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Exam 11: Current Liabilities and Payroll

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Question 1

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The journal entry a company uses to record the issuance of a discounted note for the purpose of borrowing funds for the business is

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

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

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Question 2

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Florida Keys Construction installs swimming pools. They calculate that warranty obligations are 3% of gross sales. For the year just ending Florida Keys' gross sales were $1,450,000. Due to previous quarter recognitions, the Warranty Liability account has a credit balance of $28,700. Determine the year's total warranty liability and journalize any necessary value to establish the year's liability at December 31st. Due to sales, $1,450,000, warranty liability is $43,500 ($1,450,000 × 3%). Since $28,700 has already been recognized, $14,800 (or $43,500 - $28,700) must still be recognized.

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Question 3

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The proceeds from discounting a $20,000, 60-day, note payable at 6% is $20,200.

Interest expense is reported in the operating expense section of the income statement.

An employee receives an hourly rate of $27, 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, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the net amount to be paid to the employee?

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

Obligations that depend on past events and that are based on future possible events are contingent liabilities.

The borrower is the one who issues a note payable to a creditor.

Use the following information to answer the following questions. The following totals for the month of April were taken from the payroll register of Magnum Company. The journal entry to record the monthly payroll on April 30 would include a

Use the following information to answer the following questions. Assuming no employees are subject to ceilings for their earnings, Jensen Company has the following information for the pay period of January 15 - 31, 20xx. Assuming that all wages are subject to federal and state unemployment taxes, the Payroll Taxes Expense would be recorded as:

On August 1, Batson Company issued a 60-day note with a face amount of $140,000 to Jergens Company for merchandise inventory. (Assume a 360-day year is used for interest calculations.)

Journalize the following entries on the books of the borrower and creditor. Label accordingly. (Assume a 360-day year is used for interest calculations.)

Employers are required to compute and report payroll taxes on a calendar-year basis, even if a different fiscal year is used for financial reporting and income tax purposes.

For proper matching of revenues and expenses, the estimated cost of fringe benefits must be recognized as an expense of the period during which the employee earns the benefits.

Form W-4 is a form authorizing employers to withhold a portion of employee earnings for payment of an employee's federal income taxes.

Taxes deducted from an employee's earnings to finance social security and Medicare benefits are called FICA taxes.

Like many taxes deducted from employee earnings, federal income taxes are subject to a maximum amount per employee per year.

Current liabilities are

Which of the following is an example of a variable component of a payroll system?

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, 48; federal income tax withheld, $120; cumulative earnings for the year prior to this week, $24,500; Social security tax rate, 6% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, .8% on the first $7,000. What is the net amount to be paid to the employee?