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Exam 9: Reporting and Analyzing Current Liabilities

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Question 71

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Required payroll deductions include income taxes, Social Security taxes, pension and health contributions, union dues, and charitable giving.

A) True
B) False

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Question 72

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A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is shorter.

A) True
B) False

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Question 73

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Companies with many employees often use a special ____________________ account to pay employees.

A potential lawsuit claim is disclosed when the claim can be reasonably estimated and it is reasonably possible.

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

Experience shows that the default rate on liabilities increases sharply when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods.

Athena Company provides employee health insurance that costs $5,000 per month. In addition, the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:

A liability is incurred when income is earned because income tax expense is created by earning income.

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

The Wage and Tax Statement given to each employee annually is:

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is 2.5. Times Interest Earned Ratio = Income before Interest Expense and Income Taxes/Interest Expense Times Interest Earned Ratio = $250,000/$100,000 = 2.5

A company's had fixed interest expense of $5,000, its income before interest expense and income taxes is $17,000, and its net income is $9,400. The company's times interest earned ratio equals:

Interest expense is not:

Kelso had income before interest expense and income taxes of $570 million and interest expense of $37 million. Calculate Kelso' times interest earned.

SaveMart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. Valueland had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned for each company and comment on the results.

Jones Pharmacy agreed to pay $2,000 monthly for employee medical insurance and contribute 12% of employees' gross salaries to a retirement program. If gross salaries of employees in August were $37,000, the entry to record these accrued benefits will include a:

A single liability cannot be divided between current and noncurrent liabilities.

The report that shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period is the payroll register.

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:

Describe employer responsibilities for reporting payroll taxes. (To the extent possible, reference the form to be filed for each tax.)