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Exam 9: Accounting for Current Liabilities

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Question 41

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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.

F) D) and E)
G) A) and E)

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Question 42

Multiple Choice

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Match each of the following terms with the appropriate definitions. -A seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period.

A) Long-term liability
B) Warranty
C) FUTA taxes
D) FICA taxes
E) Contingent liability
F) Net pay
G) Withholding allowance
H) Estimated liability
I) Merit rating
J) Wage bracket withholding table

K) A) and D)
L) E) and J)

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Question 43

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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.)

Match the following items with the appropriate designation (Current liability, Long-term liability, or Not a liability) . -Warranty work completed this year

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 2% 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.

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.

The annual Federal Unemployment Tax Return is:

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 $118,500 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?

An employee earned $128,500 working for an employer in the current year.The current rate for FICA Social Security is 6.2% payable on earnings up to $118,500 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:

Match each of the following terms with the appropriate definitions. -A table of amounts of income tax to be withheld from employees' wages.

Match the following items with the appropriate designation (Current liability, Long-term liability, or Not a liability) . -Payment of a 4-year term loan due this year

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.)

In order to be reported,liabilities must:

Match the following items with the appropriate designation (Estimated liability, Contingent liability, or Known liability) . -Debt guarantees

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 February 1 of the following year.

Vacation benefits are a type of ________ liability.

The times interest earned ratio reflects:

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

A company's has fixed 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:

Match each of the following terms with the appropriate definitions. -A measure provided by a state to employers that reflects a company's stability in employing workers.