corporation, when it files the Form 1120, is recorded as a debit to the Income Tax Expense account and a credit to the Cash account
C) the corporation owes, but has not yet paid, is recorded as a debit to the Income Tax Payable account
D) the corporation owes, but has not yet paid, is reported as a long-term liability on the balance sheet

Question 16

On April 1, 2017, Planet Services received $14,200 in advance of performing the services from a customer for three months of service - April, May and June. What would be the journal entry to adjust the accounts at the end of May? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

A) Debit Service Revenue $4,733, and credit Unearned Revenue $4,733.
B) Debit Unearned Revenue $9,467, and credit Service Revenue $9,467.
C) Debit Unearned Revenue $14,200, and credit Service Revenue $14,200.
D) Debit Service Revenue $9,467, and credit Accounts Receivable $9,467.

Question 17

Sales revenue for a sporting goods store amounted to $539,000 for the current period. All sales are on account and are subject to a sales tax of 11%. Which of the following would be included in the journal entry to record the sales transaction?

A) a debit to Sales Revenue for $539,000
B) a credit to Accounts Receivable for $539,000
C) a debit to Sales Tax Payable for $59,290
D) a debit to Accounts Receivable for $598,290

Question 18

Amounts owed for products or services purchased on account are accounts receivable.

Question 19

On August 31, 2016, Peter Services received $3,500 in advance of performing the service. Which journal entry is needed to record the receipt of cash?

A) Debit Unearned Revenue $3,500, and credit Cash $3,500.
B) Debit Cash $3,500, and credit Service Revenue $3,500.
C) Debit Unearned Revenue $3,500, and credit Service Revenue $3,500.
D) Debit Cash $3,500, and credit Unearned Revenue $3,500.

Question 20

Amounts owed for products or services purchased on account are called ________.

A) accounts payable
B) unearned revenue
C) accrued expense
D) warranty payable

Question 21

Which of the following accounts will be credited by the borrower when a promissory note is issued?

A) Note Payable
B) Note Receivable
C) Interest Payable
D) Cash

Question 22

On September 1, 2017, Neighborhood, Inc. borrowed $125,000 by signing a nine-month, 7.2% note payable. Prepare the journal entry to accrue interest expense on December 31, 2016.

Question 23

Jupiter Services sells service plans for commercial computer maintenance. The price for each service plan is $1,650 per year, paid in advance. On October 1, 2017, a service plan was sold to a new customer for cash. Prepare the journal entry to record this transaction.

Question 24

On October 1, 2017, Carlos, Inc. borrowed $225,000 by signing a nine-month, 8% note payable. Interest was accrued on December 31, 2017. Prepare the journal entry July, 1, 2017, the date the note was paid.

Question 25

On July 1, 2017, Ferrero, Inc. purchased merchandise inventory for $350,000 by signing a note payable. The note is for 6 months and bears interest at a rate of 8%. Prepare the journal entry for this transaction, using a perpetual inventory system.

Question 26

A $45,000, two-month, 7% note payable was issued on December 1, 2016. What is the amount of interest expense recorded in the year 2017?

A) $3,150
B) $263
C) $525
D) $45,525

Question 27

A $46,000, four-month, 7% note payable was issued on October 1, 2017. Which of the following would be included in the journal entry required on the note's maturity date by the borrower? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

A) a credit to Note payable for $47,073
B) a credit to Cash for $46,000
C) a debit to Interest expense for $268
D) a debit to Interest payable for $268

Question 28

At the maturity of a note payable, a borrower will pay ________.

A) the principal plus interest
B) the principal amount only
C) the interest amount only
D) the principal minus interest

Question 29

Which of the following correctly describes the accounting treatment for interest payable?

A) It is shown on the balance sheet as a current liability.
B) It is shown on the income statement as an operating expense.
C) It is shown on the balance sheet as a current asset.
D) It is shown on the balance sheet as a long-term liability.

Question 30

If a long-term debt is paid in installments, the business will report the current portion of the note payable as a current liability.

Question 31

Short-term notes payable represent a written promise by the business to pay a debt, without the addition of interest, within one year or less.

Question 32

Database Services sells service plans for commercial computer maintenance. The price for each plan is $1,350 per year, paid in advance. On October 1, 2017, a service plan was sold to a new customer for cash, and the plan covers the period October 1, 2017 to September 30, 2018. Prepare the December 31, 2017 adjusting entry.

Question 33

Firewood, Inc. signed a three-year note payable for $45,000 at 13% annual interest. What is the interest expense for 2017 if the note was signed on August 1, 2017? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

A) $2,925
B) $2,438
C) $17,550
D) $5,850

Question 34

Maywood, Inc. signs a $17,000, 8.5%, six-month note dated November 1, 2017. The interest expense recorded for this note in 2017 will be ________. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

A) $1,445
B) $241
C) $723
D) $482

Question 35

Rosewood, Inc. recently signed a $356,000, six-month note on August 22, 2017. The interest rate is 12.5%. How much interest will be due at maturity?

A) $18,542
B) $44,500
C) $22,250
D) $14,833

Question 36

On June 30, 2017, Nightvale, Inc. purchased merchandise inventory for $500,000 by signing a six-month, 8% note payable. Prepare the journal entry for the payment of the note on December 30, 2016.

Question 37

A $37,000, three-month, 11% note payable was issued on December 1, 2017. What is the amount of accrued interest on December 31, 2017? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

A) $339
B) $493
C) $247
D) $565

Question 38

The journal entry for accrued interest on a note payable includes ________.

A) a debit to Interest Expense and credit to Cash
B) a debit to Interest Expense and credit to Interest Payable
C) a debit to Interest Payable and credit to Cash
D) a credit to Interest Expense and debit to Notes Payable

Question 39

When a business records accrued interest expense on a note payable ________.

A) Interest Expense is credited
B) Note Payable is credited
C) Cash is debited
D) Interest Payable is credited

Question 40

NewAge, Inc. made total cash sales in February of $666,000, which are subject to 7.5% sales tax. Prepare the summary entry to record the transaction.

Question 41

Alex, an employee of Super Sunday, Inc., has gross salary for March of $5,400. The entire amount is under the OASDI limit of $117,000 and thus subject to FICA. The total amount of employee FICA tax is $826.20. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

Question 42

Net pay is the total amount of compensation that an employee takes home after the deductions are made.

Question 43

________ is a pay amount stated at an hourly rate.

A) Salary
B) Wage
C) Commission
D) Bonus

Question 44

Which of the following is pay over and above base salary, usually paid for exceptional performance?

A) FICA
B) benefits
C) wages
D) bonuses

Question 45

Benefits are extra compensation-items that are not paid directly to an employee.

Question 46

Regarding net pay, which of the following statements is incorrect?

A) The net pay amount is not important for accounting purposes.
B) The amount of compensation that the employee actually takes home is net pay.
C) The employer either writes a paycheck to each employee for his or her net pay or directly deposits the employee's net pay into the employee's bank account.
D) Net pay equals gross pay minus all deductions.

Question 47

Income taxes are withheld from the employee's paycheck.

Question 48

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.

Question 49

________ is pay stated as a percentage of a sale amount.

A) Salary
B) Wage
C) Commission
D) Bonus

Question 50

Aaron earns $18.50 per hour with time-and-a-half for hours in excess of 40 per week. He worked 45 hours at his job during the first week of March 2017. Aaron pays income taxes at 15% and 7.65% for OASDI and Medicare. All of his income is taxable under FICA. Determine Aaron's net pay for the week. (Do not round any intermediate calculations, and round your final answer to the nearest cent.)

A) $746.94
B) $679.71
C) $579.84
D) $616.51

Question 51

Gross pay is the total amount of compensation earned by an employee after the deductions are made.

Question 52

On December 31, 2016, Jerry's, Inc. borrowed $500,000 by signing a five-year, 8% note payable. The note is payable in five yearly installments of $100,000 plus interest, due at the end of every year beginning on December 31, 2017. What amount represents the current portion of Long-term Notes Payable at December 31, 2016?

Question 53

Rocco earns $19.00 per hour for straight time (40 hours), and the company pays him time-and-a-half for overtime. He worked 49 hours at his job during the first week of March 2017. What was Rocco's gross pay for the week?

A) $931.00
B) $935.50
C) $1,016.50
D) $1,396.50

Question 54

On December 31, 2016, Circle, Inc. borrowed $500,000 by signing a five-year, 8% note payable. The note is payable in five yearly installments of $100,000 plus interest, due at the end of every year beginning on December 31, 2017. Which portion is classified as the long-term portion of Notes Payable at December 31, 2016?

Question 55

The current portion of long-term notes payable is ________.

A) the amount of principal that will be paid within five years
B) typically included with the long-term liabilities on the balance sheet
C) recorded as an adjusting entry
D) reclassified as current for reporting purposes on the balance sheet

Question 56

Regarding gross and net pay, which of the following statements is correct?

A) Gross pay minus all deductions such as income tax withheld equals net pay.
B) Net pay represents the total salaries and wages expense to the employer.
C) For most businesses, gross pay equals net pay.
D) Employers are required to deposit net pay into the employee's bank account.

Question 57

The employee federal and state income tax and Social Security tax are optional payroll deductions.

Question 58

Extra compensation items that are not paid directly to an employee are called ________.

A) bonuses
B) benefits
C) wages
D) commissions

Question 59

The old age, survivors, and disability insurance component of FICA tax is imposed on the entire amount of an individual employee's earnings.

Question 60

Complete the table to show how each type of employee pay is generally stated.

Question 61

Timothy's gross pay for this month is $8,950. His gross year-to-date pay, prior to this month, totaled $110,500. What is the amount of FICA tax withheld from Timothy's pay for this month? (Assume an OASDI rate of 6.2%, applicable on the first $117,000 earnings, and a Medicare rate of 1.45%, applicable on all earnings. Do not round any intermediate calculations, and round your final answer to the nearest cent.)

A) $403.00
B) $129.78
C) $532.78
D) $554.90

Question 62

Medicare is a required column in a payroll register.

Question 63

Statewide Sales, Inc. has gross pay for March of $45,000. Which of the following is included in the journal entry to record salaries expense?

A) credit Salaries and Wages Expense
B) debit Cash
C) debit Salaries and Wages Payable
D) debit Salaries and Wages Expense

Question 64

Isabelle's gross pay for the week is $960.00. Her deduction for federal income tax is based on a rate of 20%. She has voluntary deductions of $235.00. Her yearly pay is under the limit for OASDI. What is her net pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Do not round any intermediate calculations, and round your final answer to the nearest cent.)

A) $533.00
B) $768.00
C) $694.56
D) $459.56

Question 65

A payroll register is a schedule that summarizes the earnings, withholdings, and net pay for each employee.

Question 66

The current period earnings column of the payroll register only includes regular and overtime earnings.

Question 67

Steve is an employee of Panache, Inc. Panache pays a portion of his health insurance premium and also contributes to a retirement plan in his name. The company's share of the health insurance premium is $660, and the company's contribution to the retirement plan is $820. The journal entry to record the employee benefits to be paid by the company should include a debit to Employee Health Insurance Payable for $1,480.

Question 68

Bergan Corp. has gross pay for March of $50,000. The journal entry to record salaries expense would include a debit to Salaries and Wages Payable for $50,000.

Question 69

For the month of September, Countrywide Sales, Inc. recorded gross pay of $66,000. The net pay for the month amounted to $62,500. The salaries are paid on October 5. Which of the following is the journal entry for the payment of salaries?

Question 70

Katie Pereira and Ferro Schwartz are employees of Free Star, Inc. In February 2017, Katie's gross pay was $8,500, and Ferro's gross pay was $10,900. All earnings are subject to FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Which of the following would be included in the entry to record the salaries expense for February?

A) a debit to Salaries Payable to employees for $1,202.80
B) a debit to FICA-Medicare Taxes Payable for $1,202.80
C) a credit to FICA-OASDI Taxes Payable for $1,202.80
D) a credit to Salaries Expense for $1,202.80

Question 71

Berkley's gross pay for the month is $7,400. His deduction for federal income tax is based on a rate of 18%. He has no voluntary deductions. His yearly pay is under the limit for OASDI. What is Berkley's net pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

A) $5,502
B) $7,400
C) $6,834
D) $6,068

Question 72

Tom's gross pay for the month is $3,400. Tom's deduction for federal income tax is based on a rate of 22%. Tom has no voluntary deductions. Tom's yearly pay is under the limit for OASDI. What is the amount of FICA tax withheld from Tom's pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Do not round any intermediate calculations, and round your final answer to the nearest cent.)

A) $1,008.10
B) $260.10
C) $748.00
D) $487.90

Question 73

A ________ is a schedule that summarizes the earnings, withholdings, and net pay for each employee.

A) payroll register
B) bin card
C) cash ledger
D) bank reconciliation statement

Question 74

Federal income taxes are ________.

A) deducted to arrive at an employee's gross pay
B) added to arrive at an employee's net pay
C) deducted to arrive at an employee's net pay
D) not borne by the employee

Question 75

Which of the following is required to be deducted from employees' paychecks?

A) federal income tax
B) SUTA
C) FUTA
D) charitable contributions

Question 76

Sean's gross pay for this month is $9,250. His gross year-to-date pay, prior to this month, totaled $110,500. Sean's rate for federal income tax is 20%. His voluntary deductions total $1,000. What is Sean's net pay? (Assume an OASDI rate of 6.2%, applicable on the first $117,000 earnings, and a Medicare rate of 1.45%, applicable on all earnings. Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

A) $6,862.87
B) $6,400.00
C) $7,400.00
D) $5,862.87

Question 77

Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?

A) FICA-OASDI taxes
B) sales tax
C) federal income tax
D) FICA-Medicare taxes

Question 78

Angela's gross pay for the week is $970.00. Her deduction for federal income tax is based on a rate of 24%. She has voluntary deductions of $175.00. Her yearly pay is under the limit for OASDI. What is the amount of FICA-Medicare Tax deducted from her pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Do not round any intermediate calculations, and round your final answer to the nearest cent.)

A) $232.80
B) $14.07
C) $60.14
D) $307.01

Question 79

Eric's gross pay for the week is $2,050. His deduction for federal income tax is based on a rate of 23%. He has no voluntary deductions. His yearly pay is under the limit for OASDI. What is the amount of FICA tax that will be withheld from Eric's pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

A) $471.50
B) $156.83
C) $628.33
D) $130.15

Question 80

Which of the following columns is typically included in a payroll register?

A) Direct Labor Hours Worked
B) Warranties Payable
C) Current Period Earnings
D) Sales Tax