Question 1

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

Accepted Answer

A)  The definitions and characteristics of current liabilities are broadly similar for both U.S. GAAP and IFRS. 
B)  Provision is typically used under IRFS to refer to liability under U.S. GAAP. 
C)  Because tax regulatory systems of countries are different, the approach to recording taxes is totally different. 
D)  When there is little uncertainty surrounding current liabilities, both require companies to record them in a similar manner. 
E)  When there is a known current obligation that involves an uncertain amount, but one that can be reasonable estimated, both require similar treatment.

Question 2

If the times interest ratio:

Accepted Answer

A)  Increases, then risk increases. 
B)  Increases, then risk decreases. 
C)  Is greater than 1.5, then the company is in default. 
D)  Is less than 1.5, the company is carrying too little debt. 
E)  Is greater than 3.0, the company is likely carrying too much debt.

Question 3

A company's payroll information for the month of May follows:
On May 31 the company issued Check No. 335 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 0.8% 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.

Accepted Answer

The answer of A company's payroll information for the month...

Question 4

On December 1, Gates Company borrowed $45,000 cash from FirstBank by signing a 90-day, 9% note payable.
a. Prepare Gate's journal entry to record the issuance of the note payable.
b. Prepare Gate's journal entry to record the accrued interest due at December 31.
c. Prepare Gate's journal entry to record the payment of the note on March 1 of the next year.

Accepted Answer

The answer of On December 1, Gates Company borrowed $45,000...

Question 5

Liabilities:

Accepted Answer

A)  Must be certain. 
B)  Must sometimes be estimated. 
C)  Must be for a specific amount. 
D)  Must always have a definite date for payment. 
E)  Must involve an outflow of cash.

Question 6

The payroll records of a company provided the following data for the current weekly pay period ended March 7.
Assume that the Social Security portion of the FICA taxes is 6.2% on the first $106,800 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.

Accepted Answer

The answer of The payroll records of a company provided...

Question 7

The wage bracket withholding table is used to:

Accepted Answer

A)  Compute social security withholding. 
B)  Compute Medicare withholding. 
C)  Compute federal income tax withholding. 
D)  Prepare the W-4. 
E)  All of these.

Question 8

Frado Company provides you with following information related to payroll transactions for the month of May. Prepare journal entries to record the transactions for May.
a. Recorded the March payroll using the payroll register information given above.
b. Recorded the employer's payroll taxes resulting from the March payroll. The company had a merit rating that reduces its state unemployment tax rate to 3.5% of the first $7,000 paid each employee. Only $42,000 of the current months salaries are subject to unemployment taxes. The federal rate is .8%.
c. Issued a check to Swift Bank in payment of the May FICA and employee taxes.
d. Issued a check to the state for the payment of the SUTA taxes for the month of May.
e. Issued a check to Swift Bank in payment of the employer's quarterly FUTA taxes for the first quarter in the amount of $1,360.

Accepted Answer

The answer of Frado Company provides you with following information...

Question 9

Explain how to calculate times interest earned. Explain how it is used to analyze a company's risk.

Accepted Answer

The answer of Explain how to calculate times interest earned....

Question 10

Arena Company's salaried employees earn two weeks vacation per year. It pays $858,000 in total employee salaries for 52 weeks but its employees work only 50. Record Arena Company's weekly journal entry to record the vacation expense:

Accepted Answer

A)  Debit Vacation Benefits Expense $16,500; credit Vacation Benefits Payable $16,500. 
B)  Debit Vacation Benefits Expense $17,160; credit Vacation Benefits Payable $17,160. 
C)  Debit Vacation Benefits Expense $17,875; credit Vacation Benefits Payable $17,875. 
D)  Debit Vacation Benefits Payable $17,160; credit Vacation Benefits Expense $17,160. 
E)  Debit Vacation Benefits Payable $16,500; credit Vacation Benefits Expense $16,500.

Question 11

A high value for the times interest earned ratio means that a company is a higher risk borrower.

Accepted Answer

A) True 
 B)False

Question 12

An employee earned $47,000 during the year working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is:

Accepted Answer

A)  $681.50. 
B)  $2,914.00. 
C)  $3,595.50. 
D)  $7,191.00. 
E)  Zero, since the employee's pay exceeds the FICA limit.

Question 13

Fixed expenses:

Accepted Answer

A)  Create risk. 
B)  Can be an advantage when a company is growing. 
C)  Include interest expense. 
D)  Do not fluctuate with changes in sales. 
E)  All of these.

Question 14

Describe how to account for and report on contingent liabilities.

Accepted Answer

The answer of Describe how to account for and report...

Question 15

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is .4.

Accepted Answer

A) True 
 B)False

Question 16

______________________ is the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.

Accepted Answer

The answer of ______________________ is the total compensation an employee...

Question 17

A lawsuit is an example of a contingent liability for the defendant.

Accepted Answer

A) True 
 B)False

Question 18

Gross pay less all deductions is called __________________.

Accepted Answer

The answer of Gross pay less all deductions is called...

Question 19

__________ are obligations due within one year or the company's operating cycle, whichever is longer.

Accepted Answer

The answer of __________ are obligations due within one year...

Question 20

On December 1, Martin Company signed a 90-day, 6% note payable, with a face value of $5,000. What amount of interest expense is accrued at December 31 on the note?

Accepted Answer

A)  $0 
B)  $25 
C)  $50 
D)  $75 
E)  $300

Exam 11: Current Liabilities and Payroll Accounting

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

If the times interest ratio:

Liabilities:

The wage bracket withholding table is used to:

Explain how to calculate times interest earned. Explain how it is used to analyze a company's risk.

Arena Company's salaried employees earn two weeks vacation per year. It pays $858,000 in total employee salaries for 52 weeks but its employees work only 50. Record Arena Company's weekly journal entry to record the vacation expense:

A high value for the times interest earned ratio means that a company is a higher risk borrower.

An employee earned $47,000 during the year working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is:

Fixed expenses:

Describe how to account for and report on contingent liabilities.

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is .4.

______________________ is the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.

A lawsuit is an example of a contingent liability for the defendant.

Gross pay less all deductions is called __________________.

__________ are obligations due within one year or the company's operating cycle, whichever is longer.

On December 1, Martin Company signed a 90-day, 6% note payable, with a face value of $5,000. What amount of interest expense is accrued at December 31 on the note?