Recording known Current Liabilities
Obligations due after one year (or the company’s operating cycle if longer) are reported as:
a. Current assets.
b. Current liabilities.
c. Long-term liabilities.
d. Operating cycle liabilities.
e. Bills.
c. Long-term liabilities.
When a note comes due, the difference between the amount borrowed and the amount repaid is:
a. Interest.
b. Principal.
c. Face Value.
d. Cash.
e. Accounts Payable.
a. Interest.
Employers' responsibilities for payroll do not include:
a. Providing each employee with an annual report of his or her wages subject to Federal Insurance Contributions Act (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. Maintaining individual earnings records for each employee.
e. Recording an expense for the employee Federal Income Tax withholding.
e. Recording an expense for the employee Federal Income Tax withholding.
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.
c. A company's profitability.
d. The relation between income and assets.
e. The relation between assets and liabilities.
b. A company's ability to pay interest.
If the times interest earned ratio:
a. Increases, then risk increases.
b. Increases, then risk decreases.
c. Is greater than 1.5, the company is in default.
d. Is less than 1.5, the company is carrying too little debt.
e. Is greater than 3.0, the company is likely carrying too much debt.
b. Increases, then risk decreases.
Accounts payable are:
a. Also referred to as unearned revenues.
b. Amounts received in advance from customers for future services.
c. Estimated liabilities.
d. Amounts owed to suppliers for products or services purchased on credit.
e. Always payable within 30 days.
d. Amounts owed to suppliers for products or services purchased on credit.
A short-term note payable:
a. Is a written promise to pay a specified amount on a stated future date within one year.
b. Is a contingent liability.
c. Is an estimated liability.
d. Is not a liability until the due date.
e. Cannot be used to replace an account payable.
a. Is a written promise to pay a specified amount on a stated future date within one year.
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. Are payable for up to a maximum $137,700 of employee earnings.
a. Are an added expense beyond the wages and salaries earned by employees.
Times interest earned is calculated by:
a. Multiplying interest expense by net income.
b. Dividing interest expense by net income.
c. Dividing income before interest expense and income taxes by interest expense.
d. Multiplying interest expense by income before inte. rest expense and income taxes.
Dividing income before interest expense by interest expense and income taxes.
c. Dividing income before interest expense and income taxes by interest expense.
The rate that a state assigns based on a company’s stability in employing workers is the:
a. Federal Insurance Contributions Act (FICA) rate.
b. Tax withholding rate.
c. Pay rate.
d. Credit rating.
e. Merit rating.
e. Merit rating.
If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the journal entry to record the receipt of cash would consist of a:
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 Ticket Sales Payable.
c. Debit Cash, credit Unearned Revenue.
On December 1, Victoria Company signed a 90-day, 8% note payable, with a face value of $16,200. What amount of interest expense is accrued at December 31 on the note? Note: Use 360 days a year.
a. $216
b. $324
c. $0
d. $108
e. $1,296
d. $108
Interest Expense = Principal × Interest Rate × Time
Interest Expense = $16,200 × 0.08 × 30/360; Interest Expense = $108
An employee earned $43,000 during the year working for an employer when the maximum limit for Social Security was $137,700. The Federal Insurance Contributions Act (FICA) tax rate for Social Security is 6.2% and the Federal Insurance Contributions Act (FICA) tax rate for Medicare is 1.45%. The employee's annual Federal Insurance Contributions Act (FICA) taxes amount is:
a. $623.50.
b. $5,955.50.
c. $6,579.00.
d. $2,666.00.
e. $3,289.50.
e. $3,289.50.
Federal Insurance Contributions Act (FICA) Taxes = Wages × (Federal Insurance Contributions Act (FICA) tax rate + Medicare tax rate)
Federal Insurance Contributions Act (FICA) Taxes = $43,000 × (0.062 + 0.0145); Federal Insurance Contributions Act (FICA) Taxes = $3,289.50
A company had interest expense of $8,100, income before interest expense and income taxes of $19,400, and net income of $9,800. The company's times interest earned ratio equals:
a. 0.42.
b. 1.21.
c. 0.83.
d. 1.98.
e. 2.40.
e. 2.40.
Times Interest Earned Ratio = Income before Interest Expense and Income Taxes/Interest Expense
Times Interest Earned Ratio = $19,400/$8,100 = 2.40
BMX Company has one employee. FICA Social Security taxes are 6.20% of the first $137,700 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.60% and SUTA taxes are 5.40% of the first $7,000 paid to its employee.
Gross Pay through August is $6,400 and Gross Pay through September is $7,200. What account and how is debited to record employees gross pay by the employer?
a. Cash $7,200
b. Salaries Expense $800
c. Salaries expense $6,400
d. Salaries Expense $7,200
e. Cash $800
b. Salaries Expense $800
Sep 30 Salaries Expense $800
FICA SS taxes payable $49.60
FICA Medicare taxes payable $11.60
Employee Federal IT payable $80
Salaries Payable $658.80
On June 30, Selena Gomez sells $900,000 in tickets for three concerts. On October 31, Selena performs a concert. A debit to Unearned Revenue on October 31st is made for:
a. $900,000
b. $600,000
c. $300,000
d. $30,000
e. $90,000
c. $300,000
Oct. 31 Unearned Ticket Revenue 300,000
Ticket Revenue 300,000
Record concert revenues ($900,000 × 1 ∕ 3).
On November 1, Alan Company signed a 120-day, 9% note payable, with a face value of $25,200. What is the maturity value (principal plus interest) of the note on March 1? Note: Use 360 days a year.
a. $25,200
b. $25,452
c. $25,704
d. $25,578
e. $25,956
e. $25,956
Interest Expense = Principal × Interest Rate × Time
Interest Expense = $25,200 × 0.09 × 120/360; Interest Expense = $756
Maturity Value = Principal + Interest Expense
Maturity Value = $25,200 + $756 = $25,956
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,688. The Federal Insurance Contributions Act (FICA) tax for social security is 6.2% of the first $137,700 of employee earnings each calendar year and the Federal Insurance Contributions Act (FICA) tax rate for Medicare is 1.45% of all earnings. The Federal Unemployment Taxes (FUTA) tax rate of 0.6% and the State Unemployment Taxes (SUTA) tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,441.57. Her net pay for the month is: (Note: Round your intermediate calculations to two decimal places.)
a. $6,147.79
b. $7,472.96
c. $6,581.79
d. $6,707.77
e. $6,525.79
c. $6,581.79
Net Pay = Gross Pay − Federal Income Tax − Federal Insurance Contributions Act (FICA)-Social Security (SS) Tax − Federal Insurance Contributions Act (FICA)-Medicare Tax
Net Pay = $8,688 − $1,441.57 − $538.66* − $125.98** = $6,581.79
*Federal Insurance Contributions Act (FICA)-Social Security (SS) Tax $8,688 × 0.062 = $538.66
**Federal Insurance Contributions Act (FICA)-Medicare Tax $8,688 × 0.0145 = $125.98
A company has interest expense of $52,000, income taxes expense of $120,960, and net income of $281,000. The company's times interest earned ratio equals:
a. 8.73.
b. 5.40.
c. 7.73.
d. 2.33.
e. 0.11.
a. 8.73.
Times Interest Earned Ratio = (Net income + Income Taxes Expense + Interest Expense)/Interest Expense
Times Interest Earned Ratio = ($281,000 + $120,960 + $52,000)/$52,000 = 8.73
BMX Company has one employee. FICA Social Security taxes are 6.20% of the first $137,700 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.60% and SUTA taxes are 5.40% of the first $7,000 paid to its employee.
Gross Pay through August is $6,400 and Gross Pay through September is $7,200. What amount should be debited to Payroll taxes expense
a. $49.60
b. $61.20
c. $36
d. $97.20
e. $11.60
d. $97.20
(800 x 6.2% + 800 x 1.45% + 600 x 0.6% + 600 x 5.4%)
During August, Boxer Company sells $356,000 in merchandise that has a one-year warranty. Warranty expense is estimated at 5% of sales. The warranty liability account has a credit balance of $12,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. The entry to record the customer warranty repairs is:
a. Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.
b. Debit Warranty Expense $9,400; credit Estimated Warranty Liability $9,400.
c. Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.
d. Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400.
e. Debit Estimated Warranty Liability $17,800; credit Parts Inventory $17,800.
d. Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400.
On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value (principal plus interest) of the note on March 1?
Note: Use 360 days a year.
a. $9,000
b. $720
c. $9,120
d. $9,720
e. $9,240
e. $9,240
Interest Expense = Principal × Interest Rate × Time
Interest Expense = $9,000 × 0.08 × 120/360; Interest Expense = $240
Maturity Value = Principal + Interest Expense
Maturity Value = $9,000 + $240 = $9,240
Athens Company's salaried employees earn two weeks of vacation per year. The company estimated and must expense $6,600 of accrued vacation benefits for the year. Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits?
a. Debit Vacation Benefits Expense $6,600; credit Accounts Receivable $6,600.
b. Debit Vacation Benefits Expense $6,600; credit Vacation Benefits Payable $6,600.
c. Debit Vacation Benefits Expense $17,160; credit Vacation Benefits Payable $17,160.
d. Debit Vacation Benefits Payable $6,600; credit Accounts Receivable $6,600.
e. Debit Vacation Benefits Payable $16,500; credit Vacation Benefits Expense $16,500.
b. Debit Vacation Benefits Expense $6,600; credit Vacation Benefits Payable $6,600.
A company's interest expense is $21,000. Its income before interest expense and income taxes is $152,250. Its net income is $65,450. The company's times interest earned ratio equals:
a. 0.138.
b. 2.33.
c. 0.32.
d. 7.25.
e. 0.43.
d. 7.25.
Times Interest Earned Ratio = Income before Interest Expense and Income Taxes/Interest Expense
Times Interest Earned Ratio = $152,250/$21,000 = 7.25
Hitzu Co. sold a copier (that costs $6,000) for $10,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $300 for materials taken from the parts inventory. These are the only repairs required for this copier. Hitzu expects warranty costs to be 5% of dollar sales. It records warranty expense with an adjusting entry on December 31 of Year 1. How much is the estimated warranty liability for this copier as of December 31 of Year 2?
a. $500
b. $300
c. $ 200
d. $10,000
e. $6,000
c. $ 200
5% of 10,000 = $500;
$500 - $300 repair = $200