Question 1

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Debt guarantees are:

Accepted Answer

A)   A bad business practice.
B)   Considered to be current liabilities.
C)   Recorded as liabilities even though it is highly unlikely that the original debtor will default.
D)   Considered to be contingent liabilities.
E)   Never disclosed in the financial statements.F) A) and E)
G) C) and D)

Question 4

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)

Accepted Answer

A)   $4,672.25
B)   $4,430.25
C)   $4,386.25
D)   $4,827.00
E)   $4,628.25F) B) and D)
G) A) and D)

Question 5

Match between columns
                        Premises:  A measure provided by a state to employers that reflects a company's stability in employing workers.
 Taxes that fund Social Security and Medicare, assessed on both employer and employees under the Federal Insurance Contributions Act.
 Known obligations of an uncertain amount that can be reasonably estimated.
 Obligations of a company requiring payment in more than one year or operating cycle.
 Gross pay less all tax and voluntary deductions.
 A table of amounts of income tax to be withheld from employees' wages.
 A potential obligation that depends on a future event arising from a past transaction.
 A seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period.
 A number indicated on an employee's Form W-4 that is used to reduce the amount of federal income tax withheld from an employee's pay.
 Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program.

Accepted Answer

The Answer of FUTA taxes and Contingent liability and Merit is...

Question 6

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note.
- What is the journal entry needed to record the transaction by Jarrett Company?

Accepted Answer

A)   Debit Cash $7,500; credit Notes Payable $7,500.
B)   Debit Notes Receivable $7,500; credit Cash $7,500.
C)   Debit Cash $7,650; credit Notes Payable $7,650.
D)   Debit Accounts Payable $7,500; credit Notes Payable $7,500.
E)   Debit Cash $7,500; credit Accounts Payable $7,500.F) All of the above
G) D) and E)

Question 7

Which of the following do not apply to unearned revenues?

Accepted Answer

A)   Also called collections in advance.
B)   Amounts received in advance from customers for future delivery of products or services.
C)   Also called prepayments.
D)   Also called deferred revenues.
E)   Amounts to be received in the future from customers for delivery of products or services in the current period.F) None of the above
G) A) and C)

Question 8

Debt guarantees are usually disclosed as a contingent liability.

Accepted Answer

A) True 
 B)False

Question 9

The chief executive officer earns $20,000 per month. As of May 31, her gross pay was $100,000. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. 
-What is the amount of FICA-Social Security withheld from this employee for the month of June?

Accepted Answer

A)   $290.00
B)   $268.25
C)   $1,147.00
D)   $7,347.00
E)   $1,240.00F) B) and C)
G) A) and B)

Question 10

Interest expense is not:

Accepted Answer

A)   Likely to stay the same when sales change.
B)   A fixed expense.
C)   A factor in determining a company's borrowing risk.
D)   Incurred on current liabilities.
E)   Likely to fluctuate when sales change.F) A) and E)
G) A) and B)

Question 11

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:

Accepted Answer

A)   Interest.
B)   Principal.
C)   Accounts Payable.
D)   Cash.
E)   Face Value.F) A) and B)
G) B) and E)

Question 12

During June, Vixen Company sells $850,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. Customers returned $14,000 of merchandise for warranty replacement during the month.
- The entry to settle the customer warranties is:

Accepted Answer

A)   Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.
B)   Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000.
C)   Debit Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500.
D)   Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.
E)   Debit Estimated Warranty Liability $25,500; credit Warranty Expense $25,500.F) All of the above
G) A) and B)

Question 13

Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,288. FICA tax for Social Security is 6.2% on the first $118,500 of earnings each calendar year and the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The amount of Federal Income Tax withheld from his earnings was $1,375.17. What is the amount of the employer's payroll taxes expenses for this employee? (Round your intermediate calculations to two decimal places.)

Accepted Answer

A)   $420.00
B)   $2,009.21
C)   $2,506.48
D)   $1,131.31
E)   $1,054.04F) C) and E)
G) B) and D)

Question 14

All of the following statements regarding liabilities are true except:

Accepted Answer

A)   Unearned future wages to be paid to employees should be recorded as liabilities.
B)   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.
C)   Information about liabilities is more useful when the balance sheet identifies them as either current or long term.
D)   Liabilities can involve uncertainty in whom to pay.
E)   A liability is a probable future payment of assets or services.F) A) and C)
G) A) and E)

Question 15

Experience shows that the default rate on liabilities increases sharply when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods.

Accepted Answer

A) True 
 B)False

Question 16

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

Accepted Answer

A) True 
 B)False

Question 17

Carson Company faces a probable loss on a pending lawsuit where the amount of the loss is estimated to be $500,000. The journal entry to recognize the potential loss is:

Accepted Answer

A)   Debit Lawsuit Payable $500,000, credit Contingent Legal Liability $500,000.
B)   Debit Legal Expense $500,000; credit Lawsuit Payable $500,000.
C)   Debit Contingent Legal Expense $500,000, credit Contingent Legal Liability $500,000.
D)   Debit Prepaid Legal Expense $500,000; credit Contingent Legal Liability $500,000.
E)   No journal entry is required.F) None of the above
G) A) and B)

Question 18

All of the following are employer payroll taxes except:

Accepted Answer

A)   Federal income tax equal to that withheld from employees.
B)   Medicare tax equal to that withheld from employees.
C)   State unemployment tax.
D)   Social Security tax equal to that withheld from employees.
E)   Federal unemployment tax.F) B) and D)
G) B) and C)

Question 19

Describe contingent liabilities and how to account for and/or report them.

Accepted Answer

Contingent liabilities are uncertain obl...

Question 20

Drake Company pays its employees for two weeks of vacation each year. The total annual cost of the vacation benefit is $109,920. Prepare the journal entry to record the monthly accrued vacation expense.

Accepted Answer

None...

Exam 11: Current Liabilities and Payroll Accounting

Experience shows that the default rate on liabilities increases sharply when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods.

Correct Answer
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On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. - What is the journal entry needed to record the transaction by Jarrett Company?

Correct Answer
verified

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Correct Answer
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Debt guarantees are:

Correct Answer
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Interest expense is not:

Correct Answer
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Match the following definitions with the appropriate term

Correct Answer
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Carson Company faces a probable loss on a pending lawsuit where the amount of the loss is estimated to be $500,000. The journal entry to recognize the potential loss is:

Correct Answer
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During June, Vixen Company sells $850,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. Customers returned $14,000 of merchandise for warranty replacement during the month. - The entry to settle the customer warranties is:

Correct Answer
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Drake Company pays its employees for two weeks of vacation each year. The total annual cost of the vacation benefit is $109,920. Prepare the journal entry to record the monthly accrued vacation expense.

Correct Answer
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None...
View Answer

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:

Correct Answer
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Which of the following do not apply to unearned revenues?

Correct Answer
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Describe contingent liabilities and how to account for and/or report them.

Correct Answer
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Contingent liabilities are uncertain obl...
View Answer

All of the following statements regarding liabilities are true except:

Correct Answer
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Debt guarantees are usually disclosed as a contingent liability.

Correct Answer
verified

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

Correct Answer
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All of the following are employer payroll taxes except:

Correct Answer
verified

Exam 11: Current Liabilities and Payroll Accounting

Experience shows that the default rate on liabilities increases sharply when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods.

Correct AnswerverifiedShow Answer

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. - What is the journal entry needed to record the transaction by Jarrett Company?

Correct AnswerverifiedShow Answer

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Debt guarantees are:

Correct AnswerverifiedShow Answer

Interest expense is not:

Correct AnswerverifiedShow Answer

Match the following definitions with the appropriate term

Correct AnswerverifiedShow Answer

Carson Company faces a probable loss on a pending lawsuit where the amount of the loss is estimated to be $500,000. The journal entry to recognize the potential loss is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Drake Company pays its employees for two weeks of vacation each year. The total annual cost of the vacation benefit is $109,920. Prepare the journal entry to record the monthly accrued vacation expense.

Correct AnswerverifiedNone...View AnswerShow Answer

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:

Correct AnswerverifiedShow Answer

Which of the following do not apply to unearned revenues?

Correct AnswerverifiedShow Answer

Describe contingent liabilities and how to account for and/or report them.

Correct AnswerverifiedContingent liabilities are uncertain obl...View AnswerShow Answer

All of the following statements regarding liabilities are true except:

Correct AnswerverifiedShow Answer

Debt guarantees are usually disclosed as a contingent liability.

Correct AnswerverifiedShow Answer

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

Correct AnswerverifiedShow Answer

All of the following are employer payroll taxes except:

Correct AnswerverifiedShow Answer

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None...
View Answer

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Contingent liabilities are uncertain obl...
View Answer

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