Ch11 solutionguide - CHAPTER 11 CURRENT LIABILITIES AND PAYROLL EYE OPENERS 1 A discounted note payable has no stated interest rate but provides

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 11 CURRENT LIABILITIES AND PAYROLL EYE OPENERS 1. A discounted note payable has no stated in- terest rate, but provides interest by dis- counting the note proceeds. The discount, which is the difference between the pro- ceeds and the face of the note, is the in- terest and is accounted for as such. 2. a. Income or withholding taxes, social se- curity, and Medicare b. Employees Federal Income Tax Pay- able, Social Security Tax Payable, and Medicare Tax Payable 3. There is a ceiling on (c) the social security portion of the FICA tax and (d) the federal unemployment compensation tax. 4. The deductions from employees’ earnings are for amounts owed (liabilities) to others for such items as federal taxes, state and local income taxes, and contributions to pension plans. 5. Yes. Unemployment compensation taxes are paid by the employer on the first $7,000 of annual earnings for each employee. Therefore, hiring two employees, each earn- ing $12,500 per year, would require the pay- ment of twice the unemployment tax than if only one employee, earning $25,000, was hired. 6. 1. a 2. c 3. c 4. b 5. b 7. The use of special payroll checks relieves the treasurer or other executives of the task of signing a large number of regular checks each payday. Another advantage of this system is that reconciling the regular bank statement is simplified. The paid payroll checks are returned by the bank separately from regular checks and are accompanied by a statement of the special bank account. Any balance shown on the bank’s statement will correspond to the sum of the payroll checks outstanding because the amount of each deposit is exactly the same as the total amount of checks drawn. 8. a. Input data that remain relatively un- changed from period to period (and therefore do not need to be reintroduced into the system frequently) are called constants. b. Input data that differ from period to peri- od are called variables . 9. a. If employees’ attendance records are kept and their preparation supervised in such a manner as to prevent errors and abuses, then one can be assured that wages paid are based on hours actually worked. The use of “In” and “Out” cards, whereby employees indicate by punch- ing a time clock their time of arrival and departure, is especially useful. Employ- ee identification cards or badges can be very helpful in giving additional assur- ance. Employee identification cards and badges can also contain bar codes that can be used by electronic scanners to account for employee time and control access to authorized locations. b. The requirement that the addition of names on the payroll be supported by written authorizations from the Person- nel Department can help ensure that payroll checks are not being issued to fictitious persons. Endorsements on payroll checks can be compared with other samples of employees’ signatures. Many businesses directly deposit payroll
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/05/2011 for the course ACCOUNTING 1A taught by Professor Seyedin during the Spring '08 term at Foothill College.

Page1 / 38

Ch11 solutionguide - CHAPTER 11 CURRENT LIABILITIES AND PAYROLL EYE OPENERS 1 A discounted note payable has no stated interest rate but provides

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online