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Exam 10: Liabilities: Current, Installment Notes, and Contingencies

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Question 31

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Federal income taxes withheld increase the employer's payroll tax expense.

A) True
B) False

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Question 32

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McKay Company sells merchandise with a one-year warranty. In Year 1, sales consisted of 1,200 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2. In the Year 1 income statement, McKay should show warranty expense of

A) $3,600
B) $8,400
C) $12,000
D) $0

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

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Question 33

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Which of the following taxes would be deducted in determining an employee's net pay?

The following totals for the month of June were taken from the payroll register of Young Company: $\begin{array}{lr}\text { Sal aries expense } & \$ 15,000 \\\text { Social security and Medicare taxes withheld } & 1,125 \\\text { Income taxes withheld } & 3,000 \\\text { Retirement savings } & 500\\\text { Salaries subject to federal and state }\\\text { unemployment taxes of } 6.2 \text { percent }&4,000\end{array}$ The entry to record the accrual of employer's payroll taxes would include a debit to

In a defined benefits plan, the employer bears the investment risks in funding a future retirement income benefit.

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

The following information is for employee Ella Dodd for the week ended March 15. Total hours worked: 48 Rate: $15 per hour, with double time for all hours in excess of 40 Federal income tax withheld: $200 United Fund deduction: $50 Cumulative earnings prior to current week: $6,400 Tax rates: Social security: 6% with no maximum earnings. Medicare tax: 1.5% on all earnings. State unemployment: 5.4% with no maximum earnings; on employer Federal unemployment: 0.8% with no maximum earnings; on employer (a) Determine (1) total earnings, (2) total deductions, and (3) cash paid. (b) Determine each of the employer's payroll taxes related to the earnings of Ella Dodd for the week ended March 15 .

A pension plan that promises employees a fixed annual pension benefit, based on years of service and compensation, is called a(n)

An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $120; all earnings are subject to social security tax; Social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment tax, 5.4% on the first $7,000; federal unemployment tax, 0.8% on the first $7,000. Prepare the journal entries to record the salaries expense and the employer payroll tax expense. If required, round your answers to the nearest cent.

The following totals for the month of April were taken from the payroll register of Magnum Company: $\begin{array}{lr}\text { Sal aries } & \$ 10,000 \\\text { FICA taxes withheld } & 750 \\\text { Income taxes withheld } & 2,000 \\\text { Medical insurance deductions } & 450 \\\text { Unemployment taxes } & 420\end{array}$ The entry to record accrual of employer's payroll taxes would include a

Excom sells radios and each unit carries a two-year replacement warranty. The cost of repair defects under the warranty is estimated at 5% of the sales price. During September, Excom sells 100 radios for $50 each. One radio is actually replaced during September. For what amount in September would Excom debit Product Warranty Expense?

Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings?

Zennia Company provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation cost is $135,000. On December 31, the end of the current year, the current month's accrued vacation pay is

The summary of the payroll for the monthly pay period ending July 15 indicated the following: $\begin{array} { l r } \text { Sales salaries } & \$ 125,000 \\\text { Federal income tax withheld } & 32,300 \\\text { Office salaries } & 35,000 \\\text { Medical insurance withheld } & 7,370 \\\text { Social security tax withheld } & 10,200 \\\text { Medicare tax withheld } & 2,550\end{array}$ ​ Journalize the entries to record (a) the payroll and (b) the employer's payroll tax expense for the month. The state unemployment tax rate is 5.4%, and the federal unemployment tax rate is 0.8%. Only $25,000 of salaries are subject to unemployment taxes.

An employee receives an hourly rate of $45, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $950; social security tax rate, 6.0%; and Medicare tax rate, 1.5%; state unemployment compensation tax, 5.4% on the first $7,000; federal unemployment compensation tax, 0.8% on the first $7,000. Calculate the employer's payroll tax expense if: (a) this is the first payroll of the year and the employee has no cumulative earnings for the year to date. (b) the employee's cumulative earnings for the year prior to this week equal $6,200.

Sadie White receives an hourly rate of $30, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $300; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to White?

The Core Company had the following assets and liabilities as of December 31: ​ $\begin{array}{|c|c|}\hline{\text { ASSETS }} & \\\hline \text { Cash } & \$ 58,000 \\\hline \text { Accounts receivable } & 25,000 \\\hline \text { Inventory } & 20,000 \\\hline \text { Equipment } & 50,000 \\\hline\\\hline {\text { LIABILITIES }} & \\\hline \text { Current portion of long-term debt } &20,000 \\\hline \text { Accounts payable } &12,000 \\\hline \text { Long-term debt } & 25,000 \\\hline\end{array}$ ​ Calculate the current ratio, working capital, and quick ratio. Round ratios to one decimal place.

The current portion of long-term debt should

One of the more popular defined contribution plans is the 401k plan.

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