Chapter 11
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Chapter 11

Course Number: ACCT 202, Spring 2011

College/University: Old Dominion

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Chapter 011 Current Liabilities and Payroll Accounting Summary of Questions by Difficulty Level (DL) and Learning Objective (LO) True/False Item DL LO Item DL LO Item DL LO 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Easy Easy Med Med Med Med Easy Easy Med Med Med Med Easy Easy Easy Med Med Med Hard C1 C1 C1 C1 C1 C1 C2 C2 C2 C2 C2 C2 C3 C3 C3 C3 C3 C3 C3 20. 21. 22. 23. 24. 25. 26. 27....

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011 Chapter Current Liabilities and Payroll Accounting Summary of Questions by Difficulty Level (DL) and Learning Objective (LO) True/False Item DL LO Item DL LO Item DL LO 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Easy Easy Med Med Med Med Easy Easy Med Med Med Med Easy Easy Easy Med Med Med Hard C1 C1 C1 C1 C1 C1 C2 C2 C2 C2 C2 C2 C3 C3 C3 C3 C3 C3 C3 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. Hard Easy Med Med Hard Hard Med Easy Easy Med Med Easy Easy Easy Med Easy Easy Easy Med 11-1 C3 A1 A1 A1 A1 A1 A1 P1 P1 P1 P1 P2 P2 P2 P2 P3 P3 P3 P3 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. Med Med Med Hard Hard Med Easy Med Med Hard Hard Easy Easy Easy Easy Easy Easy Med Med P3 P3 P3 P3 P3 P3 P4 P4 P4 P4 P4 P5 P5 P5 P5 P5 P5 P5 P5 Chapter 011 Current Liabilities and Payroll Accounting Multiple Choice 11-2 Chapter 011 Current Liabilities and Payroll Accounting Item 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. DL LO Easy Easy Med Med Hard Easy Easy Med Med Med Med Med Med Easy Med Med Hard Hard Easy Med Med Hard Med C1 C1 C1 C1 C1 C2 C2 C2 C2 C2 C2 C2 C3 C3 C3 C3 C3 C3 A1 A1 A1 A1 A1 Item 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. DL LO Med Med Easy Easy Easy Med Hard Hard Hard Easy Easy Easy Easy Med Med Med Med Med Hard Hard Easy Med Med A1 A1 P1 P1 P1 P1 P1 P1 P1 P2 P2 P2 P2 P2 P2 P2 P5 P2 P2 P2 P5 P5 P5 11-3 Item 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. DL LO Easy Easy Med Med Med Hard Hard Hard Hard Easy Easy Easy Med Med Hard Med Hard Hard Easy Med Med Med Med P3 P3 P3 P3 P3 P3 P3 P3 P3 P4 P4 P4 P4 P4 P4 P4 P4 P4 P5 P5 P5 P5 P5 Chapter 011 Current Liabilities and Payroll Accounting 81. Hard A1 105. Med 11-4 P5 129. Med P5 Chapter 011 Current Liabilities and Payroll Accounting Matching 11-5 Chapter 011 Current Liabilities and Payroll Accounting Item DL LO 130. Med 131. Med C1,C2, A1,P15 C1,C3 P2-P5 Short Essay Item DL LO 134. 135. 136. 137. C1 C2 C3 P5 Med Easy Hard Med Problems Item DL LO 145. 146. 147. 148. 149. 150. 151. 152. 153. 154. A1 A1 A1 A1 A1 A1 A1 P1 P1 P1 Easy Easy Med Med Med Med Med Med Med Med Completion Problems Item DL LO 173. 174. 175. 176. 177. 178. 179. Easy Easy Med Med Med Hard Med C1 C1 C2 C2 C3 C3 P5 Item 132. Item 138. 139. 140. 141. Item 155. 156. 157. 158. 159. 160. 161. 162. 163. Item 180. 181. 182. 183. 184. 185. DL LO Med C1 DL LO Med Med Med Med C5 A1 P1 P2 DL LO Med Med Easy Easy Med Med Med Med Med P1 P1 P2 P2 P2 P2 P2,P3 P2,P3 P2,P3 DL LO Med Med Easy Easy Easy Easy P5 A1 P1 P1 P2 P2 11-6 Item 133. Item 142. 143. 144. Item 164. 165. 166. 167. 168. 169. 170. 171. 172. Item 186. 187. 188. 189. 190. 191. DL LO Med C1-C3 DL LO Med Easy Hard P3 P4 P5 DL LO Med Easy Med Med Med Hard Hard Med Hard P3 P4 P4 P4 P4 P4 P5 P2 P2,P3 DL LO Hard Med Easy Med Med Easy P2 P3 P4 P4 P5 P5 Chapter 011 Current Liabilities and Payroll Accounting Problems Item DL LO Item DL LO Item DL LO 192. 193. C2 C2 194. 195. Hard Med P2,P3 P1 196. Easy P3 Easy Med 11-7 Chapter 011 Current Liabilities and Payroll Accounting True / False Questions 1. A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C1 2. Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C1 3. All expected future payments are liabilities. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C1 4. A single liability can be divided between current and noncurrent liabilities. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C1 11-8 Chapter 011 Current Liabilities and Payroll Accounting 5. A company can have a liability even if the amount of the obligation is unknown. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C1 6. A liability does not exist if there is any uncertainty about whom to pay, when to pay, or how much to pay. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C1 7. Trade accounts payable are amounts owed to suppliers for products or services purchased on credit. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C2 8. Unearned revenues is another name for sales. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C2 11-9 Chapter 011 Current Liabilities and Payroll Accounting 9. Unearned revenues are liabilities. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C2 10. Sales taxes payable is credited and cash is debited when companies send sales taxes collected from customers to the government. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C2 11. Known liabilities are obligations set by agreements, contracts, or laws, and are measurable and definitely determinable. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C2 12. The Orlando Magic received $6 million cash in advance season ticket sales. Prior to the beginning of the basketball season, these sales are recorded as a credit to unearned season ticket revenue. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C2 11-10 Chapter 011 Current Liabilities and Payroll Accounting 13. A contingent liability is a potential obligation that depends on a future event arising from a future transaction or event. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C3 14. A lawsuit is an example of a contingent liability for the defendant. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C3 15. Payroll taxes are contingent liabilities. FALSE AACSB: Reflective Thinking AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C3 16. The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: C3 11-11 Chapter 011 Current Liabilities and Payroll Accounting 17. Uncertainties from the development of new competing products are contingent liabilities. FALSE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: C3 18. Debt guarantees are not disclosed because the guarantor is not the primary debtor. FALSE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: C3 19. Accounting for contingent liabilities covers three categories. (1) The future event is probable and the amount cannot be reasonably estimated. (2) The future event is remote or unlikely to recur. (3) The likelihood of the liability to occur is impossible. FALSE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: C3 20. A potential lawsuit claim is recorded when the claim can be reasonably estimated and it is reasonably possible. FALSE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: C3 11-12 Chapter 011 Current Liabilities and Payroll Accounting 21. A high value for the times interest earned ratio means that a company is a higher risk borrower. FALSE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Easy Learning Objective: A1 22. Times interest earned can be calculated by multiplying income by the interest rate on a company's debt. FALSE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 23. The times interest earned ratio is calculated by dividing income before interest expense and income taxes by interest expense. TRUE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 24. Experience shows that when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods, the default rate on liabilities increases sharply. TRUE AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: A1 11-13 Chapter 011 Current Liabilities and Payroll Accounting 25. When the times interest earned ratio declines, the likelihood of default on liabilities increases. TRUE AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: A1 26. 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. FALSE $250,000/$100,000 = 2.5 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 27. A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is longer. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P1 28. Promissory notes are nonnegotiable meaning that they cannot be transferred from party to party. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P1 11-14 Chapter 011 Current Liabilities and Payroll Accounting 29. A note payable can be used to extend the payment due on an account payable. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P1 30. The matching principle requires that interest expense not be accrued on a note payable until the note is paid, even if the end of an accounting period occurs between the signing of a note payable and its maturity date. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 31. Gross pay is also called take-home pay. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P2 32. Social security payments consist of Social Security taxes and Medicare taxes. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P2 11-15 Chapter 011 Current Liabilities and Payroll Accounting 33. Required employee payroll deductions include income taxes, Social Security taxes, pension and health contributions, union dues, and charitable giving. FALSE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P2 34. The amount of federal income tax withheld depends on the employee's annual earnings rate and the number of withholding allowances claimed by the employee. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P2 35. Employers must pay FICA taxes equal in amount to the FICA taxes withheld from their employees. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P3 36. FUTA is the abbreviation for social security taxes. FALSE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P3 11-16 Chapter 011 Current Liabilities and Payroll Accounting 37. Employers are required to pay local, state, and federal payroll taxes. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P3 38. The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 39. A high merit rating means that an employer has high employee turnover or seasonal hiring. FALSE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 40. Employers must keep certain payroll records, including individual earnings reports for each employee. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 11-17 Chapter 011 Current Liabilities and Payroll Accounting 41. Federal depository banks are authorized to accept deposits of amounts payable to the federal government. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 42. FUTA requires employers to pay a federal unemployment tax on the first $7,000 in salary or wages paid to each employee. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Hard Learning Objective: P3 43. The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2. TRUE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Hard Learning Objective: P3 44. Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $1,000. FALSE AACSB: Communications AICPA BB: Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 11-18 Chapter 011 Current Liabilities and Payroll Accounting 45. An estimated liability is a known obligation of an uncertain amount that can at least be reasonably estimated. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P4 46. Accrued vacation benefits are a form of estimated liability for an employer. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 47. Income tax liabilities are the same whether calculated by tax accounting methods or by financial accounting methods. FALSE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 48. A corporation has a $42,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $50,000. The company should record an entry to debit Income Tax Expense for $8,000 and credit Income Taxes Payable for $8,000. TRUE AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P4 11-19 Chapter 011 Current Liabilities and Payroll Accounting 49. A company performed warranty repair work for a customer that cost $1,000. The journal entry to record the work should be a debit of $1,000 to Warranty Expense and a credit of $1,000 to Estimated Warranty Liability. FALSE AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P4 50. Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay. TRUE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Easy Learning Objective: P5 51. Each employee records the number of withholding allowances claimed on form W-4, which is the withholding allowance certificate that is filed with the employer. TRUE AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Easy Learning Objective: P5 52. Companies with many employees often use a special payroll bank account to pay employees. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P5 11-20 Chapter 011 Current Liabilities and Payroll Accounting 53. A payroll register usually shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P5 54. A payroll register is a cumulative record of an employee's hours worked, gross earnings, deductions, and net pay. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P5 55. Payment of payroll is usually done by check or an electronic funds transfer. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P5 56. An employee earnings report is a cumulative record of an employee's hours worked, gross earnings, deductions, and net pay. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 11-21 Chapter 011 Current Liabilities and Payroll Accounting 57. When the number of withholding allowances increases, the amount of income tax withheld increases. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 Multiple Choice Questions 58. The characteristics of a liability include: A. A past transaction or event. B. A present obligation. C. A future payment of assets or services. D. Both (a) and (b). E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C1 59. Obligations due to be paid within one year or the company's operating cycle, whichever is longer, are: A. Current assets. B. Current liabilities. C. Earned revenues. D. Operating cycle liabilities. E. Bills. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C1 11-22 Chapter 011 Current Liabilities and Payroll Accounting 60. Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as: A. Current assets. B. Current liabilities. C. Long-term liabilities. D. Operating cycle liabilities. E. Bills. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C1 61. Liabilities involve addressing issues of: A. When to pay. B. Whom to pay. C. How much to pay. D. All of these. E. Both (A) and (C) only. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C1 62. Liabilities: 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. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: C1 11-23 Chapter 011 Current Liabilities and Payroll Accounting 63. Known liabilities: A. Include accounts payable, notes payable, and payroll. B. Are obligations set by agreements, contracts, or laws. C. Are measurable. D. Are definitely determinable. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C2 64. Accounts payable: A. Are amounts owed to suppliers for products and/or services purchased on credit. B. Are long-term liabilities. C. Are estimated liabilities. D. Do not include specific due dates. E. Must be paid within 30 days. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C2 65. Amounts received in advance from customers for future products or services: A. Are revenues. B. Increase income. C. Are liabilities. D. Are not allowed under GAAP. E. Require an outlay of cash in the future. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 11-24 Chapter 011 Current Liabilities and Payroll Accounting 66. Sales taxes payable: A. Is an estimated liability. B. Is a contingent liability. C. Is a current liability for retailers. D. Is a business expense. E. Is a long-term liability. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 67. Unearned revenues are: A. Also called deferred revenues. B. Amounts received in advance from customers for future delivery of products or services. C. Also called collections in advance. D. Also called prepayments. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 68. Unearned revenue is initially recognized with a: A. Credit to unearned revenue. B. Credit to revenue. C. Debit to revenue payable. D. Debit to revenue. E. Debit to unearned revenue. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 11-25 Chapter 011 Current Liabilities and Payroll Accounting 69. Advance ticket sales totaling $6,000,000 cash would be recognized as follows: A. Debit Sales, credit Unearned Revenue. B. Debit Unearned Revenue, credit Sales. C. Debit Cash, credit Unearned Revenue. D. Debit Unearned Revenue, credit Cash. E. Debit Cash, credit Revenue Payable. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 70. A contingent liability: A. Is always of a specific amount. B. Is a potential obligation that depends on a future event arising from a past transaction or event. C. Is an obligation not requiring future payment. D. Is an obligation arising from the purchase of goods or services on credit. E. Is an obligation arising from a future event. AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: C3 71. Contingent liabilities can be: A. Probable. B. Remote. C. Reasonably possible. D. Estimable. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Easy Learning Objective: C3 11-26 Chapter 011 Current Liabilities and Payroll Accounting 72. Contingent liabilities must be recorded if: A. The future event is probable and the amount owed can be reasonably estimated. B. The future event is remote. C. The future event is reasonably possible. D. The amount owed cannot be reasonably estimated. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: C3 73. Debt guarantees: A. Are never disclosed in the financial statements. B. Are considered to be a contingent liability. C. Are a bad business practice. D. Are recorded as a liability even though it is highly unlikely that the original debtor will default. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: C3 74. In the accounting records of a defendant, lawsuits: A. Are estimated liabilities. B. Should always be recorded. C. Should always be disclosed. D. Should be recorded if payment for damages is probable and the amount can be reasonably estimated. E. Should never be recorded. AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: C3 11-27 Chapter 011 Current Liabilities and Payroll Accounting 75. Uncertainties such as natural disasters: A. Are not contingent liabilities because they are future events not arising from past transactions or events. B. Are contingent liabilities because they are future events arising from past transactions or events. C. Should be disclosed because of their usefulness to financial statements. D. Are estimated liabilities because the amounts are uncertain. E. Arise out of transactions such as debt guarantees. AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: C3 76. The times interest earned ratio reflects: A. A company's ability to pay its operating expenses on time. B. A company's ability to pay interest even if sales decline. C. A company's profitability. D. The relation between income and debt. E. The relation between assets and liabilities. AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Easy Learning Objective: A1 77. Fixed expenses: 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. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 11-28 Chapter 011 Current Liabilities and Payroll Accounting 78. Times interest earned is calculated by: A. Multiplying interest expense times income. B. Dividing interest expense by income before interest expense. C. Dividing income before interest expense and income taxes by interest expense. D. Multiplying interest expense by income before interest expense. E. Dividing income before interest expense by interest expense and income taxes. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 79. If the times interest ratio: 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 1.5, the company is likely carrying too much debt. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: A1 80. A company's had fixed interest expense of $6,000, its income before interest expense and any income taxes is $18,000, and its net income is $8,400. The company's times interest earned ratio equals: A. 0.33. B. 0.71. C. 1.40. D. 3.00. E. 12,000. $18,000/$6,000 = 3.0 times AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 11-29 Chapter 011 Current Liabilities and Payroll Accounting 81. The times interest earned computation is: A. (Net income + Interest expense + Income taxes)/Interest expense. B. (Net income + Interest expense - Income taxes)/Interest expense. C. (Net income - Interest expense - Income taxes)/Interest expense. D. (Net income - Interest expense + Income taxes)/Interest expense. E. Interest expense/(Net income + Interest expense + Income taxes expense). AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Hard Learning Objective: A1 82. 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: A. 0.40 B. 2.50 C. 1:2.5 D. 2.5:1 E. 0.50 $250,000/$100,000 = 2.5 AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 11-30 Chapter 011 Current Liabilities and Payroll Accounting 83. A company's fixed interest expense is $8,000, its income before interest expense and income taxes is $32,000. Its net income is $9,600. The company's times interest earned ratio equals: A. 0.25. B. 0.30. C. 0.83. D. 3.33. E. 4.0. $32,000/$8,000 = 4.0 times AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 84. The difference between the amount received from issuing a note payable and the amount repaid is referred to as: A. Interest. B. Principle. C. Face Value. D. Cash. E. Accounts Payable. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Easy Learning Objective: P1 11-31 Chapter 011 Current Liabilities and Payroll Accounting 85. A short-term note payable: A. Is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer. B. Is a contingent liability. C. Is an estimated liability. D. Is not a liability until the due date. E. Cannot be used to extend the payment period for an account payable. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P1 86. Short-term notes payable: A. Can replace an account payable. B. Can be issued in return for money borrowed from a bank. C. Are negotiable. D. Are an unconditional promise to pay. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P1 87. 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? A. $0 B. $25 C. $50 D. $75 E. $300 $5,000 x 0.06 x 30/360 = $25 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 11-32 Chapter 011 Current Liabilities and Payroll Accounting 88. On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note? A. Debit interest expense, $0; credit interest payable, $0. B. Debit interest expense, $100; credit interest payable, $100. C. Debit interest expense, $150; credit interest payable, $150. D. Debit interest expense, $200; credit interest payable, $200. E. Debit interest expense, $300; credit interest payable, $300. $9,000 x .10 x 60/360 = $150 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P1 89. On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. What is the maturity value of the note on March 1? A. $9,000 B. $9,100 C. $9,150 D. $9,200 E. $9,300 $9,000 x .10 x 120/360 = $300 + $9,000 = $9,300 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P1 11-33 Chapter 011 Current Liabilities and Payroll Accounting 90. On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. Carter made the appropriate year-end accrual. What is the journal entry as of March 1 to record the payment of the note? A. B. C. D. E. Interest accrued: $9,000 x .10 x 60/360 = $150 Interest earned during next year: $9,000 x .10 x 60/360 =$150 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P1 91. Most employees and employers are required to pay: A. Local payroll taxes. B. State payroll taxes. C. Federal payroll taxes. D. Both b and c only. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P2 11-34 Chapter 011 Current Liabilities and Payroll Accounting 92. Employers' responsibilities for payroll include: A. Providing each employee with an annual report of his or her wages subject to FICA and federal income taxes along with the amount of these taxes withheld. B. Filing Form 941, the Employer's Quarterly Federal Tax Return. C. Filing Form 940, the Annual Federal Unemployment Tax Return. D. Individual earnings records for each employee. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P2 93. Gross pay is: A. Take-home pay. B. Total compensation earned by an employee before any deductions. C. Salaries after taxes are deducted. D. Deductions withheld by an employer. E. The amount of the paycheck. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P2 94. The employer should record payroll deductions as: A. Employee receivables. B. Payroll taxes. C. Current liabilities. D. Wages payable. E. Employee payables. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P2 11-35 Chapter 011 Current Liabilities and Payroll Accounting 95. FICA taxes include: A. Social Security taxes. B. Charitable giving. C. Employee income taxes. D. Unemployment taxes. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P2 96. The amount of federal income taxes withheld from an employee's paycheck is determined by: A. The employee's annual earnings rate and number of withholding allowances. B. The employer's merit rating. C. The amount of social security taxes. D. Multiplying the gross pay by 6.2%. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 97. Recording employee expenses for employers may involve: A. Liabilities to individual employees. B. Liabilities to federal and state governments. C. Liabilities to insurance companies. D. Liabilities to labor unions. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 11-36 Chapter 011 Current Liabilities and Payroll Accounting 98. The Federal Insurance Contributions Act (FICA) requires that each employer file a: A. W-4. B. Form 941. C. Form 1040. D. Form 1099. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Reporting Difficulty: Medium Learning Objective: P5 99. 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: 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. $47,000 x (.062 + .0145) = $3,595.50 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 11-37 Chapter 011 Current Liabilities and Payroll Accounting 100. Phildell Phoenix is paid monthly. For the month of January of the current year, he earned a total of $8,288. The FICA tax for social security is 6.2% and the FICA tax rate for Medicare is 1.45%. The FUTA tax rate is 0.8%, 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. His net pay for the month is: A. $5,190.83 B. $5,844.79 C. $6,278.79 D. $6,566.00 E. $6,792.64 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P2 11-38 Chapter 011 Current Liabilities and Payroll Accounting 101. Phildell Phoenix is paid monthly. For the month of January of the current year, he earned a total of $8,288. The FICA tax rate for social security is 6.2% and the FICA tax rate for Medicare is 1.45%. The FUTA tax rate is 0.8%, 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 total amount of taxes withheld from the Phoenix's earnings? A. $3,097.17 B. $2,443.21 C. $2,009.21 D. $1,722.00 E. $1,495.36 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P2 102. The annual Federal Unemployment Tax Return is: A. Form 940. B. Form 1099. C. Form 104. D. Form W-2. E. Form W-4. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Reporting Difficulty: Easy Learning Objective: P5 11-39 Chapter 011 Current Liabilities and Payroll Accounting 103. The Wage and Tax Statement is: A. Form 940. B. Form 941. C. Form 1040 D. Form W-2. E. Form W-4. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Reporting Difficulty: Medium Learning Objective: P5 104. A bank that is authorized to accept deposits of amounts payable to the federal government is a: A. Credit union. B. FDIC insured bank. C. Federal depository bank. D. National bank. E. Federal Reserve Bank. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 105. An employer's federal unemployment taxes (FUTA) are reported: A. Annually. B. Semiannually. C. Quarterly. D. Monthly. E. Weekly. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Reporting Difficulty: Medium Learning Objective: P5 11-40 Chapter 011 Current Liabilities and Payroll Accounting 106. A merit rating: A. Is assigned by the state. B. Reflects a company's stability or instability in employing workers. C. Adjusts the employer's SUTA tax rate. D. Affects state unemployment taxes paid by an employer. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P3 107. Employer payroll taxes: A. Are an added expense beyond the wages and salaries earned by employees. B. Represent the federal taxes withheld from employees. C. Represent the social security taxes withheld from employees. D. Are paid by the employee. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Easy Learning Objective: P3 108. Employers: A. Pay FICA taxes equal to the amount of FICA taxes withheld from the employees. B. Withhold employees' FICA taxes. C. Pay unemployment taxes to the federal government. D. Pay unemployment taxes to both the state and federal governments. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 11-41 Chapter 011 Current Liabilities and Payroll Accounting 109. FUTA taxes are: A. Social Security taxes. B. Medicare taxes. C. Employee income taxes. D. Unemployment taxes. E. Employee deductions. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 110. The unemployment insurance program: A. Is a joint federal-state program. B. Is administered by each state. C. Provides unemployment benefits to qualified workers. D. Adjusts rates paid by employers based on their merit rating. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 11-42 Chapter 011 Current Liabilities and Payroll Accounting 111. The current FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned $8,900. What is the amount of total unemployment taxes the employer must pay on this employee's wages? A. $322.00. B. $434.00. C. $480.60. D. $551.80. E. Zero, since the employee's wages exceed the maximum of $7,000. $7,000 x (.054 + .008) = $434.00 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P3 112. An employee earned $4,300 working for an employer. The current rate for FICA social security is 6.2% and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is: A. $ 62.35. B. $266.60. C. $328.95. D. $657.90. E. Zero, since the FICA tax is a deduction from an employee's pay, and not an employer tax. $4,300 x (.062 + .0145) = $328.95 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P3 11-43 Chapter 011 Current Liabilities and Payroll Accounting 113. An employee earned $62,500 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 current FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. What is the amount of total unemployment taxes the employee must pay? A. $101.50 B. $56.00 C. $378.00 D. $434.00 E. $0.00 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P3 114. Phildell Phoenix 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% and the FICA tax for Medicare is 1.45%. The FUTA tax rate is 0.8%, 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 annual payroll taxes expenses for this employee? A. $56.00 B. $120.18 C. $378.00 D. $513.86 E. $1,068.04 AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P3 11-44 Chapter 011 Current Liabilities and Payroll Accounting 115. An estimated liability: A. Is an unknown liability of a certain amount. B. Is a known obligation of an uncertain amount that can be reasonably estimated. C. Is a liability that may occur if a future event occurs. D. Can be the result of a lawsuit. E. Is not recorded until the amount is known for certain. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P4 116. Estimated liabilities commonly arise from: A. Warranties. B. Vacation benefits. C. Income taxes. D. Employee benefits. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P4 117. Employees earn vacation pay at the rate of one day per month. During July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense for the month of July? A. $25 B. $100 C. $1,200 D. $30,000 25 $2,500 E. employees x $100/day x 1 day vacation earned = $2,500 AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P4 11-45 Chapter 011 Current Liabilities and Payroll Accounting 118. Employee vacation benefits: A. Are estimated liabilities. B. Are contingent liabilities. C. Are recorded as an expense when the employee takes a vacation. D. Are recorded as an expense when the employee retires. E. Increase net income. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 119. A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should: A. Consider the warranty expense a remote liability since the rate is only 2%. B. Recognize warranty expense at the time the warranty work is performed. C. Recognize warranty expense and liability in the year of the sale. D. Consider the warranty expense a contingent liability. E. Recognize warranty liability when the company purchases the trampolines. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 120. The deferred income tax liability: A. Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. B. Is a contingent liability. C. Can result in a deferred income tax asset. D. Is never recorded. E. Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Hard Learning Objective: P4 11-46 Chapter 011 Current Liabilities and Payroll Accounting 121. A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is: A. B. C. D. E. No entry is recorded until the items are returned for warranty repairs. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 122. A company sells computers at a selling price of $1,800 each. Each computer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all computers sold will be returned under the warranty at an average cost of $150 each. During November, the company sold 30,000 computers, and 400 computers were serviced under the warranty at a total cost of $55,000. The balance in the Estimated Warranty Liability account at November 1 was $29,000. What is the company's warranty expense for the month of November? A. $26,000 B. $45,000 C. $55,000 D. $60,000 E. $90,000 $30,000 x .02 x $150 = $90,000 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P4 11-47 Chapter 011 Current Liabilities and Payroll Accounting 123. Maryland Company offers a bonus plan to its employees equal to 3% of net income. Maryland's net income is expected to be $960,000. The amount of the employee bonus expense is estimated to be A. $27,961 B. $28,800 C. $29,000 D. $29,691 E. $30,000 B = 0.03($960,000 - B) B = $28,800 - 0.03B 1.03 B = $28,800 B = $27,961 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P4 124. A payroll register includes: A. Pay period dates. B. Hours worked. C. Gross pay and net pay. D. Deductions. E. All of these. AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P5 11-48 Chapter 011 Current Liabilities and Payroll Accounting 125. The wage bracket withholding table is used to: A. Compute social security withholding. B. Compute Medicare withholding. C. Compute federal income tax withholding. D. Prepare the W-4. E. All of these. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 126. The amount of federal income tax withheld from an employee's wages is based on: A. Wages earned. B. Number of withholding allowances. C. Number of hours worked. D. Both A and B. E. Both B and C. AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 127. A table that shows the amount of federal income tax to be withheld from an employee's pay is the: A. Form 941. B. Tax table. C. Wage bracket withholding table. D. W-2. E. W-4. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 11-49 Chapter 011 Current Liabilities and Payroll Accounting 128. A special bank account used solely for the purpose of paying employees, by depositing in the account each pay period an amount equal to the total employees' net pay and drawing the employees' payroll checks on the account, is a(n): A. Federal depository bank account. B. Employee's Individual Earnings account. C. Employees' bank account. D. Payroll register account. E. Payroll bank account. AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 129. If a company uses a special payroll bank account: A. The company does not need to issue paychecks. B. The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account. C. The company must use a federal depository bank for the payroll bank account. D. There is no need for a payroll register. E. There is no need to issue W-2's. AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 11-50 Chapter 011 Current Liabilities and Payroll Accounting Matching Questions 130. Match each of the following terms with the appropriate definitions. Additional compensation paid to or on behalf of employees, such as premiums for medical insurance and contributions to pension plans. A written promise to pay a specified amount on a 2. Short-term note definite future date within one year or the company's payable operating cycle, whichever is longer. A special bank account used solely for paying employees; each pay period an amount equal to the total 3. Times interest employees' net pay is deposited and the employees' payroll earned checks are drawn on that account. 4. Employee A bank authorized to accept deposits of amounts payable benefits to the federal government, including payroll taxes. A record for a pay period that shows the pay period dates, regular and overtime hours worked, gross pay, net 5. Gross pay pay and deductions. 6. Payroll register Total compensation earned by an employee. Income before interest expense and income taxes divided 7. Warranty by interest expense. 8. Deferred A seller's obligation to repair or replace a product or income tax service that fails to perform as expected within a specified liability period. Payments of income taxes that are deferred until future 9. Current years because of temporary differences between GAAP and liabilities tax accounting rules. 10. Payroll bank Obligations due within one year or the company's account operating cycle, whichever is longer. 1. Federal depository bank AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: A1 Learning Objective: C1 Learning Objective: C2 Learning Objective: P1 Learning Objective: P2 Learning Objective: P4 Learning Objective: P5 11-51 4 2 10 1 6 5 3 7 8 9 Chapter 011 Current Liabilities and Payroll Accounting 131. Match each of the following terms a through j with the appropriate definitions1 through 10. 1. FUTA taxes 2. FICA taxes 3. Net pay 4. Contingent liability 5. Merit rating 6. Wage bracket withholding table 7. Withholding allowance 8. Estimated liability 9. Warranty 10. Long-term liability Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program. A potential obligation that depends on a future event arising from a past transaction. A rating assigned to an employer by a state based on the employer's past record regarding stable employment. Obligations of a company not requiring payment within one year or the operating cycle, whichever is longer. Known obligations of an uncertain amount that can be reasonably estimated. Gross pay less all deductions. A table of amounts of income tax to be withheld from employees' wages. A seller's obligation to repair or replace a product or service that fails to perform as expected within a specified period. A number that is used to reduce the amount of federal income tax withheld from an employee's pay. Taxes assessed on both employer and employees under the Federal Insurance Contributions Act. These taxes fund Social Security and Medicare. AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C1-C3 Learning Objective: P2-P5 11-52 1 4 5 10 8 3 6 9 7 2 Chapter 011 Current Liabilities and Payroll Accounting 132. Classify each of the following items as either: a. Current liability b. Long-term liability c. Not a liability 1. Warranty work completed this year 2. Salaries payable 3. Payment of a 30-year term loan due this year 4. FICA taxes payable 5. Payment of a 4-year term loan due this year 6. Payment of a 30-year term loan due next year (The company's operating cycle is 2 months.) 7. 30-day promissory note 8. Debt guarantees 9. Income taxes payable 10. Accounts payable a a a c a 7 5 2 8 4 a a b c a 9 3 6 1 10 b a c a a c b a c c 9 6 5 3 4 7 2 1 10 8 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C1 133. Classify each of the following items as either: a. Estimated liability b. Contingent liability c. Current liability that is neither a nor b 1. Property taxes payable 2. Debt guarantees 3. Income taxes payable 4. Vacation benefits 5. Accounts payable 6. Warranty on products sold this year 7. Accrued wages payable 8. Unearned revenues 9. Lawsuit against the company 10. Payroll taxes payable AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C1-C3 11-53 Chapter 011 Current Liabilities and Payroll Accounting Short Answer Questions 134. Define liabilities and explain the difference between current and long-term liabilities. Liabilities are probable future payments of assets or services a company is presently obligated to make as a result of past transactions or events. Current liabilities are obligations due within one year or the company's operating cycle, whichever is longer. Long-term liabilities are obligations due beyond one year or the company's operating cycle, whichever is longer. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C1 135. What are known current liabilities? Cite at least two examples of known current liabilities. Known current liabilities are obligations determined by agreements, contracts, or laws, and are measurable and definitely determinable. Known current liabilities include accounts payable, sales taxes payable, unearned revenues, and payroll liabilities. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C2 136. Describe how to account for and report on contingent liabilities. If an uncertain obligation depends on a probable future event arising from a past transaction and the amount is reasonably estimated, the payment is recorded as a liability. If the future event is remote, the item is not recorded or disclosed. If the future event is reasonably possible, the information about the contingent liability is disclosed in the notes to the financial statements. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: C3 11-54 Chapter 011 Current Liabilities and Payroll Accounting 137. Describe employer responsibilities for reporting payroll taxes. (To the extent possible, reference the form to be filed for each tax.) Employers are required to report FICA taxes and federal income tax withholding to the federal government using Form 941. Federal unemployment taxes are reported annually on Form 940. Employers also have responsibilities to report state unemployment taxes. Annual earnings and deduction information are reported to each employee and to the federal government on Form W-2. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Reporting Difficulty: Medium Learning Objective: P5 138. Jason Osborn and Jason Wright of Feed Granola Company stress the importance of managing liabilities. What are some of the liabilities that the founders knew they would have to manage to be successful? The two founders focused on the importance of managing liabilities for payroll, supplies, employee benefits, vacation, training, and taxes. Effective management of liabilities, especially payroll and employee benefits, is crucial to success. They also knew that cash flow was important and that effectively managing liabilities is an essential part of cash flow management. AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: C2 11-55 Chapter 011 Current Liabilities and Payroll Accounting 139. Explain how to calculate times interest earned. Explain how it is used to analyze a company's risk. The times interest earned ratio is calculated by dividing a company's net income before interest expense and income taxes by interest expense. The ratio reflects a company's ability to pay interest and earn a profit for its owners against declines in sales. A low ratio indicates that the default risk on liabilities is high. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 140. What is a short-term note payable? Explain the accounting issues related to notes payable. A note payable is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer. Short-term notes payable are negotiable, and can be transferred from party to party. Notes payable must be recorded on the date they are signed. When the note is paid, interest is paid in addition to the principal amount. If the end of the accounting period occurs between the signing of a note payable and its maturity date, the matching principle requires that accrued but unpaid interest be recorded. AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 11-56 Chapter 011 Current Liabilities and Payroll Accounting 141. Explain the responsibilities of and the accounting by employers for employee payroll deductions. Employers are responsible for collecting employee federal income taxes and employee social security and Medicare taxes from employees. The employers record these amounts as current liabilities and send the amounts to the federal government to discharge their obligation. Payroll deductions can also include nontax items such as insurance and contributions to retirement plans. All payroll deductions are considered to be liabilities until the amounts are transmitted to the designated organization. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 142. Identify and explain the types of employer payroll taxes. Employers are required to make matching contributions for the amount of FICA taxes for Social Security and Medicare that are withheld from employees' pay. In addition, employers must contribute to both federal and state unemployment compensation programs. The federal program is called FUTA (Federal Unemployment Tax Act) and the state programs are called SUTA (State Unemployment Tax Act). The amount of unemployment tax that employers pay is based on their merit rating. The merit rating reflects a company's stability or instability in employing workers. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Medium Learning Objective: P3 11-57 Chapter 011 Current Liabilities and Payroll Accounting 143. What are estimated liabilities? Cite at least two examples and explain why they are classified as estimated liabilities. Estimated liabilities are known obligations of an uncertain amount that can be estimated. Warranties, income taxes, and employee benefits are common types of estimated liabilities. Warranties are estimated liabilities because the obligation to repair defective merchandise exists at the time of sale. The amount of potential warranty work can be estimated based on past sales. Employee benefits are generated as employees earn their wages. Amounts can be estimated based on contractual or past experience. AACSB: Communications AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Easy Learning Objective: P4 144. Identify and discuss the factors involved in computing federal income taxes for employees. The amount of federal income tax withheld for each employee depends on (1) an employee's earnings level and (2) the number of withholding allowances claimed by the employee. This amount can be determined by using a wage bracket withholding table. Difficulty: Hard Learning Objective: P5 Problems 145. A company had income before interest expense and income taxes of $176,000, and its interest expense is $55,000. Calculate the company's times interest earned ratio. $176,000/$55,000 = 3.2 AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Easy Learning Objective: A1 11-58 Chapter 011 Current Liabilities and Payroll Accounting 146. A company's income before interest expense and income taxes is $302,400, and its interest expense is $72,000. Calculate the company's times interest earned ratio. $302,400/$72,000 = 4.2 AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Easy Learning Objective: A1 147. A company's income before interest expense and income taxes in 2008 and 2009 is $225,000 and $200,000, respectively. Its interest expense was $45,000 for both years. Calculate the company's times interest earned ratio, and comment on its level of risk. 2008 $225,000/45,000 = 5 2009 $200,000/45,000 = 4.4 Risk analysis: The income before interest expense has decreased, but the interest expense appears fixed. Consequently, the company's risk has increased over the 2-year period. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 148. A company's income before interest expense and income taxes in 2008 and 2009 is $395,000 and $427,000, respectively. Its fixed interest expense was $125,000 for both years. Calculate the company's times interest earned ratio, and comment on its level of risk. 2008: $395,000/$125,000 = 3.2 2009: $427,000/$125,000 = 3.4 Risk analysis: The income before interest expense has increased, but the interest expense appears fixed. Consequently, the company's level of risk has decreased over the 2-year period. The company is improving on its ability to meet fixed interest expense. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 11-59 Chapter 011 Current Liabilities and Payroll Accounting 149. Home Depot's income before interest expense and income taxes was $5,909 million, and interest expense was $37 million. Calculate Home Depot's times interest earned. $5,909/$37 = 159.7 AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 150. Coke had income before interest expense and income taxes of $5,698 million and interest expense of $199 million. Calculate Coke's times interest earned. $5,698/$199 = 28.6 AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 151. Wal-Mart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. Sears had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned for each company and comment on the results. Wal-Mart times interest earned = $12,581/$1,063 = 11.8 Sears times interest earned = $3,596/$1,143 = 3.1 Wal-Mart's times interest earned is almost four times that of Sears. Neither company appears to have a very high risk of default on debt, but Wal-Mart appears to have much lower risk Sears. AACSB: Analytic AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 11-60 Chapter 011 Current Liabilities and Payroll Accounting 152. On November 1, 2008, Bob's Skateboards Store signed a $12,000, 90-day, 5% note payable to cover a past due account payable. a. What amount of interest expense on this note should Bob's Skateboards Store report on December 31, 2008? b. Prepare Bob's journal entry to record the issuance of the note payable. c. Prepare Bob's journal entry to record the payment of the note on February 1, 2008. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 11-61 Chapter 011 Current Liabilities and Payroll Accounting 153. On June 1, 2008, Martin Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable. a. What is the total amount of interest to be paid on this note? b. Prepare Martin Company's general journal entry to record the issuance of the note payable. c. Prepare Martin Company's general journal entry to record the payment of the note on September 29, 2008. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 11-62 Chapter 011 Current Liabilities and Payroll Accounting 154. On September 15, SportsWorld borrowed $75,000 cash from FirstBank by signing a 12%, 60-day note payable. a. Prepare SportsWorld's journal entry to record the issuance of the note payable. b. Prepare SportsWorld's journal entry to record the payment of the note at maturity. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 11-63 Chapter 011 Current Liabilities and Payroll Accounting 155. 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. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 156. A company borrowed $60,000 by signing a 60-day, 10% note payable from its bank. Compute the total cash payment due on the note's maturity date. At maturity: $60,000 + $(60,000 x .10 x 60/360) = $61,000 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 11-64 Chapter 011 Current Liabilities and Payroll Accounting 157. The tax rate for FICAsocial security is 6.2% and the tax rate for FICAMedicare is 1.45%. Calculate the total amount of FICA withholding for an employee whose pay is $2,400 and is entirely subject to these FICA taxes. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P2 158. An employee earned $3,450 for the current period. Calculate the total and individual amounts to be withheld for social security (6.2%), Medicare (1.45%) and federal income tax (15%) assuming the entire employee's pay is subject to FICA taxes. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P2 11-65 Chapter 011 Current Liabilities and Payroll Accounting 159. A company has 2 employees. The company's total salaries for the month of January were $8,000. The federal income tax rate for both employees is 15%. The FICAsocial security tax rate is 6.2% and the FICAMedicare tax rate is 1.45%. Calculate the amount of employee taxes withheld and prepare the company's journal entry to record the January payroll assuming these were the only deductions. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 160. A company has 90 employees and a weekly payroll of $117,000. The FICAsocial security tax rate is 6.2% and the FICAMedicare tax rate is 1.45%. The total withholding for federal income tax is $16,500 for the current week. Calculate the amount of FICA taxes owed (assuming no employee's salary is over the FICA limit) and prepare the journal entry to accrue this week's salaries expense and withholdings. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 11-66 Chapter 011 Current Liabilities and Payroll Accounting 161. Metro Express has 5 sales employees, each of whom earns $4,000 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 $110 for each employee. a. Prepare the general journal entry to accrue the monthly sales salaries expense at January 31. b. The employer payroll taxes for Metro Express include FICA taxes, federal unemployment taxes of 0.8% of the first $7,000 paid each employee, and state unemployment taxes of 4.0% of the first $7,000 paid to each employee. Prepare the journal entry to record the employer's payroll taxes at January 31 for Metro Express. (Assume that none of the employees has reached the unemployment limit of $7,000.) AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 Learning Objective: P3 11-67 Chapter 011 Current Liabilities and Payroll Accounting 162. The payroll records of a company provided the following data for the weekly pay period ended December 7: The FICA social security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this week's wages paid to each employee. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Prepare the journal entries to (a) accrue the payroll and (b) record payroll taxes expense. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 Learning Objective: P3 11-68 Chapter 011 Current Liabilities and Payroll Accounting 163. A company's payroll for the week ended May 15 included earned salaries of $20,000. All of that week's pay is subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45%. In addition, the company withholds the following amounts for this weekly pay period: $900 for medical insurance, $3,400 for federal income taxes, and $180 for union dues. a. Prepare the general journal entry to accrue the payroll. b. The company is subject to state unemployment taxes at the rate of 2% and federal unemployment taxes at the rate of 0.8%. By May 15, some employees had earned over $7,000, so only $9,000 of the $20,000 weekly gross pay was subject to unemployment tax. Prepare the general journal entry to accrue the employer's payroll tax expense. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 Learning Objective: P3 11-69 Chapter 011 Current Liabilities and Payroll Accounting 164. A company's employees had the following earnings records at the close of the current payroll period: The company's payroll taxes expense on each employee's earnings includes: FICA Social Security taxes of 6.2% on the first $103,000 of earnings plus 1.45% FICA Medicare on all wages; 0.8% federal unemployment taxes on the first $7,000; and 2.5% state unemployment taxes on the first $7,000. Compute the employer's total payroll taxes expense for the current pay period. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P3 11-70 Chapter 011 Current Liabilities and Payroll Accounting 165. An employer has an employee benefit package that includes employer-paid health insurance and an employer-paid retirement program. During January, the employer paid $7,500 for health insurance, and contributed to the employee retirement program 10% of the employees' $150,000 gross salaries. Prepare the journal entry to record these employee benefits. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P4 166. A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 6% of sales. During the month of June, the company performed warranty work and used $12,000 of parts to perform the warranty work. Sales for June were $450,000. 1. Record the warranty expense for the month of June. 2. Record the costs of the warranty work completed in June. 3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the account balance at June 30? AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 11-71 Chapter 011 Current Liabilities and Payroll Accounting 167. A company sells personal computers for $2,300 each. The price includes a two-year warranty. During the current year, the company sells 400 computers. On the basis of past experience, the warranty costs are estimated to be $250 per computer. The actual warranty costs (paid in cash) by the company during the current year were $65,000. Prepare general journal entries to record the (a) estimated warranty expense and (b) warranty repair costs during current year. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 168. A company sells computers with a 6-month warranty. In January, the company sold 100,000 computers at $1,750 each; and 1,500 computers were turned in for repairs during that same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P4 11-72 Chapter 011 Current Liabilities and Payroll Accounting 169. Pastimes Co. offers its employees a bonus equal to 2% of the company's net income. The estimated net income for the year is expected to be $850,000. Prepare the general journal entry to record the employee bonus plan expense. B = 0.02($850,000 - B) B = $17,000 - 0.02B 1.02 B = $17,000 B = $17,000/1.02 = $16,667 AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P4 11-73 Chapter 011 Current Liabilities and Payroll Accounting 170. A company's employer payroll tax rates are 0.8% for federal unemployment taxes, 5.4% for state unemployment taxes, 6.2% for FICA social security taxes on earnings up to $103,000, and 1.45% for FICA Medicare taxes on all earnings. Compute the W-2 Wage and Tax Statement information required below for the following employees: AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P5 11-74 Chapter 011 Current Liabilities and Payroll Accounting 171. 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 $103,000 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. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2 11-75 Chapter 011 Current Liabilities and Payroll Accounting 172. 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. 11-76 Chapter 011 Current Liabilities and Payroll Accounting AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P2 Learning Objective: P3 Fill in the Blank Questions 173. __________ are obligations due within one year or the company's operating cycle, whichever is longer. Current liabilities AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C1 11-77 Chapter 011 Current Liabilities and Payroll Accounting 174. _________________ are probable future payments of assets or services that a company is presently obligated to make as a result of past transactions or events. Liabilities AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C1 175. Unearned revenues are amounts received _______________ for future products or services. In advance from customers AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 176. ______________ are amounts owed to suppliers for products or services purchased on credit. Trade accounts payable AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 177. A ________________________ is a potential obligation that depends on a future event arising from a past transaction or event. Contingent liability AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C3 11-78 Chapter 011 Current Liabilities and Payroll Accounting 178. Contingent liabilities are recorded in the accounts if the future event is _______________ and the amount owed can be _______________. Probable; reasonably estimated AACSB: Communications AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: C3 179. ____________________________ are banks authorized to accept deposits of amounts payable to the federal government, including amounts due for payroll taxes. Federal depository banks AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 180. A _____________________ shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period. Payroll register AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 181. Times interest earned is computed by dividing _______________ by interest expense. Income before interest expense and income taxes AACSB: Communications AICPA BB: Industry AICPA FN: Risk Analysis Difficulty: Medium Learning Objective: A1 11-79 Chapter 011 Current Liabilities and Payroll Accounting 182. The difference between the amount borrowed and the amount repaid is referred to as _______________. Interest AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P1 183. A _______________________ is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer. Short-term note payable AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P1 184. ______________________ is the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes. Gross pay AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P2 185. Gross pay less all deductions is called ____________________. Net pay AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P2 11-80 Chapter 011 Current Liabilities and Payroll Accounting 186. __________ allowances are items that reduce the amount of federal income taxes owed by the individual. Withholding AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Hard Learning Objective: P2 187. Employer payroll taxes are an added employee _______________ beyond the wages and salaries earned by the employees. Expense AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P3 188. A _____________________ is a seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period. Warranty AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P4 189. Vacation benefits are a type of _______________ liability. Estimated AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P4 11-81 Chapter 011 Current Liabilities and Payroll Accounting 190. To compute the amount of tax withheld from an employee's pay, employers can use a _______________________________________________________ table. Wage bracket withholding AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Medium Learning Objective: P5 191. Companies with many employees often use a special ____________________ account to pay employees. Payroll bank AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: P5 Problems 192. Starling Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is $12,300). The sales tax law requires Starling to collect 8.25% sales tax on every dollar of merchandise sold. Record the entry for the sale and its applicable sales tax. AACSB: Analytic AICPA BB: Industry, Legal AICPA FN: Measurement Difficulty: Easy Learning Objective: C2 11-82 Chapter 011 Current Liabilities and Payroll Accounting 193. All Star Sports receives $48,000,000 cash in advance ticket sales for 12 home games. Record the advance ticket sales on April 30. Record the revenue earned for the first home game played on August 14. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C2 11-83 Chapter 011 Current Liabilities and Payroll Accounting 194. On January 31, Hale Company's payroll register showed that its employers earned $30,320 of office salaries and $82,750 of sales salaries. Withholdings from the employees' salaries include FICA Social Security taxes as the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $16,960 of federal income taxes, $2,350 of medical insurance deductions (which represents 50% of the total cost of the employee medical insurance), and $4,210 of 401(k) retirement contribution deductions. Hale Company pays the other 50% of the employee insurance cost and matches the employee 401(k) contributions. Several employees earned more than $7,000 for the period which reduced salaries subject to unemployment to $110,000. No employees exceeded the FICA-Social Security taxable wage base. 1. Prepare the journal entry to record Hale Company's January 31 payroll expenses and liabilities. 2. Prepare the journal entry to record Hale Company's employer payroll taxes resulting from the January 31 payroll. Hale's merit rating reduces its state unemployment to 4% of the first $7,000 paid each employee. The federal unemployment tax rate is .8%. 3. Prepare the journal entry to record Hale's additional employee expenses. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P2 Learning Objective: P3 11-84 Chapter 011 Current Liabilities and Payroll Accounting 195. Helix Co. entered into the following transactions involving short-term notes payable. May 14 Purchased $40,000 merchandise from Advent Co., terms are 2/15, n/30. Helix uses the perpetual inventory system. May 29 Replaced the May 14 account payable with a 60-day, $30,000 note bearing 8% annual along with paying $10,000 in cash. ______ Paid the amount due on the note at maturity. 1. Determine the maturity date for the note. 2. Prepare journal entries for all the preceding transactions and events. 1. Maturity date: July 28 (2 days in May, 30 days in June, 28 days in July) 2. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P1 196. Blake Company pays its employees for two weeks vacation each year. The total annual cost of the vacation benefit is $113,000. Prepare the journal entry to record the weekly accrued vacation expense. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P3 11-85

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Old Dominion - ACCT - 202
Chapter 012 Accounting for PartnershipsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.EasyEasyMedMedMedMedMedHardMedMedEasyEasyC1C1
Old Dominion - ACCT - 202
Chapter 013 Accounting for CorporationsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.25.26.27
Old Dominion - ACCT - 202
Chapter 014 Long-term LiabilitiesSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItem1.EasyA126.2.EasyA127.3.EasyA128.4.EasyA129.5.EasyA230.6.MedA231.7.MedA232.8.MedA233.9.
Old Dominion - ACCT - 202
Chapter 015 Investments and International OperationsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.MedMedMedM
Old Dominion - ACCT - 202
Chapter 016 Reporting the Statement of Cash FlowsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.EasyEasyMedMedMe
Olympic College - ACCT - 203
Chapter 018 Managerial Accounting Concepts and PrinciplesSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItem1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.DLEasyEasyEasyEasyEasyEasyEasyEasyM
Old Dominion - ACCT - 202
Chapter 019 Job Order Cost AccountingSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItem1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.DLEasyMedMedMedEasyEasyEasyEasyMedMedMedMedMedMedMedLOC1C1
Old Dominion - ACCT - 202
Chapter 020 Process Cost AccountingSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.25.26.27.Ea
Old Dominion - ACCT - 202
Chapter 021 Cost Allocation and Performance MeasurementSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.EasyEasyEasyEasyEasyEasyMedHard
Old Dominion - ACCT - 202
Chapter 022 Cost-Volume-Profit AnalysisSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.EasyEasyEasyEasyEasyEasyMedEasyEasyMedMe
Old Dominion - ACCT - 202
Chapter 023 Master Budgets and PlanningSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.EasyEasyEasyEasyEasyEasyEasyEasyEasyEasyEasy
Old Dominion - ACCT - 202
Chapter 024 Flexible Budgets and Standard CostsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.EasyMedMedMedMedMedEasyEasyEasyMedMedC1C1
Old Dominion - ACCT - 202
Chapter 025 Capital Budgeting and Managerial DecisionsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.EasyMedMedMedEasyEasyEasyEasyMedMedMe
Old Dominion - ACCT - 202
CHAPTER 13ACCOUNTING FOR CORPORATIONSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Identify characteristics ofcorporations and theirorganization.C2. Describe the components ofstockholders' equity.C3. Explain ch
Old Dominion - ACCT - 202
CHAPTER 14LONG-TERM LIABILITIESRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Explain the types and paymentpatterns of notes.C2AExplain and compute the presentvalue of an amount(s) to be paidat future date(s).C3
Old Dominion - ACCT - 202
CHAPTER 15INVESTMENTS ANDINTERNATIONAL OPERATIONSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Distinguish between debt and 1, 2, 5equity securities and betweenlong-term investments andshort-term investments.C2
Old Dominion - ACCT - 202
CHAPTER 20PROCESS COST ACCOUNTINGRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Explain process operations andthe way they differ from joborder operations.C2. Define equivalent units andexplain their use in proce
Old Dominion - ACCT - 201
Chapter 001 Accounting in BusinessSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.25.26.27.28.
Old Dominion - ACCT - 201
Chapter 002 Analyzing and Recording TransactionsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.EasyEasyEasyEa
Old Dominion - ACCT - 201
Chapter 003 Adjusting Accounts and Preparing Financial StatementsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.
Old Dominion - ACCT - 201
Chapter 004 Completing the Accounting CycleSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.EasyEasyEasyEas
Old Dominion - ACCT - 201
Chapter 005 Accounting for Merchandising OperationsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24
Old Dominion - ACCT - 201
Chapter 006 Inventories and Cost of SalesSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.EasyEasyMedMe
Old Dominion - ACCT - 201
Chapter 007 Accounting Information SystemsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.EasyEasyMedMedMedHardHard
Old Dominion - ACCT - 201
Chapter 008 Cash and Internal ControlsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.25.26.27.
Old Dominion - ACCT - 201
Chapter 009 Accounting for ReceivablesSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.EasyEasyMedMedMedMedHard
Old Dominion - ACCT - 201
Chapter 010 Plant Assets, Natural Resources and IntangiblesSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22
Old Dominion - ACCT - 201
Chapter 017 Analysis of Financial StatementsSummary of Questions by Difficulty Level (DL) and Learning Objective (LO)True/FalseItemDLLOItemDLLOItemDLLO1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.EasyEasyEasyMedEa
Old Dominion - ACCT - 201
CHAPTER 1ACCOUNTING IN BUSINESSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectivesC1. Explain the purpose andimportance of accounting in theinformation age.C2. Identify users and uses ofaccounting.C3. Identify opportunit
Old Dominion - ACCT - 201
CHAPTER 3ADJUSTING ACCOUNTS AND PREPARING FINANCIALSTATEMENTSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Explain the importance ofperiodic reporting and the timeperiod principle.C2. Explain accrual accounting
Old Dominion - ACCT - 201
CHAPTER 4COMPLETING THE ACCOUNTING CYCLERelated Assignment MaterialsStudent Learning ObjectivesQuestionsConceptual objectives:C1. Explain why temporary1, 2, 4, 5accounts are closed each period.C2. Identify steps in the accounting 8cycle.C3. Exp
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CHAPTER 5ACCOUNTING FOR MERCHANDISING OPERATIONSRelated Assignment MaterialsStudent Learning ObjectivesQuestionsQuickStudies*Exercises*Problems*Beyond theNumbersConceptual objectives:C1. Describe merchandising1, 2, 3, 45-35-3, 5-7, 5-8TTN,
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CHAPTER 6INVENTORIES AND COST OF SALESRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Identify the items making upmerchandise inventory.C2. Identify the costs ofmerchandise inventory.Analytical objectives:A1. Ana
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CHAPTER 7ACCOUNTING INFORMATION SYSTEMSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Identify fundamental principlesof accounting informationsystems.C2. Identify components ofaccounting information systems.C3.
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CHAPTER 8CASH AND INTERNAL CONTROLRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Define internal control and itspurpose and principles.Questions1, 2, 3, 4, 6QuickStudies*8-1,8-3C2. Define cash and cash7, 10,1
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CHAPTER 9ACCOUNTING FOR RECEIVABLESRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Describe accounts receivableand how they occur and arerecorded.C2. Describe a note receivableand the computation of itsmaturity d
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CHAPTER 10PLANT ASSETS, NATURAL RESOURCESAND INTANGIBLESRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Describe plant assets and issuesin accounting for them.C2. Explain depreciation and thefactors affecting its
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CHAPTER 11CURRENT LIABILITIES AND PAYROLL ACCOUNTINGRelated Assignment MaterialsStudent Learning ObjectivesQuestionsConceptual objectives:C1. Describe current and long-term 2liabilities and theircharacteristics.C2. Identify and describe known1,
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CHAPTER 12ACCOUNTING FOR PARTNERSHIPSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Identify characteristics ofpartnerships and similarorganizations.Analytical objectives:Al. Compute partner return onequity and
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CHAPTER 16REPORTING THE STATEMENT OF CASH FLOWSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Explain the purpose andimportance of cash flowinformation.C2. Distinguish between operating,investing, and financinga
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CHAPTER 17ANALYSIS OF FINANCIAL STATEMENTSRelated Assignment MaterialsStudent Learning ObjectivesConceptual objectives:C1. Explain the purpose of analysis.C2. Identify the building blocks ofanalysis.C3. Describe standards forcomparisons in analys
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CHAPTER 18MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLESRelated Assignment MaterialsStudent Learning ObjectivesQuestionsQuickStudies*Exercises*Problems*Beyond theNumbersConceptual objectives:C1. Explain the purpose and nature 1, 2, 13of manage
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CHAPTER 19JOB ORDER COST ACCOUNTINGRelated Assignment MaterialsStudent Learning ObjectivesQuestionsQuickStudies*Exercises*Problems*Beyond theNumbersConceptual objectives:C1. Explain the cost accountingsystem.C2. Describe important features o
Mt. SAC - ECON - 101
KIN 370: Stress Management for Healthy LivingDepartment of Kinesiology & Health PromotionCalifornia State Polytechnic UniversitySummer 2011 (10 week session)InstructorDr.KristineFish,AssociateProfessorContact InfoEmail: kfish@csupomona.eduQuestion
Mt. SAC - ECON - 101
Table of ContentsP.2 Table of ContentsP.3 Executive SummaryP.4 History and MissionP.5 Products and Services, Why we Chose This CompanyP.6 CompetitionP.7 Five Year Analysis- Raw DataP.8 Five Year Analysis- Vertical AnalysisP.9 Five Year Analysis- H
Mt. SAC - ECON - 101
~Stress is any event or situation that brings us out of homeostasis.~Stress consists of 1.stressor 2.feeling stress.~Stress is any outside force or event that has an effect on our body or mind.~Stress is the non- specific response of the body to any de
Mt. SAC - ECON - 101
9:00am It is Sunday and I am happy.10:00am I have to wash my dog and I dont want to do it.11:00am I am tired.12:00 pm I am tired and hungry.1:00 pm I just had Japanese food and I am satisfied.2:00 pm Its hot today and I am not feeling good.3:00 pm I
Mt. SAC - ECON - 101
I do agree that managing stress effectively should be considered just as important to onesphysical health as diet and exercise. For many people, stress is so commonplace that itbecomes a way of modern life. Stress maybe a necessary part of everyday life
Mt. SAC - ECON - 101
ElectronicCommunicationNetworks(ECNs)Group8SinYi,WongJennyGipTyleLe ECNs are automated systems for disclosing andexecuting stock trades. They were created in the mid- 1990s to publiclydisplay buy and sell orders of stock. Normally service instit
Mt. SAC - ECON - 101
Name_SinYi,Wong(CHRISTY)_411EvaluationofLearningFinalExamDueatFinalExamtimeorbeforeNotmorethan2pages1.Whatdidyoulikeabouttheclass?I like the Strategy and Policy Game. It was fun and challenging.2.Whatdidyoudislikeabouttheclass?3.Whatwouldyouchan
Mt. SAC - ECON - 101
DoddFrank Wall Street Reform and Consumer Protection ActFollowing the 2008 near collapse of the U.S. economy, which was fueled by the crashof the housing bubble, the Dodd-Frank Regulatory Reform Bill established restrictivemeasures in an attempt to pre
Mt. SAC - ECON - 101
Stress Journal:A. Type A Personality Assessment1.) Score: 572.) I agree with what it said, I fall between somewhere between Type A and Type Bpersonality. Sometimes I am as laidback as Type B and sometimes I express impatientand hostility as Type A.3
Mt. SAC - ECON - 101
I believe that our past experience influence our perception. Because our past experienceslead us to develop expectations and these affect current perception, which influence us toget stressed in particular situation. For instance, some people are so afr
Mt. SAC - ECON - 101
In the Judeo-Christian Creation Story, the first man, Adam, was created by God, out ofthe dust of the earth; and the breath of life was breathed into him. God gave to Adamdominion over all his creation and the Garden of Eden as a home to tend it and kee
Mt. SAC - ECON - 101
Sin Yi, WongKin 370 .04DiscussionLiving in a world with no hatred, people loving and treating each other equally would bethe first thing that exist in my perfect world. If there is no hatred, which mean therewould be such thing as war, and we have a
Mt. SAC - ECON - 101
Question 11 out of 1 pointsCorporations thatlack a consistentstrategystructure-culturerelationship arewhat strategictype?AnswerSelectedAnswer:reactorsQuestion 21 out of 1 pointsA graph showingtime plottedagainst thedollar sales of aprodu
Mt. SAC - ECON - 101
Question 11 out of 1 pointsThe measure ofcorporateperformance inwhich financialmeasures arecombines withoperationalmeasures ofcustomersatisfaction,internal processes,annd innovationand improvementactivities is calledAnswerSelectedAnswer:
Mt. SAC - ECON - 101
Peer EvaluationPerson Evaluated_Rite Galvan_Evaluator_Sin Yi, Wong( Christy)_1. Rank each member of your company on a separate evaluation form. Rank from 1-5 foreach of the areas with 5 being the highest (best) and 1 being the lowest (worst).A.B.C.
Mt. SAC - ECON - 101
1.IntroductionMy client Silvia Ho is the operations manager of a multinational industrial devicenetworking corporation. She has also been an award-winning real estate agent for over 20years. As an operations manager, her annual salary is between $150,0
Mt. SAC - ECON - 101
Sin Yi, Wong (Christy)FRL 302Midterm 2A. The main emphasis of state corporate law is to regulate the creation, organization,and dissolution of a corporation, and it deals with the formation and operations ofcorporations and its related to commercial
Mt. SAC - ECON - 101
TABLE OF CONTENTSI. Executive Summary.P.3II. History.P.4III. Industry Analysis.P.7IV. Internal Environment.P.8V. Vision, Mission, and Objectives.P.10VI. Strategies: Corporate/Business/Functional strategyP.10VII.Evaluation and Control.P.11VIII.So