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Exam 10: Current Liabilities and Payroll

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Question 71

Multiple Choice

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The journal entry a company uses to record the payment of a discounted note is

A) debit Notes Payable and Interest Expense; credit Cash
B) debit Notes Payable; credit Cash
C) debit Cash; credit Notes Payable
D) debit Accounts Payable; credit Cash

E) A) and D)
F) B) and D)

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Question 72

Multiple Choice

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The journal entry a company uses to record the payment of an interest-bearing note is

A) debit Cash; credit Notes Payable
B) debit Accounts Payable; credit Cash
C) debit Notes Payable and Interest Expense; credit Cash
D) debit Notes Payable and Interest Receivable; credit Cash

E) A) and D)
F) A) and C)

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Question 73

Multiple Choice

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The Crafter Company had the following assets and liabilities as of December 31, 2012: Determine the quick ratio for the end of the year (rounded to one decimal point) .

Receiving payment prior to delivering goods or services causes a current liability to be incurred.

A business issued a 120-day, 6% note for $10,000 to a creditor on account. The company uses a 360-day year for interest calculations. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity, including interest.

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

Mobile Sales has five sales employees which receive weekly paychecks. Each earns $11.50 per hour and each has worked 40 hours in the pay period. Each employee pays 12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in Social Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability Insurance. Journalize the recognition the pay period ending January 19th which will be paid to the employees January 26th. (Keep in mind that none of the employees is subject to a ceiling amount for social security.)

Research Company sells merchandise with a one year warranty. In 2012, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Research should show warranty expense of

Power Company sells merchandise with a one year warranty. In 2012, sales consisted of 1,600 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Power should show warranty expense of

During May, Blast sold 500 portable CD players for $50 each. Each CD player cost Blast $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should Blast debit Product Warranty Expense for in May?

Most employers are required to withhold from employees for

Estimating and recording product warranty expense in the period of the sale best follows which of the following accounting concepts?

An unfunded pension liability is reported on the balance sheet as

The Crafter Company had the following assets and liabilities as of December 31, 2012: Determine the quick ratio for the end of the year (rounded to one decimal point) .

The journal entry to record the conversion of an $550 accounts payable to a notes payable would be:

Payroll taxes only include social security taxes and federal unemployment and state unemployment taxes.

In order to be a recorded contingent liability, the liability must be possible and easily estimated.

Current liabilities are:

Most employers are levied a tax on payrolls for

An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 7.0% (on earnings up to $100,000), the Medicare tax rate was 1.5%, and the federal income tax to be withheld was $614. Required: (1) Determine the gross pay for the week. (2) Determine the net pay for the week.