Current Liabilities | Test Bank – 10e

View Product website:

https://selldocx.com/docx/current-liabilities-test-bank-10e-1045

Student name:__________

TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
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.

⊚ true
⊚ false

2) Current liabilities are liabilities not due within one year (or the company's operating cycle if longer).

⊚ true
⊚ false

3) All expected future payments are liabilities.

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

7) Accounts payable, or trade accounts payable, are amounts owed to suppliers for products or services purchased on credit.

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

14) Uncertainties from future events such as natural disasters or new technologies are not contingent liabilities because they are future events not arising from past transactions.

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

20) If times interest earned falls below around 1.5, a company will likely be at risk of not being able to pay its liabilities.

⊚ true
⊚ false

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

⊚ true
⊚ false

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.

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

25) When a note is issued in one period but paid during the next period, interest expense should not be accrued until the note is paid.

⊚ true
⊚ false

26) Required payroll deductions include pension and health contributions, health and life insurance premiums, union dues, and donations.

⊚ true
⊚ false

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

⊚ true
⊚ false

28) The amount of FICA tax that employers must pay is one-third of the amount of the FICA taxes withheld from their employees.

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

31) Form W-4 is a cumulative record of an employee’s hours worked, accrued vacation benefits, and pension contributions.

⊚ true
⊚ false

32) Federal depository banks are authorized to accept deposits of amounts payable to the federal government.

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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.

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

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

⊚ true
⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
46) Which of the following statements regarding liabilities is false?

A) 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.
B) Potential future wages to be paid to employees should be recorded as liabilities.
C) Long-term liabilities are obligations due after one year, or the company’s operating cycle if longer.
D) Liabilities are classified 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 if longer) are:

A) Current assets.
B) Current liabilities.
C) Earned revenues.
D) Operating cycle liabilities.
E) Bills.

48) Obligations due after one year (or the company’s operating cycle if longer) are reported as:

A) Current assets.
B) Current liabilities.
C) Long-term liabilities.
D) Operating cycle liabilities.
E) Bills.

49) Which of the following statements regarding uncertainty in liabilities is false?

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 specific 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 it will be required to pay.

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) Which of the following pertaining to known liabilities is false?

A) They include accounts payable, notes payable, and payroll obligations.
B) They can arise from agreements or contracts.
C) They are measurable.
D) They can arise from laws.
E) They may depend on a future event occurring.

52) Accounts payable are:

A) Amounts owed to suppliers for products or services purchased on credit.
B) Amounts received in advance from customers for future services.
C) Estimated liabilities.
D) Also referred to as unearned revenues.
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 does not apply to unearned revenues?

A) May also be called deferred revenues.
B) They are amounts received in advance from customers for future products or services.
C) Gift cards are an example.
D) They can result from advance ticket sales.
E) Classified as a long-term asset.

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 that will never require a 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 in the financial statement notes 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 statement notes.
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 as a liability.
C) Should always be disclosed in financial statement notes.
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.
B) Contingent liabilities because they are future events arising from past transactions or events.
C) Disclosed in financial statement notes.
D) Recorded as liabilities.
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.
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 long-term liabilities.
B) Reported on the income statement.
C) A fixed expense.
D) Likely to vary due to short-term changes in sales or other operating activities.
E) A factor in determining a company's borrowing risk.

65) Times interest earned is calculated by:

A) Multiplying interest expense by net income.
B) Dividing interest expense by net income.
C) Dividing income before interest expense and income taxes by interest expense.
D) Multiplying interest expense by income before interest expense and income taxes.
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 $5,700, income before interest expense and income taxes of $17,800, and net income of $8,200. The company's times interest earned ratio equals:

A) 0.70.
B) 0.32.
C) 3.12.
D) 1.44.
E) 2.17.

68) 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.

69) 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).

70) A company's income before interest expense and income taxes is $150,000 and its interest expense is $60,000. Its times interest earned ratio is:

A) 0.40
B) 2.10
C) 1.00
D) 2.50
E) 1.10

71) 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

72) A company's interest expense is $18,000. Its income before interest expense and income taxes is $117,000. Its net income is $46,800. The company's times interest earned ratio equals:

A) 6.500.
B) 0.400.
C) 0.380.
D) 0.154.
E) 2.500.

73) 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) 4.00.

74) When a note comes due, the difference between the amount borrowed and the amount repaid is:

A) Interest.
B) Principal.
C) Face Value.
D) Cash.
E) Accounts Payable.

75) A short-term note payable:

A) Is a written promise to pay a specified amount on a stated future date within one year.
B) Is a contingent liability.
C) Is an estimated liability.
D) Is not a liability until the due date.
E) Cannot be used to replace an account payable.

76) Short-term notes payable:

A) Cannot replace an account payable.
B) Can be issued in return for money borrowed from a bank.
C) Are normally categorized as noncurrent liabilities.
D) Are a conditional promise to pay.
E) Rarely involve interest charges.

77) On December 1, Victoria Company signed a 90-day, 8% note payable, with a face value of $6,600. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)

A) $132
B) $44
C) $88
D) $528
E) $0

78) 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

79) On November 1, Alan Company signed a 120-day, 9% note payable, with a face value of $25,200. What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year.)

A) Debit Interest Expense, $504; credit Interest Payable, $504.
B) Debit Interest Expense, $378; credit Interest Payable, $378.
C) Debit Interest Payable, $756; credit Interest Expense, $756.
D) No adjusting entry is required.
E) Debit Interest Payable, $252; credit Interest Expense, $252.

80) 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.

81) On November 1, Alan Company signed a 120-day, 12% note payable, with a face value of $10,800. What is the maturity value (principal plus interest) of the note on March 1? (Use 360 days a year.)

A) $10,944
B) $11,232
C) $11,016
D) $10,800
E) $11,088

82) 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

83) On November 1, Alan Company signed a 120-day, 9% note payable, with a face value of $48,000. 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 $48,000; debit Interest Expense $1,440; credit Cash $49,440.
B) Debit Notes Payable $49,440; credit Interest Payable $720; credit Interest Expense $720; credit Cash $48,000.
C) Debit Cash $48,720; credit Notes Payable $48,720.
D) Debit Notes Payable $48,000; debit Interest Payable $720; credit Cash $48,720.
E) Debit Notes Payable $48,000; debit Interest Payable $720; debit Interest Expense $720; credit Cash $49,440.

84) 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.

85) 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.

86) 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.

87) The employer should record payroll deductions as:

A) Employee receivables.
B) Payroll taxes.
C) Current liabilities.
D) Wages payable.
E) Employee payables.

88) FICA taxes include:

A) Social Security and Medicare taxes.
B) Charitable giving.
C) Employee state income tax.
D) Federal and state unemployment taxes.
E) Employee state income tax.

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

A) The employee’s income 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.

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

91) 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.

92) An employee earned $46,800 during the year working for an employer when the maximum limit for Social Security was $132,900. 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) $678.60.
B) $3,580.20.
C) $2,223.00.
D) $6,481.80.
E) $2,901.60.

93) An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $132,900. 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.

94) Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of 8,538. The FICA tax for social security is 6.2% of the first $132,900 of employee earnings 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 $1,416.67. Her net pay for the month is: (Round your intermediate calculations to two decimal places.)

A) $6,591.97
B) $6,412.17
C) $6,468.17
D) $6,034.17
E) $7,359.34

95) 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 $132,900 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

96) Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $9,088. The FICA tax for social security is 6.2% of the first $132,900 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 $1,507.97. What is the total amount of taxes withheld from the Portia's earnings?(Round your intermediate calculations to two decimal places.)

A) $1,999.00
B) $2,203.21
C) $1,690.17
D) $2,689.36
E) $3,343.32

97) 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 $132,900 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

98) Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,540. The FICA tax for social security is 6.2% of the first $132,900 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) $3,511.99
B) $3,857.30
C) $4,190.84
D) $4,538.00
E) $3,162.98

99) Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,540. The FICA tax for social security is 6.2% of the first $132,900 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) $1,028.01
E) $680.70

100) The Annual Federal Unemployment Tax Return is:

A) Form 940.
B) Form 1099.
C) Form 104.
D) Form W-2.
E) Form W-4.

101) 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.

102) 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.

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

A) Annually.
B) Semiannually.
C) Quarterly.
D) Monthly.
E) Weekly.

104) The rate that a state assigns based on a company's stability in employing workers is the:

A) FICA rate.
B) Tax withholding rate.
C) Pay rate.
D) Credit rating.
E) Merit rating.

105) Employer payroll taxes:

A) Are an added expense beyond 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.

106) Which of the following is not an employer payroll tax?

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.

107) FUTA taxes are:

A) Social Security taxes.
B) Medicare taxes.
C) Employee income taxes.
D) Unemployment taxes.
E) Employee deductions.

108) Which of the following is false regarding the unemployment insurance program?

A) It requires withholding from employee wages.
B) Each state has its own program.
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.

109) 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 $12,700. What is the amount of total unemployment taxes the employer must pay on this employee's wages?

A) $0.00.
B) $762.00.
C) $685.80.
D) $420.00.
E) $76.20.

110) 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.

111) 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.

112) An employee earned $43,800 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $132,900 maximum per year, and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is:

A) $3,350.70.
B) $635.10.
C) $2,715.60.
D) $0, since the FICA tax is only deducted from an employee's pay.
E) $6,701.40.

113) 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 $132,900 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.

114) 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 $132,900 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.

115) An employee earned $61,200 during the year working for an employer. The FICA tax rate for Social Security is 6.2% of the first $132,900 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

116) 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 $132,900 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

117) Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,438. FICA tax for Social Security is 6.2% on the first $132,900 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 $1,400.07. What is the amount of the employer's payroll taxes expenses for this employee? (Round your intermediate calculations to two decimal places.)

A) $420.00
B) $2,044.67
C) $1,151.79
D) $2,551.86
E) $1,065.51

118) Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,300. FICA tax for Social Security is 6.2% on the first $132,900 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) $2,430.12
C) $524.95
D) $420.00
E) $1,054.95

119) Triston Vale is paid on a monthly basis. For the month of January of the current year, he earned a total of $5,220. FICA tax for Social Security is 6.2% on the first $132,900 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? (Round your intermediate calculations to two decimal places.)

A) $1,284.27
B) $312.60
C) $398.57
D) $712.53
E) $1,596.87

120) 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.

121) Which of the following does not result in an estimated liability?

A) Warranties.
B) Vacation benefits.
C) Pension benefits.
D) Bonuses.
E) Unearned revenues.

122) Belkin Company provides medical care and insurance benefits to its retirees. In the current year, Belkin agrees to contribute 5% of the employees’ $340,000 gross salaries to a retirement program. What is the amount of employee benefits expense for the current period?

A) $34
B) $136
C) $340
D) $17,000
E) $34,000

123) Belkin Company 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

124) 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.

125) 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.

126) 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.

127) 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.

128) 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.

129) A company estimates that warranty expense will be 2% of sales. The company's sales for the current period are $170,000. The current period's entry to record the warranty expense is:

A) Debit Warranty Expense $3,400; credit Sales $3,400.
B) Debit Warranty Expense $3,400; credit Estimated Warranty Liability $3,400.
C) Debit Estimated Warranty Liability $3,400; credit Warranty Expense $8,400.
D) Debit Estimated Warranty Liability $3,400; credit Cash $3,400.
E) No entry is recorded until the items are returned for warranty repairs.

130) 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.

131) A company has a selling price of $1,900 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 $152 each. During November, the company sold 32,000 printers, and 420 printers were serviced under the warranty. What is the company's warranty expense for the month of November?

A) $57,000
B) $48,640
C) $97,280
D) $63,840
E) $27,000

132) 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

133) Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $955,000 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:

A) Debit Employee Bonus Expense $955,000; credit Prepaid Employee Bonus $955,000.
B) Debit Employee Bonus Expense $955,000; credit Bonus Payable $955,000.
C) Debit Unearned Bonuses $955,000; credit Bonus Payable $955,000.
D) Debit Estimated Bonus Payable $955,000; credit Cash $955,000.
E) No entry since the bonuses are not paid until January.

134) 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.

135) 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

136) The wage bracket withholding table is used to:

A) Compute Social Security withholding.
B) Compute Medicare withholding.
C) Compute federal income taxes withheld.
D) Prepare the W-4.
E) Compute unemployment taxes.

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

A) Form 941.
B) Tax table.
C) Wage bracket withholding table.
D) W-2.
E) W-4.

138) Companies with few employees often pay their employees with checks drawn on the company’s regular bank account, while companies with many employees often use a special bank account to pay employees. This special bank account is known as 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.

139) 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 total 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.

140) Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $7,000 of cash sales that are subject to an 6% sales tax, what is the journal entry to record the cash sales?

A) Debit Cash $7,000; credit Sales $7,000; and record the taxes when paid.
B) Debit Sales Taxes Payable $420; debit Cash $6,580; credit Sales $7,000.
C) Debit Cash $7,000; credit Sales $6,580; credit Sales Taxes Payable $420.
D) Debit Accounts Receivable $7,420; credit Sales $7,000; credit Sales Taxes Payable $420.
E) Debit Cash $7,420; credit Sales $7,000; credit Sales Taxes Payable $420.

141) 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.

142) 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.

143) Which of the following statements regarding long-term liabilities is false?

A) Long-term liabilities are obligations due after one year (or the company’s operating cycle if longer).
B) Long-term liabilities can 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) A note payable due in 8 years is classified as a long-term liability.
E) A single long-term liability can be divided between current and noncurrent sections on the balance sheet.

144) On April 12, Hong Company agrees to accept a 60-day, 10%, $6,400 note from Indigo Company to extend the due date on an overdue account payable. What is the journal entry made by Indigo Company to record the transaction?

A) Debit Cash $6,400; credit Notes Payable $6,400.
B) Debit Notes Payable $6,400; credit Accounts Payable $6,400.
C) Debit Sales $6,400; credit Notes Payable $6,400.
D) Debit Accounts Payable $6,400; credit Notes Payable $6,400.
E) Debit Accounts Receivable $6,400; credit Notes Payable $6,400.

145) 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 payable. What is the journal entry made by Indigo Company to record the transaction?

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.

146) On April 12, Hong Company agrees to accept a 60-day, 8%, $8,100 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 Cash $8,208; credit Interest Revenue $108; credit Notes Payable $8,100.
B) Debit Cash $8,208; credit Interest Revenue $108; credit Notes Receivable $8,100.
C) Debit Notes Payable $8,100; credit Interest Expense $108, credit Cash $7,992.
D) Debit Notes Payable $8,100; debit Interest Expense $108; credit Cash $8,208.
E) Debit Notes Payable $8,100; debit Interest Expense $162; credit Cash $8,262.

147) 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.

148) On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry made by Jarrett Company to record the transaction?

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.

149) On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry made by Jarrett Company to record the payment of the note 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.

150) An employee earns $5,550 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $132,900 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 $184 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $152 and contributes $76 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) $4,413.72
B) $4,369.32
C) $4,793.90
D) $4,669.02
E) $4,713.42

151) An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $132,900 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

152) At the end of the first pay period of the year, Dan earned $5,800 of salary. Withholdings from Dan’s salary include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $696 of federal income taxes, $215 of medical insurance deductions, and $17 of life insurance deductions. Compute Dan’s net pay for this first pay period.

A) $5,800.00
B) $4,428.30
C) $5,356.30
D) $4,660.30
E) $5,104.00

153) At the end of the first pay period of the year, Dan earned $5,000 of salary. Withholdings from Dan’s salary include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $600 of federal income taxes, $175 of medical insurance deductions, and $15 of life insurance deductions. Compute Dan’s net pay for this first pay period.

A) $5,000.00
B) $3,827.50
C) $4,617.50
D) $4,017.50
E) $4,400.00

154) During the first week of January, an employee works 45 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $35 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 $132,900 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 $97 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) $1,662.50
B) $224.18
C) $1,535.32
D) $1,438.32
E) $1,565.50

155) During the first week of January, an employee works 50 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 $132,900 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) $880.00
B) $147.32
C) $800.00
D) $732.68
E) $812.68

156) The chief executive officer earns $10,120 per month. As of May 31, her gross pay was $50,600. The FICA tax rate for Social Security is 6.2% of the first $132,900 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA 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) $7,435.16
B) $627.44
C) $1,254.88
D) $271.22
E) $293.48

157) The chief executive officer earns $10,000 per month. As of May 31, her gross pay was $50,000. The FICA tax rate for Social Security is 6.2% of the first $132,900 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

158) The chief executive officer earns $21,600 per month. As of May 31, her gross pay was $108,000. The tax rate for Social Security is 6.2% of the first $132,900 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) $7,934.76
B) $669.60
C) $1,339.20
D) $289.71
E) $313.20

159) 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 $132,900 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

160) An employee earned $4,600 in February working for an employer. The FICA tax rate for Social Security is 6.2% of the first $132,900 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

161) An employee earns $5,700 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $132,900 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 $190 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $158 and contributes $79 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? (Round your intermediate calculations to two decimal places.)

A) $436.05
B) $480.05
C) $630.05
D) $868.80
E) $778.05

162) An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $132,900 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

163) 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 $132,900 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

164) Which of the following statements regarding FICA taxes is false?

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.

165) Athena Company provides employee health insurance that costs $14,100 per month. In addition, the company contributes an amount equal to 4% of the employees' $141,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:

A) Credit to Employee Benefits Expense $14,100.
B) Debit to Medical Insurance Payable $14,100.
C) Debit to Employee Retirement Program Payable $5,640.
D) Debit to Payroll Taxes Expense $19,740.
E) Debit to Employee Benefits Expense $19,740.

166) 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.

167) Athens Company's salaried employees earn two weeks of vacation per year. The company estimated and must expense $7,600 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 $17,500; credit Vacation Benefits Payable $17,500.
B) Debit Vacation Benefits Expense $7,600; credit Vacation Benefits Payable $7,600.
C) Debit Vacation Benefits Expense $18,160; credit Vacation Benefits Payable $18,160.
D) Debit Vacation Benefits Payable $7,600; credit Vacation Benefits Expense $7,600.
E) Debit Vacation Benefits Payable $17,500; credit Vacation Benefits Expense $17,500.

168) 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.

169) Which of the following statements related to estimated liabilities is false?

A) They are known obligations 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.

170) Which of the following statements related to recording warranty expense is false?

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) Expected warranty expense is recorded in the period 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 using past experience.

171) During August, Boxer Company sells $348,000 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 $11,000 before adjustment. Customers returned merchandise for warranty repairs during the month that used $7,600 in parts for repairs. The entry to record the estimated warranty expense for the month is:

A) Debit Warranty Expense $17,400; credit Estimated Warranty Liability $17,400.
B) Debit Warranty Expense $6,400; credit Estimated Warranty Liability $6,400.
C) Debit Estimated Warranty Liability $17,400; credit Warranty Expense $17,400.
D) Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.
E) Debit Estimated Warranty Liability $7,600; credit Warranty Expense $7,600.

172) 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.

173) During August, Boxer Company sells $359,000 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 $13,100 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,700 in parts for repairs. The entry to record the customer warranty repairs is:

A) Debit Warranty Expense $17,950; credit Estimated Warranty Liability $17,950.
B) Debit Estimated Warranty Liability $17,950; credit Parts Inventory $17,950.
C) Debit Warranty Expense $9,700; credit Estimated Warranty Liability $9,700.
D) Debit Warranty Expense $14,550; credit Estimated Warranty Liability $14,550.
E) Debit Estimated Warranty Liability $9,700; credit Parts Inventory $9,700.

174) 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.

175) 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.

176) 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.

177) If a company has advance subscription sales totaling $45,000 for the upcoming year, when four quarterly journals will be 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.

178) A company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will be 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 Revenue $11,250.
D) Debit Unearned Revenue $11,250, credit Revenue $11,250.
E) Debit Prepaid Subscriptions $11,250, credit Revenue $11,250.

179) Carson Company sells sporting tickets in advance of the event for $500,000. The journal entry to record the receipt of cash 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 Revenue $500,000.
D) Debit Cost of Sales $500,000, credit Inventory $500,000.
E) No journal entry is required.

180) 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

181) 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.

182) 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 payment of the note at maturity? (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.

183) A company's has interest expense of $52,000, income taxes expense of $120,960, 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.

Answer Key

Test name: John Wild Ch09 Algorithmic and Static

1) TRUE

2) FALSE

3) FALSE

4) FALSE

5) FALSE

6) TRUE

7) TRUE

8) TRUE

9) TRUE

10) FALSE

11) TRUE

12) FALSE

13) TRUE

14) TRUE

15) TRUE

16) FALSE

17) TRUE

18) TRUE

19) FALSE

20) TRUE

21) TRUE

22) FALSE

23) FALSE

24) TRUE

25) FALSE

26) FALSE

27) TRUE

28) FALSE

29) TRUE

30) FALSE

31) FALSE

32) TRUE

33) FALSE

34) TRUE

35) TRUE

36) TRUE

37) TRUE

38) TRUE

39) TRUE

40) TRUE

41) TRUE

42) FALSE

43) TRUE

44) TRUE

45) TRUE

46) B

47) B

48) C

49) D

50) B

51) E

52) A

53) C

54) C

55) E

56) C

57) B

58) B

59) A

60) B

61) D

62) A

63) B

64) D

65) C

66) B

67) C

68) D

69) A

70) D

71) B

72) A

73) E

74) A

75) A

76) B

77) B

78) B

79) B

80) C

81) B

82) E

83) E

84) D

85) E

86) B

87) C

88) A

89) A

90) B

91) B

92) B

93) C

94) C

95) C

96) B

97) C

98) A

99) D

100) A

101) D

102) C

103) A

104) E

105) A

106) E

107) D

108) A

109) D

110) B

111) C

112) A

113) C

114) A

115) E

116) E

117) E

118) E

119) D

120) B

121) E

122) D

123) D

124) B

125) A

126) C

127) E

128) A

129) B

130) B

131) C

132) E

133) B

134) B

135) E

136) C

137) C

138) E

139) B

140) E

141) D

142) A

143) C

144) D

145) B

146) D

147) A

148) D

149) D

150) E

151) B

152) B

153) B

154) D

155) D

156) B

157) B

158) E

159) E

160) A

161) E

162) E

163) D

164) D

165) E

166) C

167) B

168) B

169) C

170) B

171) A

172) A

173) E

174) D

175) C

176) E

177) A

178) D

179) C

180) B

181) B

182) E

183) A