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Exam 9: Accounting for Current Liabilities

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Question 51

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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.

F) B) and E)
G) A) and B)

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Question 52

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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.

F) A) and B)
G) B) and C)

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Question 53

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

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.)

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.

Gross pay less all deductions is called ________.

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.

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.

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.

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.

All of the following are employer payroll taxes except:

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.

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

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

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

Which of the following do not apply to unearned revenues?

Vacation benefits are a type of ________ liability.

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?

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%.

A payroll register does not include: