Question 1

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.

Accepted Answer

The answer of An employee earned $3,450 for the current...

Question 2

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?

Accepted Answer

A)   $9,000
B)   $9,100
C)   $9,150
D)   $9,200
E)   $9,300F) B) and C)
G) C) and D)

Question 3

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

Accepted Answer

A) True 
 B)False

Question 4

Unearned revenues are:

Accepted Answer

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.F) A) and B)
G) A) and D)

Question 5

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

Accepted Answer

The times interest earned ratio is calcu...

Question 6

All of the following statements related to recording warranty expense are True except:

Accepted Answer

A)   Recording estimated warranty expense complies with the full disclosure principle.
B)   Warranty expense should be recorded in the period when the warranty service is performed.
C)   Recording estimated warranty expense complies with the matching principle.
D)   The seller reports a warranty obligation as a liability.
E)   Warranty costs are probable and the amount can be estimated.F) C) and D)
G) B) and D)

Question 7

Agro Depot's income before interest expense and income taxes was $5,909 million, and interest expense was $37 million. Calculate Agro Depot's times interest earned.

Accepted Answer

The answer of Agro Depot's income before interest expense and...

Question 8

Sales taxes payable:

Accepted Answer

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.F) A) and D)
G) A) and E)

Question 9

Companies with many employees often use a special ____________________ account to pay employees.

Accepted Answer

The answer of Companies with many employees often use a...

Question 10

Accounting for contingent liabilities covers three possibilities. (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.

Accepted Answer

A) True 
 B)False

Question 11

The times interest earned ratio reflects:

Accepted Answer

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.F) None of the above
G) D) and E)

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

Matt and Bryan Walls of SnorgTees stress the importance of managing liabilities. What are some of the liabilities that the brothers discovered they would have to manage to be successful?

Accepted Answer

To control costs and liabilities, the br...

Question 14

All of the following statements regarding liabilities are True except:

Accepted Answer

A)   A liability is a probable future payment of assets or services.
B)   Unearned future wages to be paid to employees should be recorded as liabilities.
C)   For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services.
D)   Information about liabilities is more useful when the balance sheet identifies them as either current or long term.
E)   All of these are True.F) B) and D)
G) A) and E)

Question 15

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:

Accepted Answer

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.F) B) and C)
G) B) and D)

Question 16

Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities.

Accepted Answer

A) True 
 B)False

Question 17

An estimated liability:

Accepted Answer

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.F) C) and E)
G) C) and D)

Question 18

Times interest earned is computed by dividing _______________ by interest expense.

Accepted Answer

Income b e...

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Uncertainties from the development of new competing products are contingent liabilities.

Accepted Answer

A) True 
 B)False

Exam 11: Current Liabilities and Payroll Accounting

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?

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Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities.

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Agro Depot's income before interest expense and income taxes was $5,909 million, and interest expense was $37 million. Calculate Agro Depot's times interest earned.

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An estimated liability:

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The times interest earned ratio reflects:

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Sales taxes payable:

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Accounting for contingent liabilities covers three possibilities. (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.

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Times interest earned is computed by dividing _______________ by interest expense.

Correct AnswerverifiedIncome b e...View AnswerShow Answer

Uncertainties from the development of new competing products are contingent liabilities.

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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.

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Companies with many employees often use a special ____________________ account to pay employees.

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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:

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All of the following statements regarding liabilities are True except:

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Unearned revenues are:

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

Correct AnswerverifiedThe times interest earned ratio is calcu...View AnswerShow Answer

Matt and Bryan Walls of SnorgTees stress the importance of managing liabilities. What are some of the liabilities that the brothers discovered they would have to manage to be successful?

Correct AnswerverifiedTo control costs and liabilities, the br...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

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.

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All of the following statements related to recording warranty expense are True except:

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Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

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Income b e...
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The times interest earned ratio is calcu...
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To control costs and liabilities, the br...
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