Deck 11: Current Liabilities and Payroll

Question 1

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

A)It is due within one year or one operating cycle,whichever is longer.
B)It is due within five years or five accounting periods,whichever is longer.
C)It is due within five years or five accounting periods,whichever is shorter.
D)It is due within one year or one operating cycle,whichever is shorter.

Answer 1

A

Question 2

A $35,000,two-month,7% note payable was issued on December 1,2015.What is the amount of interest expense recorded in the year 2016?

A)$402
B)$204
C)$408
D)$202

Answer 2

B

Question 3

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

Answer 3

False

Question 4

Amounts owed for products or services,due within one year,are current liabilities.

Question 5

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

A)$133
B)$92
C)$276
D)$184

Question 6

Firewood Inc.signed a three-year note payable for $45,000 at 7% annual interest.What is the interest expense for 2013 if the note was signed on August 1,2013?

A)$1,575
B)$1,313
C)$9,450
D)$3,150

Question 7

A $30,000,three-month,7% note payable was issued on December 1,2015.What is the amount of accrued interest on December 31,2015?

A)$175
B)$267
C)$133
D)$275

Question 8

Notes payable are considered long-term debts,usually involving interest,if they are to be paid within 1 year or less.

Question 9

Which of the following occurs when a company 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 10

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 11

Unearned revenues relating to a one-year service contract are current liabilities until they are earned.

Question 12

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

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

Question 13

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 14

Sales revenue for a sporting goods store amounted to $525,000 for the current period.All sales are on account and are subject to a sales tax of 9%.Which of the following would be included in the journal entry to record the sales?

A)a debit to Sales Revenue for $525,000
B)a credit to Accounts Receivable for $525,000
C)a debit to Sales Tax Payable for $47,250
D)a debit to Accounts Receivable for $572,250

Question 15

Revenue collected but not yet earned is recorded as ________.

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

Question 16

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?

A)a credit to Note payable for $40,867
B)a credit to Cash for $40,000
C)a debit to Interest expense for $217
D)a debit to Interest payable for $217

Question 17

Which of the following would be included in the journal entry to record the payment of sales taxes 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

Question 18

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

Question 19

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

Question 20

Where does unearned revenue to be earned in six months appear on the balance sheet?

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

Question 21

The journal entry for accrued interest on a note payable by the borrower 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 22

Gem Corp.had sales of $3,500 for cash.The state sales tax rate is 8.2%.What amount will be debited to the Cash account?

A)$3,500
B)$3,787
C)$287
D)$350

Question 23

Jupiter Services sells a service plan for commercial computer maintenance.The price is $1,650 per year,paid in advance.On October 1,2013,the company sells a service plan to a new customer for cash.Provide the journal entry to record this transaction on October 1.

Question 24

NewAge Inc.made total cash sales in February of $666,000,and they are subject to 7.5% sales tax.Please provide the summary entry to record sales revenues and sales tax payable.

Question 25

On September 1,2013,Ferrero Inc.borrowed $125,000 by signing a note payable.The note is for 9 months and bears interest at a rate of 7.2%.Provide the journal entry to accrue interest expense at the end of 2013.

Question 26

On October 1,2014,Ferrero Inc.borrowed $225,000 by signing a note payable.The note is for 9 months and bears interest at a rate of 8%.The company accrued interest at the end of 2014.Provide the journal entry at the end of June,2015 when the note is settled.

Question 27

Barter Inc.sold goods for $875,500 on account.The company operates in a state that imposes a 6% sales tax.Which of the following would be the amount of the sales tax payable to the state?

A)$52,530
B)$50,540
C)$45,300
D)$55,090

Question 28

Jupiter Services sells a service plan for commercial computer maintenance.The price is $1,350 per year,paid in advance.On October 1,2015,the company sells a service plan to a new customer for cash,and the plan covers the period October 1,2015 to September 30,2016.Provide the journal entry to record the adjustment needed on December 31,2015.

Question 29

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

A)debit Service Revenue $1,600 and credit Unearned Revenue $1,600
B)debit Unearned Revenue $3,200 and credit Service Revenue $3,200
C)debit Unearned Revenue $4,800 and credit Service Revenue $4,800
D)debit Service Revenue $3,200 and credit Accounts Receivable $3,200

Question 30

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 31

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 32

On July 1,2013,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%.Provide the journal entry for this transaction,using a perpetual inventory system.

Question 33

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 $100,000 plus interest 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?

Question 34

Pluto Corp.had sold goods with a selling price of $8,421 for cash.The state sales tax rate is 8%.What amount will be credited to the Sales Revenue account?

A)$8,421
B)$9,095
C)$674
D)$7,747

Question 35

Rosewood Inc.recently signed a $350,000,six-month note on August 22,2013.The interest rate is 6.5%.How much total interest will be due on the note at maturity?

A)$9,479
B)$22,750
C)$11,375
D)$7,583

Question 36

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 37

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 a compound journal entry to record the sales revenue and sales tax for the month.

Question 38

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?

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 39

On July 1,2013,Ferrero Inc.purchased merchandise inventory for $500,000 by signing a note payable.The note is for 6 months and bears interest at a rate of 8%.Provide the journal entry at the end of December for payment of the note.

Question 40

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 $100,000 plus interest due at the end of every year beginning on December 31,2015.

-What amount represents the current portion of Long-term Notes Payable at December 31,2014?

Question 41

FICA tax is a tax which is paid by the employee only.

Question 42

Income taxes are withheld from each employee's paycheck.

Question 43

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

Question 44

Federal unemployment compensation tax (FUTA),is not withheld from employees' gross earnings.

Question 45

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

Question 46

The Social Security system is funded by contributions from both the employer and employee.

Question 47

Establishing controls for efficiency of the payroll process is one of the two key controls for payroll.

Question 48

FICA tax is paid by the employee only and is deducted from gross pay.

Question 49

FICA tax is a tax which is paid both by the employer and the employee in equal amounts.

Question 50

State unemployment compensation tax (SUTA),is paid by the employer only and is not deducted from an employee's gross pay.

Question 51

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

Question 52

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

Question 53

FUTA,Federal unemployment compensation tax,is paid by the employer only and is not deducted from an employee's gross pay.

Question 54

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

Question 55

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

Question 56

Steve,an employee of Panache Inc.,has gross salary for March of $5,000.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%.His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA.The journal entry in the payroll cycle to record the employer's payroll tax expense includes a credit to FICA-OASDI Taxes Payable for $310.(Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45 %.)

Question 57

Employer FICA is a tax expense that is paid out by the employer and recorded as a payroll tax expense.

Question 58

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 $600,and the company's contribution to the retirement plan is $780.The journal entry in the payroll cycle to record the employee benefits to be paid by the company should include a debit to Employee Health Insurance Payable for $1,380.

Question 59

Employer FICA tax is a tax paid by the employer and is added to the employee's pay.

Question 60

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

Question 61

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

A)Federal income tax
B)SUTA
C)FUTA
D)Charitable contributions

Question 62

Isabelle's gross pay for the week is $850.Her deduction for federal income tax is based on a rate of 19%.She has voluntary deductions of $135.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 4.2% and FICA-Medicare Tax of 1.45%.)

A)$198.03
B)$12.33
C)$96.47
D)$209.53

Question 63

It is mandatory for both the employer and employee to pay ________.

A)FICA
B)SUTA
C)Employee income tax
D)Federal unemployment tax

Question 64

Steve,an employee of Panache Inc.,has gross salary for March of $5,000.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%.His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA.The journal entry in the payroll cycle to record employer's payroll tax expense includes a credit to FICA-Medicare Taxes Payable for $145.(Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45 %.)

Question 65

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

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

Question 66

Berkley's gross pay for the month is $5,400.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 4.2% and FICA-Medicare Tax of 1.45%.)

A)$4,122.90
B)$5,400.00
C)$5,094.90
D)$4,428.00

Question 67

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 68

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

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

Question 69

The journal entry in the payroll cycle to record the employer's payroll tax expense will include a debit to Employee Income Taxes Payable.

Question 70

Panache Inc.withholds $720 from Steve's paycheck for federal income tax.This amount is part of the company's payroll tax expense.

Question 71

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 72

Which of the following is paid by the employer only?

A)OASDI tax
B)Medicare tax
C)Employee income tax
D)Federal unemployment tax

Question 73

Steve,an employee of Panache Inc.,has gross salary for March of $5,000.The entire amount is under the OASDI limit of $110,100,and thus subject to FICA.The total amount of employee FICA tax is $565.(Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45 %.)

Question 74

Rocco earns $14.5 per hour for straight time (40 hours)and the company pays him time-and-a-half for overtime.He worked 43 hours at his job during the first week of March,2015.What was Rocco's gross pay for the week?

A)$623.50
B)$628.00
C)$645.25
D)$935.25

Question 75

Rocco earns $14.5 per hour with time-and-a-half for hours in excess of 40 per week.He worked 43 hours at his job during the first week of March,2015.Rocco pays income taxes at 15% and 5.65% for OASDI and Medicare.All of his income is taxable under FICA.Determine Rocco's net pay for the week.

A)$548.46
B)$512.00
C)$446.75
D)$483.21

Question 76

________ is a pay amount stated at an hourly rate.

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

Question 77

Tom's gross pay for the month is $2,400.Tom's deduction for federal income tax is based on a rate of 20%.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 4.2% and FICA-Medicare Tax of 1.45%.)

A)$615.60
B)$135.60
C)$480.00
D)$296.40

Question 78

Which of the following deductions is paid by both the employer and employee?

A)Federal income taxes
B)Federal unemployment taxes
C)FICA taxes
D)SUTA taxes

Question 79

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 80

Isabelle's gross pay for the week is $850.Her deduction for federal income tax is based on a rate of 19%.She has voluntary deductions of $135.Her yearly pay is under the limit for OASDI.What is her net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

A)$553.50
B)$688.50
C)$640.47
D)$505.47