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Exam 10: Current Liabilities and Payroll

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Question 21

True/False

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During the first year of operations, a company granted warranties on its products. The estimated cost of the product warranty liability at the end of the year is $8,500. The product warranty expense of $8,500 should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

A) True
B) False

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Question 22

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Garrett Company sells merchandise with a one year warranty. In 2012, sales consisted of 3,500 units. It is estimated that warranty repairs will average $15 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Garrett should show warranty expense of

A) $36,750
B) $15,750
C) $52,500
D) $0

E) B) and C)
F) All of the above

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Question 23

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For proper matching of revenues and expenses, the estimated cost of fringe benefits must be recognized as an expense of the period during which the employee earns the benefits.

Journalize the following transactions:

Which of the following is required to be withheld from employee's gross pay?

The payroll register of Seaside Architecture Company indicates $870 of Social Security and $217 of Medicare tax withheld on total salaries of $14,500 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $5,250. at the federal rate of 0.8% and state rate of 5.4%. Provide the journal entry to record the payroll tax expense for the period.

The discount on a note payable is charged to an account that has a normal credit balance.

The following totals for the month of February were taken from the payroll register of Arcon Company: How much is the total payroll expense for Arcon Company for this payroll? Assume that the monthly salaries expense remains the same for the entire year and no employees are hired or fired during that time. Based on what you learned in Chapter 11 about payroll taxes, do you expect the total payroll expense to stay the same every month? Explain.

The cost of a product warranty should be included as an expense in the

Which of the following will have no effect on an employee's take-home pay?

Most employers are required to withhold federal unemployment taxes from employee earnings.

A pension plan which requires the employer to make annual pension contributions, with no promise to employees regarding future pension payments, is termed

The journal entry a company uses to record pension rights that have not been funded for its salaried employees, at the end of the year is

List five internal controls that relate directly to payroll.

Vacation pay payable is reported on the balance sheet as a(n)

According to a summary of the payroll of Scotland Company, $450,000 was subject to the 7.0% social security tax and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%) and federal (0.8%) unemployment taxes. The journal entry to record accrued salaries would include:

Amounts withheld from each employee for Social Security and Medicare varies by state.

Payroll taxes are based on the employee's net pay.

The current portion of long-term debt should

Based on the following data, what is the acid-test ratio, rounded to one decimal point?