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Exam 11: Current Liabilities and Payroll Accounting

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Question 21

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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.

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Question 22

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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:

A) $9,210.25.
B) $9,830.25.
C) $8,950.50.
D) $879.75.
E) $0, since the FICA tax is only deducted from an employee's pay.

F) None of the above
G) B) and D)

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Question 23

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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?

Classify each of the following items as either: A. Estimated liability B. Contingent liability C. Known liability 1. Lawsuit against the company 2. Warranty on products sold this year 3. Accounts payable 4. Income taxes payable 5. Vacation benefits 6. Accrued wages payable 7. Debt guarantees 8. Sales taxes payable 9. Payroll taxes payable 10. Unearned revenues

________ are amounts owed to suppliers for products or services purchased on credit.

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:

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

FICA taxes include:

__________are amounts received in advance from customers for future products or services.

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

Companies may use a special bank account solely for the purpose of paying employees, by depositing an amount equal to the total employees' net pay into the account each pay period and drawing the employees' payroll checks on the account. This account is a(n) :

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:

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.)

What are estimated liabilities? Cite at least two examples and explain why they are classified as estimated liabilities.

Identify and explain the types of employer payroll taxes.

Employers must keep individual earnings reports for each employee.

Match each of the following terms with the appropriate definitions. a. Employee benefits f. Gross pay b. Short-term note payable g. Times interest earned c. Payroll bank account h. Warranty d. Federal depository bank i. Deferred income tax liability e. Payroll register j. Current liabilities _____ 1. A record for a pay period that shows the pay period dates, regular and overtime hours worked, gross pay, net pay and deductions. _____ 2. Obligations due within one year or the company's operating cycle, whichever is longer. _____ 3. A special bank account used solely for paying employees; each pay period an amount equal to the total employees' net pay is deposited and the employees' payroll checks are drawn on that account. _____ 4. A seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period. _____ 5. Total compensation earned by an employee. 6. Compensation provided to employees beyond salaries and wages, such as premiums for medical insurance and contributions to pension plans. _____ 7. Payments of income taxes that are deferred until future years because of temporary differences between GAAP and tax accounting rules. _____ 8. A bank authorized to accept deposits of amounts payable to the federal government, including payroll taxes. _____ 9. A calculation of a company's risk of its ability to pay interest when due. 10. A written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.

Vacation benefits is an example of a known liability.

All of the following statements regarding FICA taxes are true except:

Identify and discuss the factors involved in computing federal income taxes withheld from employees.