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FICA payments consist of Social Security taxes and Medicare taxes.

A) True
B) False

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On January 2,2015,AAA Publishing,Inc.received a one-year subscription for $100 to one of the magazines that it publishes.At that time,it debited cash for $100 and credited unearned revenue for $100.After all the magazines have been delivered through December 31,2015,what journal entry needs to be recorded?


A) Debit Cash for $100 and credit Unearned Revenue for $100
B) Debit Accounts Receivable for $100 and credit Subscription Revenue for $100
C) Debit Accounts Receivable for $100 and credit Unearned Revenue for $100
D) Debit Unearned Revenue for $100 and credit Subscription Revenue for $100

E) B) and C)
F) None of the above

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Bobby Darling is the only employee of Atlantic Records, Inc.During the first week of January, Darling earned $800 and had federal and state income tax withholdings of $40 and $15, respectively.FICA taxes are 7.65% on earnings up to $117,000.State and federal unemployment taxes for the period are $50 and $8, respectively. -Use the information above to answer the following question.What would be the amount of Darling's payroll check for the first week of January?


A) $683.80
B) $741.80
C) $628.80
D) $625.80

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

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The Big Co.issued $100,000 of bonds for their face value six years ago.This year,it retires the bonds for $105,000.As a result of retiring these bonds,it:


A) reduces its liabilities by $105,000.
B) reduces its assets by $100,000.
C) reports a gain of $5,000.
D) reports a loss of $5,000.

E) C) and D)
F) B) and C)

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Accrued liabilities could include all of the following except:


A) Wages and Salaries Payable.
B) Current Portion of Long-Term Debt.
C) Income Tax Payable.
D) Interest Payable.

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

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Contingent liabilities must be recorded if the:


A) future event is reasonably possible.
B) amount owed cannot be reasonably estimated.
C) future event is probable and the amount owed can be reasonably estimated.
D) future event is remote.

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

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Texable,Inc.is required to match $45,900 for its portion of FICA and $4,700 for federal and state unemployment taxes.The entry to record Texable's payroll taxes includes:


A) debit to Payroll Tax Expense for $50,600.
B) credit to Payroll Tax Expense for $50,600.
C) debit to FICA Payable for $45,900.
D) debit to Unemployment Tax Payable of $4,700.

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

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Your company issues $50,000 of one-year,10% bonds at face value.The journal entry to record this transaction will include a debit to:


A) Cash and a credit to Bonds Payable for $50,000.
B) Cash and a credit to Bonds Payable for $55,000.
C) Cash for $55,000, a credit to Bonds Payable for $50,000, and a credit to Interest Payable for $5,000.
D) Cash for $50,000, a debit to Interest Expense for $5,000, and a credit to Bonds Payable for $55,000.

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

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A bond premium:


A) arises when interest payments are higher than the cost of borrowing.
B) essentially free money.
C) arises when the interest payments are less than the cost of borrowing.
D) is reported on the income statement as a gain on the issuance of a bond.

E) C) and D)
F) B) and D)

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A negative times interest earned ratio suggests that the company:


A) is using resources very efficiently.
B) has a serious financial problem.
C) has a very high interest expense.
D) has a high level of sales revenue.

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

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Your company issues $500,000 in bonds at a price of 98.The journal entry used to record the issuance will include a debit to:


A) Cash for $490,000, a debit to Discount on Bonds Payable for $10,000, and a credit to Bonds Payable for $500,000.
B) Bonds Payable for $500,000, a credit to Discount on Bonds Payable for $10,000, and a credit to Cash for $490,000.

C) A) and B)
D) undefined

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Selected financial information presented below was obtained from the financial statements of the Napa Valley Brewery: Selected financial information presented below was obtained from the financial statements of the Napa Valley Brewery: What is the debt-to-assets ratio? A) 0.350 B) 0.800 C) 0.200 D) 1.000 What is the debt-to-assets ratio?


A) 0.350
B) 0.800
C) 0.200
D) 1.000

E) B) and C)
F) B) and D)

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The total amount of interest that will be paid on a four-month,$6,500,9% note payable equals:


A) $585
B) $292
C) $146
D) $195

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

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Gross earnings for the pay period are $100,000.Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850.What is the net pay to employees?


A) $70,000
B) $100,000
C) $130,000
D) $78,150

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

Correct Answer

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Company A has liabilities of $6,773,000 and stockholders' equity of $3,647,000 at the end of the current year,and sales revenue of $9,800,000 and net income of $899,080 for the year.Company B has assets of $1,680,000 and stockholders' equity of $978,750 at the end of the current year,and sales revenue of $1,950,000 and net income of $351,000 for the year. Required: Part a.Calculate the debt-to-assets ratio for each company. Part b.Identify the company that has greater financing risk and explain why.

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Part a
Debt-to-assets ratio = Total Liab...

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During one pay period,your company distributes $130,500 to employees as net pay.The income tax withholdings were $19,000 and the FICA withholdings were $5,000.Total payroll costs to the company for this pay period,excluding any unemployment taxes,was:


A) $149,500.
B) $130,500.
C) $154,500.
D) $159,500.

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

Correct Answer

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The stated rate is the rate used to determine the:


A) interest expense.
B) face value.
C) present value.
D) interest payment.

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

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On September 1, 2016, a company issued a $50,000, 6-month, 9% note payable to purchase equipment.At December 31, 2016, the company records an adjusting entry to accrue interest incurred by not paid.The company pays the note with interest at the maturity date. -Use the information above to answer the following question.What is the adjusting journal entry at December 31 to record the accrued interest on the note payable?


A) Debit Interest Expense and credit Interest Payable for $1,500
B) Debit Interest Expense and credit Interest Payable for $2,000
C) Debit Interest Expense and credit Interest Payable for $4,500
D) Debit Interest Payable and credit Cash for $2,000

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

Correct Answer

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Which of the following statements best describes a contingent liability?


A) The amount of a contingent liability is known and will definitely have to be paid in the future.
B) A contingent liability is a potential liability that has arisen because of a past transaction or event, but its ultimate outcome will not be known until a future event occurs or fails to occur.
C) A contingent liability will only be incurred if a particular future event takes place.
D) A contingent liability is a potential liability that will be incurred if a natural disaster happens.

E) B) and C)
F) None of the above

Correct Answer

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At the maturity date,the carrying value of a bond should always be equal to the face value.

A) True
B) False

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