Deck 10: Accounting for Liabilities

Question 1

Effective for years beginning after December 31, 2019, most operating leases will appear as assets on the lessee's balance sheet.

Answer 1

True

Question 2

Federal unemployment tax is withheld from each employee's wages.

Answer 2

False

Question 3

In most situations, the total FICA tax levied on employers will exceed the amount of FICA tax withheld from employees.

Answer 3

False

Question 4

The required withholding of federal income taxes and FlCA taxes from employees' wages results in a direct reduction of operating expenses for the employer firm.

Question 5

The employer firm's total expenses for employing an employee is less than the related employee's gross earnings.

Question 6

Brothers Inc. issued a 120-day note in the amount of $180,000 on November 1, 2019 with an annual rate of 6%.
What amount of interest has accrued as of December 31, 2019?

A) $3,000
B) $2,250
C) $1,800
D) Zero. The interest is accrued at the end of the 120 day period.

Question 7

Goel Inc. issued a 120-day note in the amount of $540,000 on November 1, 2019 with an annual rate of 6%.
What amount of interest has accrued as of December 31, 2019?

A) $9,000
B) $6,750
C) $5,400
D) Zero. The interest is accrued at the end of the 120 day period.

Question 8

Which one of the following would be considered a contingent liability?

A) A company owes $200,000 on inventories purchased on credit.
B) A company has $1,690,000 worth of bonds outstanding.
C) A company estimates that it will probably have to pay $2,400,000 to the Department of Environment Protection for a chemical spill.
D) The company has access to a line of credit with a bank in the amount of $3,000,000.

Question 9

What effects would the accrual of $160 of interest on a note payable have on financial statements?

A) I, II, and III
B) II, III, and V
C) II, IV, and V
D) II, III, and IV

Question 10

Weasley Mart borrows $210,000 on July 1 with a short-term loan that has an annual interest rate of 5% which is payable on the first day of each subsequent quarter.
What will Weasley Mart need to accrue on August 31, assuming that no accrual has yet been made?

A) $10,500; Decrease liabilities and decrease cash
B) $3,500; Decrease liabilities, decrease cash
C) $1,750; Increase liabilities, increase expenses
D) $3,500; Increase liabilities, decrease retained earnings

Question 11

Avery Mart borrows $630,000 on July 1 with a short-term loan that has an annual interest rate of 5% which is payable on the first day of each subsequent quarter.
What will Avery Mart need to accrue on August 31, assuming that no accrual has yet been made?

A) $31,500; Decrease liabilities and decrease cash
B) $10,500; Decrease liabilities, decrease cash
C) $5,250; Increase liabilities, increase expenses
D) $10,500; Increase liabilities, decrease retained earnings

Question 12

On April 30, 2019, one year before maturity, Yellow Plums, Inc. retired $300,000 of 8% bonds payable at 103. The book value of the bonds on April 30 was $289,200. Bond interest was last paid on April 30, 2019.
What is the gain or loss on the retirement of the bonds?

A) $19,800 loss
B) $10,800 gain
C) $30,600 gain
D) $24,000 loss

Question 13

On April 30, 2019, one year before maturity, Green Tomatoes, Inc. retired $900,000 of 8% bonds payable at 103. The book value of the bonds on April 30 was $867,600. Bond interest was last paid on April 30, 2019.
What is the gain or loss on the retirement of the bonds?

A) $59,400 loss
B) $32,400 gain
C) $46,800 gain
D) $72,000 loss

Question 14

Courtney Industries plans to issue 8-year, 8%, $200,000 bonds paying interest on an annual basis, at a $4,000 premium.
Which one of the following statements is true?

A) The cash paid to bondholders will be $4,000 each interest period.
B) Courtney will receive $196,000 as the issue price.
C) Courtney's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year.
D) Courtney's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year.

Question 15

On January 1, 2019, Amin, Inc. issued $1,200,000, 10-year, 8% bonds for $1,050,450. The bonds pay interest on June 30 and December 31. The market rate is 10%.
How much is the interest expense on the bonds for the first interest payment on June 30, 2019?

A) $ 52,523
B) $105,045
C) $ 96,000
D) $ 48,000

Question 16

On January 1, 2019, Pelino, Inc. issued $1,600,000, 10-year, 8% bonds for $1,400,600. The bonds pay interest on June 30 and December 31. The market rate is 10%.
How much is the interest expense on the bonds for the first interest payment on June 30, 2019?

A) $ 70,030
B) $140,060
C) $168,000
D) $ 64,000

Question 17

Oak Park Appliances, Inc. sells food processors for $300 with a 120-day warranty against defects. Past experience indicates that 5% of the processors will have some defect during the warranty period and that the necessary repairs and adjustments will cost $50 per defective unit. Sales for August were $438,000. 30 of the units sold in August were reported defective and repaired in August.
What is the August 31 journal entry for the estimated liability for product warranties for units sold in August?

A) Product Warranty Expense $\quad$ 21,900
$\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 21,900
B) Product Warranty Expense $\quad$ 3,650
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 3,650
C) Estimated Liability for Product Warranty $\quad$ 3,650
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Product Warranty Expense $\quad$ 3,650
D) Product Warranty Expense $\quad$ 2,150
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 2,150

Question 18

Forest Grove Appliances, Inc. sells food processors for $900 with a 120-day warranty against defects. Past experience indicates that 5% of the processors will have some defect during the warranty period and that the necessary repairs and adjustments will cost $150 per defective unit. Sales for August were $1,404,000. 30 of the units sold in August were reported defective and repaired in August.
What is the August 31 journal entry for the estimated liability for product warranties for units sold in August?

A) Product Warranty Expense $\quad$ 70,200
$\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 70,200
B) Product Warranty Expense $\quad$ 11,700
$\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 11,700
C) Estimated Liability for Product Warranty $\quad$ 11,700
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Product Warranty Expense $\quad$ 11,700
D) Product Warranty Expense $\quad$ 7,200
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 7,200

Question 19

Boris, Inc. sells a single product for $900 per unit, including a 90-day warranty against defects. It is estimated that 3% of the units sold will prove defective and require an average repair cost of $70 per unit. During July, 800 units were sold. Five of them were reported defective and repaired in July.
What amount should be added to the Estimated Liability for Product Warranties for July?

A) $ 4,500
B) $ 1,680
C) $18,900
D) $ 1,330

Question 20

Crescent City, Inc. sells a single product for $2,700 per unit, including a 90-day warranty against defects. It is estimated that 3% of the units sold will prove defective and require an average repair cost of $210 per unit. During July, 800 units were sold. Five of them were reported defective and repaired in July.
What amount should be added to the Estimated Liability for Product Warranties for July?

A) $13,500
B) $44,100
C) $56,700
D) $ 3,990

Question 21

Pedal Power Products Company sells bicycles for $240, with a 30-day warranty against defects. Past experience indicates that 6% of the bicycles will have a defect and that the necessary repairs will cost $32 per bicycle. Sales for May were $216,000; 20 units sold in May were found defective and repaired that month.
What is the May 31 journal entry for the estimated liability for product warranties?

A) Product Warranty Expense $\quad$ 1,088
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 1,088
B) Product Warranty Expense $\quad$ 640
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 640
C) Estimated Liability for Product Warranty $\quad$ 1,728
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Product Warranty Expense $\quad$ 1,728
D) Estimated Liability for Product Warranty $\quad$ 1,088
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Product Warranty Expense $\quad$ 1,088

Question 22

Perfect Pedal Products Company sells bicycles for $720, with a 30-day warranty against defects. Past experience indicates that 6% of the bicycles will have a defect and that the necessary repairs will cost $96 per bicycle. Sales for May were $648,000; 20 units sold in May were found defective and repaired that month.
What is the May 31 journal entry for the estimated liability for product warranties?

A) Product Warranty Expense $\quad$ 3,264
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 3,264
B) Product Warranty Expense $\quad$ 1,920
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Estimated Liability for Product Warranty $\quad$ 1,920
C) Estimated Liability for Product Warranty $\quad$ 5,184
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Product Warranty Expense $\quad$ 5,184
D) Estimated Liability for Product Warranty $\quad$ 3,264
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Product Warranty Expense $\quad$ 3,264

Question 23

Klug Technology, Inc. was organized to sell a single product for $1,200 per unit, including a 60-day warranty against defects. Engineering estimates indicate that 5% of the units sold will prove defective and require an average repair cost of $100 per unit. During the first month of operations, total sales were $408,000. Nine units sold in the first month were found defective and repaired that month.
The accrued liability for product warranties at month-end should be:

A) $1,700
B) $ 800
C) $ 900
D) $2,300

Question 24

Super Tech was organized to sell a single product for $3,600 per unit, including a 60-day warranty against defects. Engineering estimates indicate that 5% of the units sold will prove defective and require an average repair cost of $300 per unit. During the first month of operations, total sales were $1,152,000. Nine units sold in the first month were found defective and repaired that month.
The accrued liability for product warranties at month-end should be:

A) $4,800
B) $2,100
C) $2,700
D) $6,900

Question 25

Cracker Company sold goods for which it received total cash payments of $427,800. A 9% excise tax and a 6% sales tax were included in the total cash payments.
Sales revenue recorded should be:

A) $363,630
B) $389,298
C) $372,000
D) $400,632

Question 26

Dresden Company sold merchandise for which it received total cash payments of $1,316,100. A 7% sales tax was included in the total cash payments.
The proper amount to record as sales would be:

A) $1,408,227
B) $1,223,973
C) $1,284,000
D) $1,230,000

Question 27

Alsfeld Company sold merchandise for which it received total cash payments of $3,948,300. A 7% sales tax was included in the total cash payments.
The proper amount to record as sales would be:

A) $4,104,000
B) $3,671,919
C) $3,852,252
D) $3,690,000

Question 28

Pokagon Company sold merchandise for which it received $355,200, including sales and excise taxes. All of the firm's sales are subject to a 6% sales tax but only 50% of sales are subject to a 10% excise tax.
Sales before sales taxes and excise taxes were:

A) $300,000
B) $320,000
C) $316,128
D) $316,000

Question 29

Herald Company sold merchandise for which it received $1,065,600, including sales and excise taxes. All of the firm's sales are subject to a 6% sales tax but only 50% of sales are subject to a 10% excise tax.
Sales before sales taxes and excise taxes were:

A) $900,000
B) $960,000
C) $948,384
D) $948,000

Question 30

Azul, Inc. records sales at amounts that include sales tax. During June, total sales of $180,200, including 6% sales tax, were recorded.
The sales tax liability for June is:

A) $ 10,812
B) $170,000
C) $ 10,200
D) $169,388

Question 31

Coffee, Inc. records sales at amounts that include sales tax. During June, total sales of $540,600, including 6% sales tax, were recorded.
The sales tax liability for June is:

A) $ 32,436
B) $510,000
C) $ 30,600
D) $508,164

Question 32

Southeastern Company sells four tires to George. Each tire retails for $190 and is subject to sales tax of 5% and federal excise tax of 10%. Southeastern Company's journal entry to record the transaction is:

A) Cash $\quad$ 760
$\quad$ $\quad$ $\quad$ Sales $\quad$ 760
B) Cash $\quad$ 874
$\quad$ $\quad$ $\quad$ $\quad$ Sales $\quad$ 874
C) Cash $\quad$ 874
$\quad$ $\quad$ $\quad$ $\quad$ Sales $\quad$ 760
$\quad$ $\quad$ $\quad$ $\quad$ Sales Tax Payable $\quad$ 38
$\quad$ $\quad$ $\quad$ $\quad$ Excise Tax Payable $\quad$ 76
D) Cash $\quad$ 760
Sales Tax Expense $\quad$ 38
Excise Tax Expense $\quad$ 76
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Sales $\quad$ 874

Question 33

Northern Company sells four tires to Road Runner. Each tire retails for $570 and is subject to sales tax of 5% and federal excise tax of 10%. Northern Company's journal entry to record the transaction is:

A) Cash $\quad$ 2,280
$\quad$ $\quad$ $\quad$ Sales $\quad$ 2,280
B) Cash $\quad$ 2,622
$\quad$ $\quad$ $\quad$ $\quad$ Sales $\quad$ 2,622
C) Cash 2,622
$\quad$ $\quad$ $\quad$ $\quad$ Sales $\quad$ 2,280
$\quad$ $\quad$ $\quad$ $\quad$ Sales Tax Payable $\quad$ 114
$\quad$ $\quad$ $\quad$ $\quad$ Excise Tax Payable $\quad$ 228
D) Cash 2,280
$\quad$ $\quad$ $\quad$ Sales Tax Expense $\quad$ 114
$\quad$ $\quad$ $\quad$ $\quad$ Excise Tax Expense $\quad$ 228
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Sales $\quad$ 2,622

Question 34

Which of the following is not a payroll tax on wages or salaries?

A) FICA tax
B) Federal Unemployment tax
C) Federal product excise tax
D) State unemployment tax

Question 35

Assume that Josh earns $24 per hour and he worked 40 hours this week. The Social Security rate is 6.2% and the Medicare rate is 1.45%, and his entire earnings are subject to both FICA taxes. Also, $120 in income taxes and $40 of union dues are withheld.
Josh's net take-home pay should be:

A) $726.56
B) $800.00
C) $640.00
D) $738.80

Question 36

Assume that Brian earns $72 per hour and he worked 40 hours this week. The Social Security rate is 6.2% and the Medicare rate is 1.45%, and his entire earnings are subject to both FICA taxes. Also, $360 in income taxes and $120 of union dues are withheld.
Brian's net take-home pay should be:

A) $2,179.68
B) $2,400.00
C) $1,920.00
D) $2,216.40

Question 37

Assume that Josh earns $36.00 per hour, that he worked 40 hours this week. The Social Security rate is 6.2% and the Medicare rate is 1.45%, and his entire earnings are subject to both FICA taxes. Also, $225 in income taxes and $30 of union dues are withheld.
Josh's take-home pay should be:

A) $1,329.60
B) $1,074.84
C) $1,185.00
D) $1,440.00

Question 38

Assume that Brian earns $108.00 per hour, that he worked 40 hours this week. The Social Security rate is 6.2% and the Medicare rate is 1.45%, and his entire earnings are subject to both FICA taxes. Also, $675 in income taxes and $90 of union dues are withheld.
Josh's take-home pay should be:

A) $3,988.80
B) $3,224.52
C) $3,555.00
D) $4,320.00

Question 39

Federal unemployment taxes are:

A) Levied against both employee and employer
B) Levied against only the employer
C) Levied against only the employee
D) None of the above

Question 40

A firm has the following monthly payroll for June 2019:
Total salaries $120,000
Salaries subject to FICA taxes (6.2% + 1.45%) 120,000
Salaries subject to FUTA (0.8%) and state unemployment taxes (2.7%) 28,000
Income taxes withheld 10,800
In recording the payroll, the net payroll payable is:

A) $ 97,200
B) $100,020
C) $ 99,040
D) $ 81,200

Question 41

A firm has the following monthly payroll for June 2019:
Total salaries 360,000
Salaries subject to FICA taxes (6.2% + 1.45%) 360,000
Salaries subject to FUTA (0.8%) and state unemployment taxes (2.7%) 84,000
Income taxes withheld 32,400
In recording the payroll, the net payroll payable is:

A) $291,600
B) $300,060
C) $263,874
D) $182,814

Question 42

Moonbeam Company has the following monthly payroll for June 2019:
Total salaries $108,000
Salaries subject to FICA taxes (6.2% + 1.45%) 108,000
Salaries subject to FUTA (0.8%) and state unemployment taxes (2.7%) 28,000
Income taxes withheld 9,700
The total employer's payroll tax expense for this period is:

A) $10,476
B) $ 1,558
C) $18,942
D) $ 9,242

Question 43

Sunshine Company has the following monthly payroll for June 2019:
Total salaries $324,000
Salaries subject to FICA taxes (6.2% + 1.45%) 324,000
Salaries subject to FUTA (0.8%) and state unemployment taxes (2.7%) 84,000
Income taxes withheld 29,250
The total employer's payroll tax expense for this period is:

A) $31,428
B) $ 3,174
C) $60,126
D) $27,726

Question 44

A firm has the following monthly payroll for April 2019:
Total salaries $180,000
Salaries subject to FICA taxes (6.2% + 1.45%) 180,000
Salaries subject to FUTA tax (0.8%) and state unemployment taxes (5.4%) 32,000
Income taxes withheld 19,200
The total employer's payroll tax expense for this period is:

A) $13,158
B) $28,300
C) $15,754
D) $34,954

Question 45

If Foster Toys has a current ratio of 3.2 and working capital of $4,400,000, which of the following will cause both the current ratio and working capital to decrease?

A) Paid accounts payable in the amount of $60,000
B) Recorded unpaid salaries in the amount of $160,000
C) Borrowed $200,000 from a bank to be repaid in 90-days
D) Purchased $30,000 of inventory on credit

Question 46

The December 31, 2019, balance sheet of Ivey Company includes the following information:
Inventory $750,000
Prepaid Expenses 60,000
Total Current Assets 1,800,000
Total Current Liabilities 875,000
Accounts Payable 540,000
What is Ivey's quick ratio at December 31, 2019?

A) 0.80
B) 2.57
C) 1.85
D) 1.13

Question 47

The December 31, 2019, balance sheet of Patrick Company includes the following information:
Inventory $1,500,000
Prepaid Expenses 120,000
Total Current Assets 3,600,000
Total Current Liabilities 1,575,000
Accounts Payable 1,080,000
What is Patrick's quick ratio at December 31, 2019?

A) 0.80
B) 1.71
C) 1.85
D) 1.26

Question 48

The December 31, 2019, balance sheet of Simon Company includes the following information:
Cash $ 120,000
Short-term Investments 60,000
Accounts Receivable 340,000
Inventory 360,000
Prepaid Expenses 80,000
Current Liabilities 300,000
Total Liabilities 1,200,000
What is Simon's quick ratio at December 31, 2019?

A) 0.89
B) 2.42
C) 1.73
D) 1.56

Question 49

The December 31, 2019, balance sheet of Bash Company includes the following information:
Cash $ 360,000
Short-term Investments 180,000
Accounts Receivable 1,020,000
Inventory 1,080,000
Prepaid Expenses 240,000
Current Liabilities 1,312,500
Total Liabilities 360,000
What is Bash's quick ratio at December 31, 2019?

A) 0.76
B) 2.33
C) 1.19
D) 1.33

Question 50

On November 1, Minerva borrowed from Dumbledore, giving him a $12,000, 3 month, 9% note, interest payable at maturity. Minerva made no entry after November 1.
What entry would Minerva make on December 31, the end of the accounting period?

A) Interest Payable 180
$\quad$ $\quad$ $\quad$ $\quad$ Interest Expense 180
B) Interest Expense 180
$\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 180
C) Interest Expense 180
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 180
D) Interest Expense 180
$\quad$ $\quad$ $\quad$ $\quad$ Discount on Notes Payable 180

Question 51

On November 1, Luna borrowed from Lumos, giving him a $36,000, 3 month, 9% note, interest payable at maturity. Luna made no entry after November 1.
What entry would Luna make on December 31, the end of the accounting period?

A) Interest Payable 540
$\quad$ $\quad$ $\quad$ $\quad$ Interest Expense 540
B) Interest Expense 540
$\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 540
C) Interest Expense 540
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 540
D) Interest Expense 540
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Discount on Notes Payable 540

Question 52

Michigan Company paid Wisconsin Company for merchandise with a $6,400, 90-day, 8% note dated May 10.
If Michigan Company pays the note at maturity, what entry should be made at that time?

A) Notes Payable 6,528
$\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 128
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 6,400
B) Cash 6,528
$\quad$ $\quad$ $\quad$ $\quad$ Notes Payable 128
$\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 6,400
C) Notes Payable 6,400
Interest Expense 128
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 6,528
D) Notes Payable 6,400
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Interest Expense 128
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 6,272

Question 53

France Company paid Heidelberg Company for merchandise with a $19,200, 90-day, 8% note dated May 10.
If France Company pays the note at maturity, what entry should be made at that time?

A) Notes Payable 19,584
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 384
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 19,200
B) Cash 19,584
$\quad$ $\quad$ $\quad$ $\quad$ Notes Payable 384
$\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 19,200
C) Notes Payable 19,200
Interest Expense 384
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 19,554
D) Notes Payable 19,200
$\quad$ $\quad$ $\quad$ $\quad$ Interest Expense 384
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 18,816

Question 54

On December 1, Jenna borrowed $12,000 from Bacerra, giving a 90-day, 10% note. Which entry would Jenna make on December 31, the end of the accounting period?

A) Interest Expense 100
$\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 100
B) Interest Expense 100
$\quad$ $\quad$ $\quad$ $\quad$ Discount on Notes Payable 100
C) Interest Expense 300
$\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 300
D) Interest Expense 300
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 300

Question 55

On December 1, Julian borrowed $36,000 from Jessie, giving a 90-day, 10% note. Which entry would Julian make on December 31, the end of the accounting period?

A) Interest Expense 300
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 300
B) Interest Expense 300
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Discount on Notes Payable 300
C) Interest Expense 900
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Interest Payable 900
D) Interest Expense 900
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 900

Question 56

On December 1, Hedwig Company borrowed $20,000 from Pigwidgeon Company, giving a 60-day, 12% note.
If the correct adjusting entry is made on December 31, Hedwig's entry at maturity is:

A) Notes Payable 20,000
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 20,000
B) Notes Payable 20,000
Interest Payable 200
Interest Expense 200
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 20,400
C) Notes Payable 20,000
Interest Expense 400
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 20,400
D) Notes Payable 20,000
Interest Payable 400
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 20,400

Question 57

On December 1, Screech Company borrowed $60,000 from Hedwig Company, giving a 60-day, 12% note.
If the correct adjusting entry is made on December 31, Screech's entry at maturity is:

A) Notes Payable 60,000
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 60,000
B) Notes Payable 60,000
Interest Payable 600
Interest Expense 600
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 61,200
C) Notes Payable 60,000
Interest Expense 1,200
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 61,200
D) Notes Payable 60,000
Interest Payable 1,200
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 61,200

Question 58

On September 1, 2019, Maibritt Equipment signed a 12-month, 9% interest bearing note payable for $200,000.
Assuming Maibritt maintains its books on a calendar year basis, the amount of interest expense that should be reported in the 2020 income statement for this note would be:

A) $12,000
B) $ 8,000
C) $18,000
D) $ 6,000

Question 59

On September 1, 2019, Bea Equipment signed a 12-month, 9% interest bearing note payable for $600,000.
Assuming Bea maintains its books on a calendar year basis, the amount of interest expense that should be reported in the 2020 income statement for this note would be:

A) $36,000
B) $24,000
C) $54,000
D) $18,000

Question 60

Rafael Company borrowed $24,000 from Bank of Jane on December 1, 2019, and signed a 90 day, 8% Notes Payable.
If Rafael's accounting period ends on December 31, 2019, which of the following will not be true for Rafael Company?

A) On December 31, 2019, Rafael will debit Interest Expense for $160
B) On December 31, 2019 Rafael, will credit Interest Payable for $160
C) On March 1, 2020, Rafael will debit Interest Expense for $320
D) On March 1, 2020, Rafael will debit Interest Payable for $320

Question 61

Snow White Company borrowed $72,000 from Bank of Fairytales on December 1, 2019, and signed a 90 day, 8% Notes Payable.
If Snow White's accounting period ends on December 31, 2019, which of the following will not be true for Snow White Company?

A) On December 31, 2019, Snow White will debit Interest Expense for $480
B) On December 31, 2019 Snow White, will credit Interest Payable for $480
C) On March 1, 2020, Snow White will debit Interest Expense for $960
D) On March 1, 2020, Snow White will debit Interest Payable for $960

Question 62

On December 1, 2019, MAI Company purchased $60,000 of equipment by issuing a 120-day, 10% note payable to Bank of Washington.
Assuming the company's accounting period ends on December 31, the journal entry recorded by MAI Company on the note maturity date will include:

A) Debit to Interest Expense for $1,500
B) Debit to Interest Payable for $1,500
C) Debit to Interest Payable for $1,000
D) Debit to Interest Expense for $500

Question 63

On December 1, 2019, Coke Company purchased $180,000 of equipment by issuing a 120-day, 10% note payable to Bank of Georgia.
Assuming the company's accounting period ends on December 31, the journal entry recorded by Coke Company on the note maturity date will include:

A) Debit to Interest Expense for $4,500
B) Debit to Interest Payable for $4,500
C) Debit to Interest Payable for $3,000
D) Debit to Interest Expense for $1,500

Question 64

Kangaroo Company signed a three-month, 8% note on November 1, 2019 for the purchase of $120,000 of inventory.
Assuming the company's accounting period ends on December 31, which one of the following statements is not correct?

A) On February 1, 2020, the company will debit Interest Expense for $1,600.
B) On December 31, 2019 the company will debit Interest Expense for $1,600.
C) On February 1, 2020, the company will debit Interest Payable for $1,600.
D) On December 31, 2019, the company will credit Interest Payable for $1,600.

Question 65

Wombat Company signed a three-month, 8% note on November 1, 2019 for the purchase of $360,000 of inventory.
Assuming the company's accounting period ends on December 31, which one of the following statements is not correct?

A) On February 1, 2020, the company will debit Interest Expense for $4,800.
B) On December 31, 2019 the company will debit Interest Expense for $4,800.
C) On February 1, 2020, the company will debit Interest Payable for $4,800.
D) On December 31, 2019, the company will credit Interest Payable for $4,800.

Question 66

Montana Company signed a $180,000, 90-day, 9% note payable, on December 1, 2019. If the accounting period ends on December 31, 2019, the entry made on the note's maturity (March 1, 2020) will include:

A) A debit to Interest Payable for $2,700
B) A debit to Interest Expense for $4,050
C) A debit to Interest Expense for $1,350
D) A debit to Interest Expense for $2,700

Question 67

Idaho Company signed a $540,000, 90-day, 9% note payable, on December 1, 2019. If the accounting period ends on December 31, 2019, the entry made on the note's maturity (March 1, 2020) will include:

A) A debit to Interest Payable for $8,100
B) A debit to Interest Expense for $12,150
C) A debit to Interest Expense for $4,050
D) A debit to Interest Expense for $8,100

Question 68

Charter Company has a total payroll of $780,000 which is subject to a 7.65% FICA tax. Assuming $180,000 was subject to state and federal unemployment tax rates of 4% and 0.8% respectively, the entry to accrue payroll taxes would include a:

A) Debit to payroll tax expense for $94,340
B) Credit to SUTA tax payable for $25,200
C) Debit to FICA tax expense for $11,900
D) Credit to FUTA tax payable for $1,440

Question 69

Four Points Company has a total payroll of $2,340,000 which is subject to a 7.65% FICA tax. Assuming $540,000 was subject to state and federal unemployment tax rates of 4% and 0.8% respectively, the entry to accrue payroll taxes would include a:

A) Debit to payroll tax expense for $283,020
B) Credit to SUTA tax payable for $75,600
C) Debit to FICA tax expense for $35,700
D) Credit to FUTA tax payable for $4,320

Question 70

Assume that the current rate for FICA social security is 6.2% (for the first $102,000 of an employee's salary) and the FICA Medicare rate is 1.45% for all salary. Also, the current FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%, which apply to the first $7,000 of an employee's pay. Assume that an employee earned $300,000 in 2019.
What is the employer's total payroll-related expense for this employee for 2019?

A) $316,998
B) $316,868
C) $311,108
D) $323,384

Question 71

Assume that the current rate for FICA social security is 6.2% (for the first $102,000 of an employee's salary) and the FICA Medicare rate is 1.45% for all salary. Also, the current FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%, which apply to the first $7,000 of an employee's pay. Assume that an employee earned $525,000 in 2019.
What is the employer's total payroll-related expense for this employee for 2019?

A) $475,497
B) $475,302
C) $539,371
D) $597,713

Question 72

Denver Company has a monthly gross payroll (paid on the last day of each month) of $172,000, which is subject to unemployment taxes (Federal at 0.8% and State at 5.4%). All earnings are subject to 7.65% FICA tax (combined Social Security and Medicare). Federal income tax withholdings are 25%, and state income tax withholdings are 8% of total earnings.
Assuming no individual employee has reached the maximum limit for Social Security tax or for unemployment tax, which of the following is not true for the month ended January 31?

A) Denver Company will record a net payroll of $102,082.
B) Denver Company will record a total liability for FICA Taxes of $13,158.
C) Denver Company will record a liability for Federal Unemployment Taxes of $1,376.
D) Denver Company will record a liability for State Income Taxes of $13,760.

Question 73

Pennsylvania Company has a monthly gross payroll (paid on the last day of each month) of $516,000, which is subject to unemployment taxes (Federal at 0.8% and State at 5.4%). All earnings are subject to 7.65% FICA tax (combined Social Security and Medicare). Federal income tax withholdings are 25%, and state income tax withholdings are 8% of total earnings.
Assuming no individual employee has reached the maximum limit for Social Security tax or for unemployment tax, which of the following is not true for the month ended January 31?

A) Pennsylvania Company will record a net payroll of $306,246.
B) Pennsylvania Company will record a total liability for FICA Taxes of $39,474.
C) Pennsylvania Company will record a liability for Federal Unemployment Taxes of $4,128.
D) Pennsylvania Company will record a liability for State Income Taxes of $41,280.

Question 74

Hola Company has 5 sales employees, each of whom earns $8,000 per month and is paid on the last working day of the month. Each employee's wages are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $220 for each employee.
The entry to accrue the company's monthly sales salaries expense on January 31 will not include:

A) A credit to Accrued Payroll Payable of $10,560
B) A credit to FICA-Medicare Taxes Payable for $580
C) A credit to FICA-Social Security Taxes Payable for $2,480
D) A credit to Employee Medical Insurance Payable for $1,100

Question 75

Barker Company has 5 sales employees, each of whom earns $24,000 per month and is paid on the last working day of the month. Each employee's wages are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $660 for each employee.
The entry to accrue the company's monthly sales salaries expense on January 31 will not include:

A) A credit to Accrued Payroll Payable of $31,680
B) A credit to FICA-Medicare Taxes Payable for $1,740
C) A credit to FICA-Social Security Taxes Payable for $7,440
D) A credit to Employee Medical Insurance Payable for $3,300

Question 76

Hola Company has 5 sales employees, each of whom earns $8,000 per month and is paid on the last working day of the month. The gross monthly payroll is subject to federal unemployment taxes of 0.8% and state unemployment taxes of 4.0%. All earnings are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45%. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $220 for each employee.
Monthly payroll tax expense will be:

A) $ 5,980
B) $ 6,080
C) $ 4,980
D) $11,380

Question 77

Barker Company has 5 sales employees, each of whom earns $24,000 per month and is paid on the last working day of the month. The gross monthly payroll is subject to federal unemployment taxes of 0.8% and state unemployment taxes of 4.0%. All earnings are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45%. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $660 for each employee.
Monthly payroll tax expense for January 31 will be:

A) $14,940
B) $18,240
C) $16,440
D) $34,140

Question 78

Sic 'n Span Inc. sells washing machines with a 2 year warranty. Sic 'n Span estimates that total warranty costs are 3% of sales. In the year 2019, Sic 'n Span recorded total sales of washing machines of $1,400,000. The balance in the Estimated Liability for Warranties account was $76,400 on December 31, 2018, and $51,200 on December 31, 2019.
What must have been the actual cost of repairs (covered under warranty) for the year 2019?

A) $67,200
B) $65,800
C) $13,800
D) $88,600

Question 79

Laundry Needs, Inc. sells washing machines with a 2 year warranty. Laundry Needs estimates that total warranty costs are 3% of sales. In the year 2019, Washing Machines recorded total sales of washing machines of $4,200,000. The balance in the Estimated Liability for Warranties account was $229,200 on December 31, 2018, and $153,600 on December 31, 2019.
What must have been the actual cost of repairs (covered under warranty) for the year 2019?

A) $201,600
B) $197,400
C) $ 41,400
D) $265,800

Question 80

Eastern Company estimates warranty expense as 5% of sales. On January 1, 2019 warranties payable was $20,000, and the December 31 liability for the warranty was $22,000. During the year Western recorded sales of $300,000.
The amount paid by Eastern during the year to meet its warranty obligations was:

A) $30,000
B) $15,000
C) $12,000
D) $13,000