Chapter 11 – Current Liabilities and Payroll | Full Test Bank – 24e

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Fundamental Accounting Principles, 24e (Wild)

Chapter 11 Current Liabilities and Payroll Accounting

1) A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

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

3) All expected future payments are liabilities.

4) A liability cannot be divided between current and noncurrent liabilities.

5) A company cannot have a liability if the amount of the obligation is unknown.

6) A liability may exist even if there is uncertainty about whom to pay, when to pay, or how much to pay.

7) Trade accounts payable (or accounts payable) are amounts owed to suppliers for products or services purchased on credit.

8) Unearned revenues are amounts received in advance from customers for future products or services. 

9) Sales Taxes Payable is debited and Cash is credited when companies send sales taxes collected from customers to the government.

10) Vacation benefits is an example of a known liability.

11) A contingent liability is a potential obligation that depends on a future event arising from a past transaction or event.

12) Payroll is an example of a contingent liability for the employer.

13) Contingent liabilities that are reasonably possible are disclosed in the notes. 

14) Uncertainties from the development of future competing products are not contingent liabilities.

15) Debt guarantees are usually disclosed in the financial statement notes as a contingent liability. 

16) A contingent liability is a potential obligation that is based on uncertainties surrounding future technologies and natural disasters. 

17) A potential lawsuit claim is disclosed in the notes when the claim cannot be reasonably estimated and it is reasonably possible. 

18) A high value for the times interest earned ratio means that a company is a lower risk borrower.

19) The times interest earned ratio is calculated by dividing interest expense by income before interest expense, depreciation, and income taxes. 

20) The risk of a company not being able to pay its 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.

21) A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is 2.5.

22) A short-term note payable is a written promise to pay a specified amount on a stated future date within five years or the operating cycle, whichever is more reasonable. 

23) A note payable cannot be sold or transferred under any circumstance.

24) A company can replace an overdue account payable with a note payable.

25) If the end of an accounting period occurs between the signing of a note payable and its maturity date, interest expense should not be accrued until the note is paid.

26) Required payroll deductions include pension and health contributions, union dues, and charitable giving. 

27) The amount of federal income tax withheld from employee pay depends on the employee's income and the number of withholding allowances claimed by the employee. 

28) The amount of FICA tax that employers must pay is exactly twice the amount of the FICA taxes withheld from their employees.

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

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

31) Employers keep employee earnings reports which include a cumulative record of an employee's hours worked, gross earnings, deductions, and net pay. 

32) Deposits of amounts payable to the federal government may be paid through federal depository banks.

33) FUTA requires employers to pay a federal unemployment tax on the first $1 million in salary or wages paid to each employee. 

34) The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2.

35) Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

36) A known obligation of an uncertain amount that can be reasonably estimated is reported as an estimated liability. 

37) Accrued vacation benefits are a form of estimated liability for an employer.

38) A liability is incurred when income is earned because income tax expense is created by earning income.

39) A corporation has a $40,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $47,000. The company should record an entry to debit Income Tax Expense for $7,000 and credit Income Taxes Payable for $7,000.

40) Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay.

41) Each employee records the number of withholding allowances claimed on the withholding allowance certificate that is filed with the employer, which is the Form W-4.

42) Companies with many employees rarely use a special payroll bank account from which to pay employees.

43) The report that shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period is the payroll register.

44) An employee earnings report is a cumulative record of each employee's hours worked, gross earnings, deductions, and net pay.

45) When the number of withholding allowances claimed on Form W-4 increases, the amount of income tax withheld decreases.

46) All of the following statements regarding liabilities are true except:

A) A liability is a probable future payment of assets or services.

B) Potential future wages to be paid to employees should be recorded as liabilities.

C) 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.

D) Information about liabilities is more useful when the balance sheet identifies them as either current or long term.

E) Liabilities can involve uncertainty in whom to pay.

47) Obligations to be paid within one year or the company's operating cycle, whichever is longer, are:

A) Current assets.

B) Current liabilities.

C) Earned revenues.

D) Operating cycle liabilities.

E) Bills.

48) Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as:

A) Current assets.

B) Current liabilities.

C) Long-term liabilities.

D) Operating cycle liabilities.

E) Bills.

49) All of the following statements regarding uncertainty in liabilities are true except:

A) Liabilities can involve uncertainty in whom to pay.

B) A company can create a liability with a known amount even when the holder of the note may not be known until the maturity date.

C) A company can have an obligation of a known amount to a known creditor but not know when it must be paid.

D) A company only records liabilities when it knows whom to pay, when to pay, and how much to pay. Without all three, a liability cannot be recorded.

E) A company can be aware of an obligation but not know how much will be required to settle it.

50) In order to be reported, liabilities must:

A) Be certain.

B) Sometimes be estimated.

C) Be for a specific amount.

D) Always have a definite date for payment.

E) Involve an outflow of cash.

51) All of the following are true of known liabilities except:

A) Include accounts payable, notes payable, and payroll.

B) Can arise from agreements or contracts.

C) Are measurable.

D) Can arise form laws.

E) May depend on some future event occurring.

52) Accounts payable are:

A) Amounts owed to suppliers for products and/or services purchased on credit.

B) Amounts received in advance from customers for future services.

C) Estimated liabilities.

D) Not usually due on specific dates.

E) Always payable within 30 days.

53) Amounts received in advance from customers for future products or services:

A) Are revenues.

B) Increase income.

C) Are liabilities.

D) Are not allowed under GAAP.

E) Require an outlay of cash in the future.

54) Sales taxes payable is reported as a(n): 

A) Estimated liability.

B) Contingent liability.

C) Current liability.

D) Business expense.

E) Long-term asset.

55) Which of the following do not apply to unearned revenues?

A) May also be called deferred revenues.

B) Amounts received in advance from customers for future delivery of products or services.

C) Gift cards are an example.

D) Result from prepayments for concert tickets.

E) Amounts to be received in the future from customers for delivery of products or services in the current period.

56) If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the receipt of cash would be journalized as:

A) Debit Sales, credit Unearned Revenue.

B) Debit Unearned Revenue, credit Sales.

C) Debit Cash, credit Unearned Revenue.

D) Debit Unearned Revenue, credit Cash.

E) Debit Cash, credit Ticket sales payable.

57) A contingent liability is:

A) Always of a specific amount.

B) A potential obligation that depends on a future event arising from a past transaction or event.

C) An obligation not requiring future payment.

D) An obligation arising from the purchase of goods or services on credit.

E) An obligation arising from a future event.

58) Contingent liabilities are recorded or disclosed unless they are:

A) Probable and estimable.

B) Remote (very unlikely).

C) Reasonably possible.

D) Probable and not estimable.

E) Possible and estimable.

59) Contingent liabilities must be recorded if:

A) The future event is probable and the amount owed can be reasonably estimated.

B) The future event is remote.

C) The future event is reasonably possible but not estimable.

D) The amount owed cannot be reasonably estimated.

E) The future event is probable but not estimable.

60) Debt guarantees are:

A) Never disclosed in the financial statements.

B) Considered to be contingent liabilities.

C) A bad business practice.

D) Recorded as liabilities even though it is highly unlikely that the original debtor will default.

E) Considered to be an unearned revenue.

61) In the accounting records of a defendant, lawsuits:

A) Are known liabilities.

B) Should always be recorded.

C) Should always be disclosed.

D) Should be recorded if payment for damages is probable and the amount can be reasonably estimated.

E) Should never be recorded.

62) Uncertainties such as natural disasters are:

A) Not contingent liabilities because they are future events not arising from past transactions or events.

B) Contingent liabilities because they are future events arising from past transactions or events.

C) Disclosed because of their usefulness to financial statements.

D) Estimated liabilities because the amounts are uncertain.

E) Reported in the same way as debt guarantees.

63) The times interest earned ratio reflects:

A) A company's ability to pay its operating expenses on time.

B) A company's ability to pay interest expense.

C) A company's profitability.

D) The relation between income and assets.

E) The relation between assets and liabilities.

64) Interest expense is not:

A) Incurred on current liabilities.

B) Reported on the income statement.

C) A fixed expense.

D) Likely to fluctuate when sales change.

E) A factor in determining a company's borrowing risk.

65) Times interest earned is calculated by:

A) Multiplying interest expense by income.

B) Dividing interest expense by income before depreciation and interest expense.

C) Dividing income before interest expense and income taxes by interest expense.

D) Multiplying interest expense by income before interest expense.

E) Dividing income before interest expense by interest expense and income taxes.

66) If the times interest earned ratio:

A) Increases, then risk increases.

B) Increases, then risk decreases.

C) Is greater than 1.5, the company is in default.

D) Is less than 1.5, the company is carrying too little debt.

E) Is greater than 3.0, the company is likely carrying too much debt.

67) A company had interest expense of $5,000, income before interest expense and income taxes of $17,000, and net income of $9,400. The company's times interest earned ratio equals:

A) 0.5.

B) 1.8.

C) 1.9.

D) 3.4.

E) 0.3.

68) The correct times interest earned computation is:

A) (Net income + Interest expense + Income taxes)/Interest expense.

B) (Net income + Interest expense − Income taxes)/Interest expense.

C) (Net income − Interest expense − Income taxes)/Interest expense.

D) (Net income − Interest expense + Income taxes)/Interest expense.

E) Interest expense/(Net income + Interest expense − Income taxes expense).

69) 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:

A) 0.29

B) 3.50

C) 2.50

D) 1.75

E) 0.50

70) A company's interest expense is $8,000. Its income before interest expense and income taxes is $32,000. Its net income is $9,600. The company's times interest earned ratio equals:

A) 0.25.

B) 0.30.

C) 0.83.

D) 3.33.

E) 4.0.

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

A) Interest.

B) Principal.

C) Face Value.

D) Cash.

E) Accounts Payable.

72) A short-term note payable:

A) Is a written promise to pay a specified amount on a stated future date within one year or the company's operating cycle, whichever is longer.

B) Is a contingent liability.

C) Is an estimated liability.

D) Is not a liability until the due date.

E) Cannot be used to extend the payment period for an account payable.

73) Short-term notes payable:

A) Cannot replace an account payable.

B) Can be issued in return for money borrowed from a bank.

C) Are not negotiable.

D) Are a conditional promise to pay.

E) Rarely involve interest charges.

74) On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)

A) $0

B) $75

C) $900

D) $225

E) $300

75) On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year.)

A) No adjusting entry is required.

B) Debit Interest Payable, $120; credit Interest Expense, $120.

C) Debit Interest Expense, $120; credit Interest Payable, $120.

D) Debit Interest Expense, $720; credit Interest Payable, $720.

E) Debit Interest Payable, $240; credit Interest Expense, $240.

76) On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value (principal plus interest) of the note on March 1? (Use 360 days a year.)

A) $9,000

B) $720

C) $9,120

D) $9,720

E) $9,240

77) On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. Alan made the appropriate year-end accrual. What is the journal entry as of March 1 to record the payment of the note assuming no reversing entry was made? (Use 360 days a year.)

A) Debit Notes Payable $9,000; debit Interest Payable $120; credit Cash $9,120.

B) Debit Cash $9,240; credit Notes Payable $9,240.

C) Debit Notes Payable $9,240; credit Interest Payable $120; credit Interest Expense $120; credit Cash $9,000.

D) Debit Notes Payable $9,000; debit Interest Payable $120; debit Interest Expense $120; credit Cash $9,240.

E) Debit Notes Payable $9,000; debit Interest Expense $240; credit Cash $9,240.

78) Employers' responsibilities for payroll do not include:

A) Providing each employee with an annual report of his or her wages subject to FICA and federal income taxes along with the amount of these taxes withheld.

B) Filing Form 941, the Employer's Quarterly Federal Tax Return.

C) Filing Form 940, the Annual Federal Unemployment Tax Return.

D) Maintaining individual earnings records for each employee.

E) Recording the employee Federal Income Tax withholding as a debit to the Federal Income Tax Expense account.

79) Gross pay is:

A) Take-home pay.

B) Total compensation earned by an employee before any deductions.

C) Salaries after taxes are deducted.

D) Deductions withheld by an employer.

E) The amount of the paycheck.

80) The employer should record deductions from employee pay as:

A) Employee receivables.

B) Payroll taxes.

C) Current liabilities.

D) Wages payable.

E) Employee payables.

81) FICA taxes include:

A) Social Security and Medicare taxes.

B) Charitable giving.

C) Employee state income tax.

D) Federal and state unemployment taxes.

E) Farming income crop adjustment taxes.

82) The amount of federal income taxes withheld from an employee's paycheck is determined by:

A) Current earnings for the pay period and number of withholding allowances the employee claims.

B) The employer's merit rating.

C) The amount of social security taxes withheld.

D) Multiplying the gross pay by 6.2%.

E) Tax rates provided by the state in which the employee works.

83) Recording employee payroll deductions may involve:

A) Liabilities to the employer.

B) Liabilities to federal and state governments.

C) Expenses for state unemployment.

D) Expenses for the gross wages and salaries.

E) Expenses for the employer portion of any medical insurance.

84) The Federal Insurance Contributions Act (FICA) requires that each employer file a:

A) W-4.

B) Form 941.

C) Form 1040.

D) Form 1099.

E) W-2.

85) An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $128,400. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is:

A) $2,294.00.

B) $536.50.

C) $2,830.50.

D) $1,757.50.

E) $8,950.50.

86) Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax for social security is 6.2% of the first $128,400 of employee earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of .6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,325.17. Her net pay for the month is: (Round your intermediate calculations to two decimal places.)

A) $6,422.71

B) $6,246.94

C) $6,302.94

D) $5,868.94

E) $7,194.11

87) Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,325.17. What is the total amount of taxes withheld from the Portia's earnings? (Round your intermediate calculations to two decimal places.)

A) $3,097.17

B) $2,443.21

C) $1,957.06

D) $1,722.00

E) $1,495.36

88) Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. His net pay for the month is:

A) $3,510.14

B) $3,857.30

C) $4,190.84

D) $4,538.00

E) $3,162.98

89) Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. What is the total amount of taxes withheld from the Trey's earnings?

A) $1,375.02

B) $746.50

C) $962.06

D) $1,027.86

E) $680.70

90) The annual Federal Unemployment Tax Return is:

A) Form 940.

B) Form 1099.

C) Form 104.

D) Form W-2.

E) Form W-4.

91) The Wage and Tax Statement given to each employee annually is:

A) Form 940.

B) Form 941.

C) Form 1040.

D) Form W-2.

E) Form W-4.

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

A) Credit union.

B) FDIC insured bank.

C) Federal depository bank.

D) National bank.

E) Federal Reserve Bank.

93) An employer's federal unemployment taxes (FUTA) are reported:

A) Annually.

B) Semiannually.

C) Quarterly.

D) Monthly.

E) Weekly.

94) The rate that a state assigns reflecting a company's stability or instability in employing workers is the:

A) FICA rate.

B) Tax withholding rate.

C) Pay rate.

D) Credit rating.

E) Merit rating.

95) Employer payroll taxes:

A) Are added expenses beyond that for the wages and salaries earned by employees.

B) Represent the federal taxes withheld from employees.

C) Represent the social security taxes withheld from employees.

D) Are paid by the employee.

E) Are payable for up to a maximum $117,000 of employee earnings.

96) All of the following are employer payroll taxes except:

A) Social Security tax equal to that withheld from employees.

B) Medicare tax equal to that withheld from employees.

C) State unemployment tax.

D) Federal unemployment tax.

E) Federal income tax equal to that withheld from employees.

97) FUTA taxes are:

A) Social Security taxes.

B) Medicare taxes.

C) Employee income taxes.

D) Unemployment taxes.

E) Employee deductions.

98) Which of the following is not true regarding the unemployment insurance program?

A) It requires withholding from employee wages.

B) It is administered by each state.

C) It provides unemployment benefits to qualified workers.

D) It adjusts rates paid by employers based on their merit rating.

E) It is a joint federal and state program.

99) The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $9,900. What is the amount of total unemployment taxes the employer must pay on this employee's wages?

A) $336.00.

B) $420.00.

C) $534.60.

D) $594.00.

E) $0.00.

100) The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $2,900 in the current period and had cumulative pay for prior periods of $5,800. What is the amount of unemployment taxes the employer must pay on this employee's wages for the current period?

A) $420.00.

B) $348.00.

C) $72.00.

D) $174.00.

E) $0.00.

101) An employee earned $43,300 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum per year and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is:

A) $8,950.50.

B) $5,638.05.

C) $3,312.45.

D) $2,684.60.

E) $0, since the FICA tax is only deducted from an employee's pay.

102) An employee earned $100,000 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum per year and the rate for FICA Medicare 1.45% of all earnings. The employer's total FICA payroll tax for this employee is:

A) $7,650.

B) $9,830.

C) $879.

D) $8,950.

E) $0, since the FICA tax is only deducted from an employee's pay.

103) An employee earned $62,500 during the year working for an employer. The FICA tax rate for Social Security is 6.2% of the first $128,400 of employee earnings per 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 total unemployment taxes the employee must pay?

A) $101.50

B) $56.00

C) $378.00

D) $434.00

E) $0.00

104) 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 $128,400 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.)

A) $2,009.21

B) $1,131.31

C) $2,506.48

D) $420.00

E) $1,054.04

105) Triston Vale is paid on a monthly basis. For the month of January of the current year, he earned a total of $5,210. FICA tax for Social Security is 6.2% on the first $128,400 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 $885.70. What is the amount of the employer's payroll taxes expenses for this employee?

A) $1,284.27

B) $312.60

C) $398.57

D) $711.17

E) $1,596.87

106) An estimated liability:

A) Is an unknown liability of a certain amount.

B) Is a known obligation of an uncertain amount that can be reasonably estimated.

C) Is a liability that may occur if a future event occurs.

D) Can be the result of a lawsuit.

E) Is not recorded until the amount is known for certain.

107) Estimated liabilities commonly arise from all of the following except:

A) Warranties.

B) Vacation benefits.

C) Pension benefits.

D) Employee benefits.

E) Unearned revenues.

108) Belkin Co. provides medical care and insurance benefits to its retirees. In the current year, Belkin agrees to contribute 5% of the employees' $250,000 gross salaries to a retirement program. What is the amount of employee benefits expense for the current period?

A) $25

B) $100

C) $250

D) $12,500

E) $25,000

109) Employees earn vacation pay at a rate of one day per month. The company estimated and must expense $1,500 of accrued vacation benefits for the year. Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits?

A) Debit Vacation Benefits Expense $1,500; credit Prepaid Vacation $1,500.

B) Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500.

C) Debit Payroll Tax Expense $1,500; credit Payroll Taxes Payable $1,500.

D) Debit Prepaid Vacation Benefits $1,500; credit Vacation Benefits Payable $1,500.

E) Debit Prepaid Benefits Payable $1,500; credit Vacation Benefits Expense $1,500.

110) Employee vacation benefits:

A) Are estimated liabilities.

B) Are contingent liabilities.

C) Are recorded as an expense when the employee takes a vacation.

D) Are recorded as an expense when the employee retires.

E) Increase net income.

111) A company sold $12,000 worth of bicycles with an extended warranty. The company's experience is that warranty expense averages 2% of sales. The company should:

A) Consider the warranty expense a remote liability since the rate is only 2%.

B) Recognize warranty expense at the time the warranty work is performed.

C) Recognize warranty expense and liability in the year of the sale.

D) Consider the warranty expense a contingent liability.

E) Recognize warranty liability when the company purchases the bicycles.

112)  A company sold $12,000 worth of bicycles with an extended warranty. The company's experience is that warranty expense averages 2% of sales. The current period's entry to record the warranty expense is:

A) Debit Warranty Expense $240; credit Cash $240.

B) Debit Prepaid Warranties $240; credit Warranty Expense $240.

C) Debit Estimated Warranty Liability $240; credit Cash $240.

D) Debit Sales Allowances $240; credit Estimated Warranty Liability $240.

E) Debit Warranty Expense $240; credit Estimated Warranty Liability $240.

113) The deferred income tax liability:

A) Results from the income tax expense reported on the income statement differing from the amount of income taxes payable to the government.

B) Is a contingent liability.

C) Can result in a deferred income tax asset.

D) Is never recorded.

E) Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary.

114) A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:

A) Debit Warranty Expense $7,400; credit Sales $7,400.

B) Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.

C) Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400.

D) Debit Estimated Warranty Liability $7,400; credit Cash $7,400.

E) No entry is recorded until the items are returned for warranty repairs.

115) A company has a selling price of $1,800 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $150 each. During November, the company sold 30,000 printers, and 400 printers were serviced under the warranty. What is the company's warranty expense for the month of November?

A) $26,000

B) $45,000

C) $55,000

D) $60,000

E) $90,000

116) Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:

A) Debit Estimated Bonus Payable $32,500; credit Cash $32,500.

B) Debit Employee Bonus Expense $32,500; credit Bonus Payable $32,500.

C) No entry since the bonuses are not paid until January.

D) Debit Employee Bonus Expense $32,500; credit Prepaid Employee Bonus $32,500.

E) Debit Unearned Bonuses $32,500; credit Bonus Payable $32,500.

117) A payroll register does not include:

A) Pay period dates.

B) Hours worked.

C) Gross pay and net pay.

D) Deductions.

E) Prior year's earnings

118) The wage bracket withholding table is used to:

A) Compute social security withholding.

B) Compute Medicare withholding.

C) Compute federal income tax withholding.

D) Prepare the W-4.

E) Compute unemployment taxes.

119) A table that shows the amount of federal income tax to be withheld from an employee's pay is the:

A) Form 941.

B) Tax table.

C) Wage bracket withholding table.

D) W-2.

E) W-4.

120) Companies may use a special bank account solely for the purpose of paying employees, by depositing an amount equal to the total employees' net pay into the account each pay period and drawing the employees' payroll checks on the account. This account is a(n):

A) Federal depository bank account.

B) Employee's Individual Earnings account.

C) Employees' bank account.

D) Payroll register account.

E) Payroll bank account.

121) If a company uses a special payroll bank account:

A) The company does not need to issue paychecks.

B) The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account.

C) The company must use a federal depository bank for the payroll bank account.

D) There is no need for a payroll register.

E) There is no need to issue W-2's.

122) Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales?

A) Debit Cash $8,000; credit Sales $7,360; credit Sales Taxes Payable $640.

B) Debit Sales Taxes Payable $640; debit Cash $7,360; credit Sales $8,000.

C) Debit Cash $8,000; credit Sales $8,000; and record the taxes when paid.

D) Debit Cash $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.

E) Debit Accounts Receivable $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.

123) Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

A) Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.

B) Debit Sales Taxes Payable $4,680; debit Cash $73,220; credit Sales $78,000.

C) Debit Cash $78,000; credit Sales $78,000; and record the taxes when paid.

D) Debit Cash $78,000; credit Sales $73,320; credit Sales Taxes Payable $4,680.

E) Debit Accounts Receivable $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.

124) All of the following statements regarding long-term liabilities are true except?

A) Liabilities not expected to be paid within the longer of one year or the company's operating cycle are reported as long-term liabilities.

B) Long-term liabilities include long-term notes payable, warranty liabilities, lease liabilities, and bonds payable.

C) Liabilities that do not have a fixed due date, but are payable on demand, are reported as long-term liabilities.

D) Long-term liabilities can be reported on the balance sheet in a single total or in multiple categories.

E) A single long-term liability can be divided between current and noncurrent sections on the balance sheet.

125) On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue accounts payable. What is the journal entry needed to record the transaction by Indigo Company?

A) Debit Notes Payable $4,500; credit Accounts Payable $4,500.

B) Debit Accounts Payable $4,500; credit Notes Payable $4,500.

C) Debit Accounts Receivable $4,500; credit Notes Payable $4,500.

D) Debit Cash $4,500; credit Notes Payable $4,500.

E) Debit Sales $4,500; credit Notes Payable $4,500.

126) On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account. What is the journal entry that Indigo Company would make, when it records payment of the note on the maturity date? (Use 360 days a year.)

A) Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575.

B) Debit Notes Payable $4,500; credit Interest Expense $75, credit Cash $4,425.

C) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Payable $4,500.

D) Debit Notes Payable $4,500; debit Interest Expense $112; credit Cash $4,612.

E) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Receivable $4,500.

127) 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?

A) Debit Cash $7,500; credit Accounts Payable $7,500.

B) Debit Accounts Payable $7,500; credit Notes Payable $7,500.

C) Debit Cash $7,650; credit Notes Payable $7,650.

D) Debit Cash $7,500; credit Notes Payable $7,500.

E) Debit Notes Receivable $7,500; credit Cash $7,500.

128) 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 payment of the note by Jarrett Company on the maturity date?

A) Debit Notes Payable $7,500; credit Interest Expense $150; credit Cash $7,350.

B) Debit Notes Payable $7,500; credit Cash $7,500.

C) Debit Notes Payable $7,650; credit Cash $7,650.

D) Debit Notes Payable $7,500; debit Interest Expense $150; credit Cash $7,650.

E) Debit Cash $7,650; credit Interest Revenue $150; credit Notes Receivable $7,500.

129) An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $128,400 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.)

A) $4,827.00

B) $4,672.25

C) $4,628.25

D) $4,386.25

E) $4,430.25

130) During the first week of January, an employee works 46 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour, and her wages are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $128,400 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 $80 in federal income taxes withheld. What is the amount of this employee's gross pay for the first week of January?

A) $736

B) $784

C) $1,104

D) $1,156

E) $1,004

131) During the first week of January, an employee works 46 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour, and her wages are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $128,400 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 $80 in federal income taxes withheld. What is the amount of this employee's net pay for the first week of January? (Round your intermediate calculations to two decimal places.)

A) $784.00

B) $139.98

C) $724.02

D) $644.02

E) $923.98

132) The chief executive officer earns $10,000 per month. As of May 31, her gross pay was $50,000. The tax rate for Social Security is 6.2% of the first $128,400 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?

A) $7,347

B) $620

C) $1,240

D) $268

E) $290

133) 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 $128,400 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 - Medicare withheld from this employee for the month of June?

A) $7,347.00

B) $620.00

C) $1,240.00

D) $268.25

E) $290.00

134) An employee earned $4,600 in February working for an employer. The FICA tax rate for Social Security is 6.2% of the first $128,400 earned during each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The employee has $644 in federal income taxes withheld and has voluntary deductions for health insurance of $50 and contributes 10% of gross pay to a retirement plan each month. The employer pays the $200 remainder of the health insurance premium and an equal amount of contribution to the retirement fund. What is the amount of net pay for the employee for the month of February?

A) $3,094.10

B) $3,496.00

C) $3,604.10

D) $3,446.00

E) $2,634.10

135) An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $128,400 of earnings 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 the employer should record as payroll taxes expense for the employee for the month of January?

A) $420.75

B) $464.75

C) $602.75

D) $841.50

E) $750.75

136) An employee earned $4,600 in February working for an employer. Cumulative earnings of the previous pay periods are $4,800. The FICA tax rate for Social Security is 6.2% of the first $128,400 of earnings 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 the employer should record as payroll taxes expense for the month of February?

A) $581.90

B) $110.00

C) $351.90

D) $483.90

E) $230.00

137) All of the following statements regarding FICA taxes are true except:

A) FICA taxes are deducted from the employee.

B) Employers must pay withheld FICA taxes to the IRS.

C) The amount of FICA deducted from the employee is credited to a liability account.

D) FICA taxes include Medicare taxes and state income taxes.

E) An employer must pay FICA taxes equal to the amount withheld from the employee.

138) Athena Company provides employee health insurance that costs $5,000 per month. In addition, the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:

A) Debit to Medical Insurance Payable $5,000.

B) Debit to Employee Retirement Program Payable $6,000.

C) Debit to Employee Benefits Expense $11,000.

D) Credit to Employee Benefits Expense $11,000.

E) Debit to Payroll Taxes Expense $11,000.

139) Athens Company's salaried employees earn two weeks of vacation per year. The company estimated and must expense $6,600 of accrued vacation benefits for the year. Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits?

A) Debit Vacation Benefits Expense $16,500; credit Vacation Benefits Payable $16,500.

B) Debit Vacation Benefits Expense $6,600; credit Vacation Benefits Payable $6,600.

C) Debit Vacation Benefits Expense $17,160; credit Vacation Benefits Payable $17,160.

D) Debit Vacation Benefits Payable $6,600; credit Vacation Benefits Expense $6,600.

E) Debit Vacation Benefits Payable $16,500; credit Vacation Benefits Expense $16,500.

140) All of the following statements related to estimated liabilities are true except:

A) Are a known obligation of an uncertain amount that can be reasonably estimated.

B) Include vacation benefits or paid absences.

C) Depends on the likelihood that a future event will occur.

D) Entry to record includes a debit to an expense account and credit to a payable account.

E) Can be both current and long term.

141) All of the following statements related to recording warranty expense are true except:

A) Recording estimated warranty expense requires a debit to Warranty Expense.

B) Warranty expense should be recorded in the period when the warranty service is performed.

C) Estimated warranty expense is recorded when revenue from the sale of the product or service is reported.

D) The seller reports a warranty obligation as a liability.

E) Warranty costs are probable and the amount can be estimated.

142) 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 estimated warranty expense for the month is:

A) Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.

B) Debit Warranty Expense $5,000; credit Estimated Warranty Liability $5,000.

C) Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.

D) Debit Estimated Warranty Liability $9,400; credit Warranty Expense $9,400.

E) Debit Estimated Warranty Liability $17,800; credit Warranty Expense $17,800.

143) 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:

A) Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.

B) Debit Warranty Expense $9,400; credit Estimated Warranty Liability $9,400.

C) Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.

D) Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400.

E) Debit Estimated Warranty Liability $17,800; credit Parts Inventory $17,800.

144) 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 record the estimated warranty liability at the end of the month is:

A) Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.

B) Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.

C) Debit Warranty Expense $25,500; credit Estimated Warranty Liability $25,500.

D) Debit Estimated Warranty Liability $14,000; credit Warranty Expense $14,000.

E) Debit Estimated Warranty Liability $11,500; credit Warranty Expense $11,500.

145) 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:

A) Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.

B) Debit Estimated Warranty Liability $25,500; credit Warranty Expense $25,500.

C) Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.

D) Debit Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500.

E) Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000.

146) If a company has advance subscription sales totaling $45,000 for the upcoming year, when four quarterly journals will mailed to customers, the receipt of cash would be journalized as:

A) Debit Cash $45,000; credit Unearned Revenue $45,000.

B) Debit Unearned Revenue $45,000; credit Sales $45,000.

C) Debit Cash $45,000, credit Accounts Payable $45,000.

D) Debit Sales $45,000, credit Unearned Revenue $45,000.

E) Debit Prepaid Subscriptions $45,000, credit Sales $45,000.

147) A company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers. When the company mails the first quarterly journal to customers, it should record:

A) Debit Prepaid Subscriptions $33,750; credit Unearned Revenue $33,750.

B) Debit Unearned Revenue $45,000; credit Cash $45,000.

C) Debit Cash $11,250, credit Sales $11,250.

D) Debit Unearned Revenue $11,250, credit Sales $11,250.

E) Debit Prepaid Subscriptions $11,250, credit Sales $11,250.

148) Carson Company sells sporting tickets in advance of the event for $500,000. The journal entry to record the sale is:

A) Debit Prepaid Sales $500,000; credit Sales Revenue $500,000.

B) Debit Cash $500,000; credit Accounts Payable $500,000.

C) Debit Cash $500,000, credit Unearned Ticket Revenue $500,000.

D) Debit Cost of Sales $500,000, credit Inventory $500,000.

E) No journal entry is required.

149) On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as replacement of an account payable with Erikson Company. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)

A) $0

B) $80

C) $320

D) $960

E) $160

150) On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as replacement of an account payable with Erikson Company. What is the journal entry that should be recorded by Watson Enterprises upon signing the note?

A) Debit Accounts Receivable $24,000; credit Notes Receivable $24,000.

B) Debit Accounts Payable $24,000; credit Notes Payable $24,000.

C) Debit Accounts Payable $24,160; credit Notes Payable $24,160.

D) Debit Notes Payable $24,000; debit Interest Expense $160; credit Accounts Payable $24,160.

E) Debit Notes Payable $24,000; debit Interest Expense $160; credit Cash $24,160.

151) On September 1, Knack Company signed a $50,000, 90-day, 5% note payable with Central Savings Bank. What is the journal entry that should be recorded by Knack upon maturity of the note? (Use 360 days a year.)

A) Debit Interest Expense $625; credit Interest Payable $625.

B) Debit Notes Payable $50,000; credit Interest Revenue $625; credit Cash $49,375.

C) Debit Cash $50,625; credit Notes Receivable $50,625.

D) Debit Notes Payable $50,625; credit Cash $50,625.

E) Debit Notes Payable $50,000; debit Interest Expense $625; credit Cash $50,625.

152) A company has interest expense of $52,000, income taxes expense of $121,000, and net income of $281,000. The company's times interest earned ratio equals:

A) 8.73.

B) 5.40.

C) 7.73.

D) 2.33.

E) 0.11.

153) Match each of the following terms with the appropriate definitions.

a. Employee benefits f. Gross pay

b. Short-term note payable g. Times interest earned

c. Payroll bank account h. Warranty

d. Federal depository bank i. Medicare taxes

e. Payroll register j. Current liabilities

154) Match each of the following terms a through j with the appropriate definitions 1-10.

a. FUTA taxes

b. Contingent liability

c. Merit rating

d. Long-term liability

e. Estimated liability

f. Net pay

g. Wage bracket withholding table

h. Warranty

i. Withholding allowance

j. FICA taxes

155) Classify each of the following items as either:

A. Current liability

B. Long-term liability

C. Not a liability

1. 60-day note payable

2. A loan due in 3 months

3. Salaries payable

4. Debt guarantees

5. FICA taxes payable

6. Income taxes payable

7. A note payable due in 45 days

8. A loan due in 10 years

9. Warranty work completed this year

10. Accounts payable

156) Identify each of the following payroll taxes as an (A) Employer Payroll Tax, (B) Employee Payroll Tax, or (C) Both.

1. FICA–Social Security taxes

2. FICA–Medicare taxes

3. FUTA (federal unemployment taxes)

4. SUTA (state unemployment taxes)

5. Employee federal income taxes

6. Employee state and local income taxes

157) Define liabilities and explain the difference between current and long-term liabilities.

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

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

160) Describe employer responsibilities for reporting payroll taxes. (To the extent possible, reference the form to be filed for each tax.)

161) Explain how to calculate times interest earned and how it is used to analyze a company's risk.

162) What is a short-term note payable? Explain the accounting issues related to notes payable.

163) Explain the responsibilities of and the accounting by employers for deductions from employee payroll.

164) Identify and explain the types of employer payroll taxes.

165) What are estimated liabilities? Cite at least two examples and explain why they are classified as estimated liabilities.

166) Identify and discuss the factors involved in computing federal income taxes withheld from employees.

167) 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.

168) A company's income before interest expense and income taxes is $302,400, and its interest expense is $62,000. Calculate the company's times interest earned ratio.

169) A company's income before interest expense and income taxes in Year 1 and Year 2 is $225,000 and $250,000, respectively. Its interest expense was $45,000 for both years. Calculate the company's times interest earned ratio, and comment on its level of risk.

170) A company's income before interest expense and income taxes in Year 1 and Year 2 is $487,500 and $427,000, respectively. Its interest expense was $125,000 for both years. Calculate the company's times interest earned ratio, and comment on its level of risk.

171) Floral Depot's income before interest expense and income taxes was $5,900 million, and interest expense was $38 million. Calculate Floral Depot's times interest earned.

172) Kelso had income before interest expense and income taxes of $570 million and interest expense of $37 million. Calculate Kelso' times interest earned.

173) SaveMart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. Valueland had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned for each company and comment on the results.

174) On November 1, Casey's Snowboards signed a $12,000, 90-day, 5% note payable to cover a past due account payable.

a. What amount of interest expense on this note should Casey's Snowboards report on year-end December 31?

b. Prepare Casey's journal entry to record the issuance of the note payable.

c. Prepare Casey's adjusting journal entry at the end of the year

d. Prepare Casey's journal entry to record the payment of the note on January 30 of the following year.

175) On June 1, Jasper Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable.

a. What is the total amount of interest to be paid on this note?

b. Prepare Jasper Company's general journal entry to record the issuance of the note payable.

c. Prepare Jasper Company's general journal entry to record the payment of the note on September 29.

176) On September 15, SkateWorld borrowed $70,000 cash from Mutual Bank by signing a 6%, 60-day note payable.

a. Prepare SkateWorld's journal entry to record the issuance of the note payable.

b. Prepare SkateWorld's journal entry to record the payment of the note at maturity.

177) On December 1, Williams Company borrowed $45,000 cash from Second National Bank by signing a 90-day, 9% note payable.

a. Prepare Williams' journal entry to record the issuance of the note payable.

b. Prepare Williams' journal entry to record the accrued interest due at December 31.

c. Prepare Williams' journal entry to record the payment of the note on March 1 of the next year.

178) A company borrowed $60,000 by signing a 60-day, 5% note payable from its bank. Compute the total cash payment due on the note's maturity date.

179) Calculate the total amount of FICA withholding for an employee whose pay is $2,400 for the first pay period of the year. The tax rate for FICA–Social Security is 6.2% and the tax rate for FICA–Medicare is 1.45%.

180) An employee earns $8,500 for the current period. The cumulative earnings of previous pay periods is $100,900. Social security tax applies to the first $128,400 of employee earnings. Calculate the total and individual amounts to be withheld for social security (6.2%), Medicare (1.45%) and federal income tax (15%).

181) A company has three employees. Total salaries for the month of January were $8,000. The federal income tax rate for all employees is 15%. The FICA–social security tax rate is 6.2% and the FICA–Medicare tax rate is 1.45%. Calculate the amount of employee taxes withheld and prepare the company's journal entry to record the January payroll assuming these were the only deductions.

182) A company has 90 employees and a weekly payroll of $117,000. The FICA–social security tax withheld totals $7,254 and the FICA–Medicare tax withheld totals $1,696.50. The total withholding for federal income tax is $16,500. Prepare the journal entry to accrue this week's salaries expense and withholdings.

183) 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 5.4% 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.)

184) The payroll records of a company provided the following data for the weekly pay period ended December 7:

The FICA social security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this week's wages paid to each employee. The federal and state unemployment tax rates are 0.6% and 5.4%, respectively, on the first $7,000 paid to each employee. Prepare the journal entries to (a) accrue the payroll and (b) record payroll taxes expense.

185) A company's payroll for the week ended May 15 included earned salaries of $20,000. All of that week's pay is subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45%. In addition, the company withholds the following amounts for this weekly pay period: $900 for medical insurance, $3,400 for federal income taxes, and $180 for union dues.

a. Prepare the general journal entry to accrue the payroll.

b. The company is subject to state unemployment taxes at the rate of 5.4% and federal unemployment taxes at the rate of 0.6%. By May 15, some employees had earned over $7,000, so only $11,000 of the $20,000 weekly gross pay was subject to unemployment tax. Prepare the general journal entry to accrue the employer's payroll tax expense.

186) A company's employees had the following earnings records at the close of the current payroll period:

The company's payroll taxes expense on each employee's earnings includes: FICA Social Security taxes of 6.2% on the first $128,400 of earnings plus 1.45% FICA Medicare on all wages; 0.6% federal unemployment taxes on the first $7,000; and 5.4% state unemployment taxes on the first $7,000. Compute the employer's total payroll taxes expense for the current pay period.

187) An employer has an employee benefit package that includes employer-paid health insurance and an employer-paid retirement program. The March payroll included contributions of $5,500 for health insurance, and 10% of the employees' $120,000 gross salaries for the employee retirement program. Prepare the journal entry to record these employee benefits.

188) A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 5% of sales. During the month of July, the company performed warranty work and used $11,000 of parts to perform the warranty work. Sales for July were $450,000.

1. Record the warranty expense for the month of July.

2. Record the costs of the warranty work completed in June.

3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the account balance at July 31?

189) A company sells tablet computers for $1,300 each. The price includes a two-year warranty. During the current year, the company sells 400 tablets. On the basis of past experience, the warranty costs are estimated to be $280 per tablet. The actual warranty costs (paid in cash) by the company during the current year were $65,000. Prepare general journal entries to record the (a) estimated warranty expense and (b) warranty repair costs during current year.

190) A company sells sofas with a 6-month warranty. In January, the company sold 100,000 sofas at $1,750 each; and 500 sofas needed repairs during that same month. The total repairs amounted to $85,000 costs from the upholstery materials inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January.

191) Early Co. offers its employees a bonus equal to 2% of the company's net income. The estimated bonus for the year is $15,686. Prepare the general journal entry to record the estimated employee bonus plan expense.

192) A company's employer payroll tax rates are 0.6% for federal unemployment taxes, 5.4% for state unemployment taxes, 6.2% for FICA social security taxes on earnings up to $128,400, and 1.45% for FICA Medicare taxes on all earnings. Compute the W-2 Wage and Tax Statement information required below for the following employees:

Employee Gross Earnings Federal Income Taxes

Withheld

A. Baylor $114,000 $17,600

C. Jasmine 52,000 8,200

A. Baylor C. Jasmine

W-2 Information: ________ ________

Federal Income Tax Withheld………….. ________ ________

Wages, Tips, Other Compensation……... ________ ________

Social Security Tax Withheld…………... ________ ________

Social Security Wages………………….. ________ ________

Medicare Tax Withheld………………… ________ ________

Medicare Wages………………………… ________ ________

193) The payroll records of a company provided the following data for the current weekly pay period ended March 12.

Assume that the Social Security portion of the FICA taxes is 6.2% on the first $128,400 and the Medicare portion is 1.45% of all wages paid to each employee for this pay period. The federal and state unemployment tax rates are 0.6% and 5.4%, respectively, on the first $7,000 paid to each employee. Calculate the net pay for each employee.

194) A company's payroll information for the month of May follows:

On May 31 the company issued Check No. 4625 payable to the Payroll Bank Account to pay for the May payroll. It issued payroll checks to the employees after depositing the check.

The federal and state unemployment tax rates are 0.6% and 5.4%, respectively, on the first $7,000 paid to each employee. The portion of May wages and salaries subject to these taxes were $6,000.

(1) Prepare the journal entry to record (accrue) the employer's payroll for May.

(2) Prepare the journal entry to record payment of the May payroll.

(3) Prepare the journal entry to record the employer's payroll taxes.

195) Cardinal Company sells merchandise for $24,000 cash on March 31. 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.

196) Star Recreation receives $48,000 cash in advance ticket sales for 12 home games. Record the advance ticket sales on April 30. Record the revenue earned for the first home game played on August 14.

197) On January 31, Ransom Company's payroll register showed that its employers earned $30,320 of office salaries and $82,750 of sales salaries. Withholdings from the employees' salaries include FICA Social Security taxes as the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $16,960 of federal income taxes, $3,350 of medical insurance deductions (which represents 50% of the total cost of the employee medical insurance), and $4,210 of 401(k) retirement contribution deductions. Ransom Company pays the other 50% of the employee insurance cost and matches the employee 401(k) contributions. Several employees earned more than $7,000 for the period which reduced salaries subject to unemployment to $104,000. No employees exceeded the FICA-Social Security taxable wage base.

1. Prepare the journal entry to record Ransom Company's January 31 payroll expenses and liabilities.

2. Prepare the journal entry to record Ransom Company's employer payroll taxes resulting from the January 31 payroll. Ransom's merit rating reduces its state unemployment (SUTA) to 5.4% of the first $7,000 paid each employee. The federal unemployment tax (FUTA) rate is 0.6%.

3. Prepare the journal entry to record Ransom's additional employee expenses.

198) 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 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.

199) Logitech Company pays its employees for two weeks of vacation each year. The company estimated and must expense $9,160 of accrued vacation benefits for the year. Prepare the year-end adjusting entry to record accrued vacation benefits.

200) Hollow Company provides you with following information for two of its employees. The company is subject to the following taxes.

Compute amounts for each of these four taxes as applied to each employee's gross earnings for November.

201) Deacon Company provides you with following information related to payroll transactions for the month of May. Prepare journal entries to record the transactions for May.

a. Recorded the May payroll using the payroll register information given above.

b. Recorded the employer's payroll taxes resulting from the May payroll. The state unemployment tax rate is 5.4% of the first $7,000 paid each employee. Only $42,000 of the current month's salaries are subject to unemployment taxes. The federal rate is 0.6%.

c. Issued a check to Reliant Bank in payment of the May FICA and employee taxes.

d. Issued a check to the state for the payment of the SUTA taxes for the month of May.

e. Issued a check to Reliant Bank in payment of the employer's quarterly FUTA taxes for the first quarter in the amount of $1,020.

202) Sparks Company entered into the following transactions involving short-term notes payable. On June 18, Sparks purchased $25,000 merchandise from EquipCo., terms 2/10, n/30. Sparks uses the perpetual inventory system. On July 19, Sparks replaced the June 18 account payable with a 60-day, $12,000 note bearing 4% annual interest in addition to paying $13,000 in cash. Sparks paid the amount due on the note at maturity.

1. Determine the maturity date for the note.

2. Prepare journal entries for all the preceding transactions and events.

203) Richardson Fields receives $31,680 cash in advance ticket sales for 11 home soccer games. Record the advance ticket sales on March 31. Record the revenue earned for the first game played on August 17.

204) Obligations due within one year or the company's operating cycle, whichever is longer, are ________.

205) ________ are probable future payments of assets or services that a company is presently obligated to make as a result of past transactions or events.

206) ________ are amounts received in advance from customers for future products or services.

207) ________ are amounts owed to suppliers for products or services purchased on credit.

208) A ________ is a potential obligation that depends on a future event arising from a past transaction or event.

209) Contingent liabilities are recorded in the accounts if the future event is ________ and the amount owed can be ________.

210) Banks authorized to accept deposits of amounts payable to the federal government, including amounts due for payroll taxes are ________.

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

212) Times interest earned is computed by dividing income before interest expense and income taxes by ________.

213) The difference between the amount borrowed and the amount repaid is referred to as ________.

214) A ________ is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.

215) The total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes is called ________.

216) Gross pay less all deductions is called ________.

217) The more ________ allowances an employee claims, the less federal income tax the employer will deduct from pay.

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

219) A ________ is a seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period.

220) Vacation benefits are a type of ________ liability.

221) To compute the amount of tax withheld from an employee's pay, employers can use a ________ table.

222) Companies with many employees often use a special ________ account to pay employees.