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Exam 10: Current Liabilities and Payroll

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Question 71

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An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 7.0% (on earnings up to $100,000), the Medicare tax rate was 1.5%, and the federal income tax to be withheld was $614. Required: (1) Determine the gross pay for the week. (2) Determine the net pay for the week.

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Question 72

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Most employers are levied a tax on payrolls for

A) sales tax
B) medical insurance premiums
C) federal unemployment compensation tax
D) union dues

E) B) and C)
F) A) and D)

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Question 73

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An unfunded pension liability is reported on the balance sheet as

Power Company sells merchandise with a one year warranty. In 2012, sales consisted of 1,600 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Power should show warranty expense of

During May, Blast sold 500 portable CD players for $50 each. Each CD player cost Blast $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should Blast debit Product Warranty Expense for in May?

Receiving payment prior to delivering goods or services causes a current liability to be incurred.

The journal entry a company uses to record the payment of an interest-bearing note is

Most employers are required to withhold federal unemployment taxes from employee earnings.

A business issued a 120-day, 6% note for $10,000 to a creditor on account. The company uses a 360-day year for interest calculations. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity, including interest.

Current liabilities are:

The journal entry to record the conversion of an $550 accounts payable to a notes payable would be:

Mobile Sales has five sales employees which receive weekly paychecks. Each earns $11.50 per hour and each has worked 40 hours in the pay period. Each employee pays 12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in Social Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability Insurance. Journalize the recognition the pay period ending January 19th which will be paid to the employees January 26th. (Keep in mind that none of the employees is subject to a ceiling amount for social security.)

Research Company sells merchandise with a one year warranty. In 2012, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Research should show warranty expense of

The Crafter Company had the following assets and liabilities as of December 31, 2012: Determine the quick ratio for the end of the year (rounded to one decimal point) .

The journal entry a company uses to record the payment of a discounted note is

The Crafter Company had the following assets and liabilities as of December 31, 2012: Determine the quick ratio for the end of the year (rounded to one decimal point) .

Estimating and recording product warranty expense in the period of the sale best follows which of the following accounting concepts?

Most employers are required to withhold from employees for

Payroll taxes only include social security taxes and federal unemployment and state unemployment taxes.

In order to be a recorded contingent liability, the liability must be possible and easily estimated.