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Exam 9: Current Liabilities

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Question 91

Multiple Choice

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

A) The employee's annual earnings rate and number of withholding allowances
B) The employer's merit rating
C) The amount of social security taxes
D) Multiplying the gross pay by 6.2%
E) The employee's credit rating

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

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Question 92

Multiple Choice

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Sales taxes payable:

A) Is an estimated liability
B) Is a contingent liability
C) Is a current liability for retailers
D) Is a business expense
E) Is a long-term liability

F) All of the above
G) A) and B)

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Question 93

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When companies pay the government collected sales tax, sales taxes payable is credited and cash is debited.

On December 1, 2010 Gates Company borrowed $45,000 cash from FirstBank on a 90-day, 9% note payable. a. Prepare Gate's general journal entry to record the issuance of the note payable b. Prepare Gate's general journal entry to record the accrued interest due at December 31, 2010 c. Prepare Gate's general journal entry to record the payment of the note on March 1, 2013.

On December 1, Martin Company signed a $5,000 3-month 6% note payable, with the principle plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note?

FUTA taxes are:

Mission Company has three employees: $\begin{array} { c c c } & \text { Gross Pay through July } & \text { Gross Pay for August } \\\text { Smith } & \$ 3,200 & \$ 1,000 \\\text { Cain } & 25,800 & 3,500 \\\text { Clark } & 94,600 & 13,100\end{array}$ $\begin{array} { l c l } \text { Tax } & \text { Rate } & { \text { Applied To } } \\\text { FICA-Social Security } & 6.20 \% & \text { First } \$ 106,800 \\\text { FICA-Medicare } & 1.45 & \text { All gross pay } \\\text { FUTA } & .80 & \text { First } \$ 7,000 \\\text { SUTA } & 5.40 & \text { First } \$ 7,000\end{array}$ What is Mission Company's amount for payroll taxes for Clark?

A company borrowed $60,000 on a 60-day, 10% note payable from its bank. Compute the total cash payment at the note's maturity.

A company performed warranty repair work for a customer that cost $1,000. The journal entry to record the work should be a debit of $1,000 to Warranty Expense and a credit of $1,000 to Estimated Warranty Liability.

Define liabilities and explain the differences between current and long-term liabilities.

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $1,000.

A lawsuit is an example of a contingent liability for the defendant.

The times interest earned computation is:

Which of the following is a true statement?

A payroll register usually shows the pay period dates, hours worked, gross pay, deductions and net pay of each employee for every pay period.

Most employees and employers are required to pay:

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

A company's income before interest expense and income taxes in 2010 was $225,000 and $200,000 in 2011. Its interest expense was $45,000 for both years. Calculate the company's times interest earned ratio and comment on its level of risk.

A company had a fixed interest expense of $6,000, its income before interest expense and any income taxes was $18,000 and its net income was $8,400. The company's times interest earned ratio is equals to

Employees earn vacation pay at the rate of one day per month. During July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense for the month of July?