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Exam 9: Accounting for Current Liabilities

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Question 51

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An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 4.4%. 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?

A) $4,827.00
B) $4,672.25
C) $4,628.25
D) $4,386.25
E) $4,430.

F) A) and C)
G) A) and B)

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Question 52

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A _____________________ shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period.

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Question 53

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The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.

Short-term notes payable:

A company's income before interest expense and income taxes is $350,000 and its interest expense is $100,000. Its times interest earned ratio is:

During June, Vixen Fur 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:

The times interest earned ratio reflects:

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 4.4%. 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 the employer should record as payroll taxes expense for the employee for the month of January?

A company had income before interest expense and income taxes of $186,000, and its interest expense is $55,000. Calculate the company's times interest earned ratio.

If a company uses a special payroll bank account:

What are known current liabilities? Cite at least two examples of known current liabilities.

General Co. entered into the following transactions involving short-term notes payable. On May 14, General purchased $40,000 merchandise from Steller Co., terms are 2/15, n/30. General uses the perpetual inventory system. On May 29, General replaced the May 14 account payable with a 60-day, $36,000 note bearing 8% annual along with paying $4,000 in cash. On July 28, General paid the amount due on the note at maturity. Prepare journal entries for all the preceding transactions and events.

Athena Company's salaried employees earn two weeks of vacation per year. It pays $858,000 in total employee salaries for 52 weeks but its employees work only 50. Record Athena Company's weekly journal entry to record the vacation expense:

A payroll register does not include:

Santa Barbara Express has 4 sales employees, each of whom earns $5,000 per month and is paid on the last working day of the month. Each employee's wages are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $110 for each employee. a. Prepare the general journal entry to accrue the monthly sales salaries expense at January 31. b. The employer payroll taxes for Santa Barbara Express include FICA taxes, federal unemployment taxes of 0.6% of the first $7,000 paid each employee, and state unemployment taxes of 4.0% of the first $7,000 paid to each employee. Prepare the journal entry to record the employer's payroll taxes at January 31 for Santa Barbara Express. (Assume that none of the employees has reached the unemployment limit of $7,000.)

During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. 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:

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:

Cardinal Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is $12,300). The sales tax law requires Cardinal to collect 8.5% sales tax on every dollar of merchandise sold. Record the entry for the sale and its applicable sales tax.

A bank that is authorized to accept deposits of amounts payable to the federal government is a:

Employer payroll taxes are an added employee _______________ beyond the wages and salaries earned by the employees.