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Exam 9: Accounting for Current Liabilities

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Question 41

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Recording employee payroll deductions may involve:

A) Liabilities to the employer.
B) Liabilities to federal and state governments.
C) Expenses for state unemployment.
D) Expenses for the gross wages and salaries.
E) Expenses for the employer portion of any medical insurance.

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

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Question 42

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A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:

A) Debit Warranty Expense $7,400; credit Sales $7,400.
B) Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C) Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400.
D) Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E) No entry is recorded until the items are returned for warranty repairs.Warranty Expense = $185,000 * 0.04 = $7,400

F) A) and C)
G) A) and E)

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Question 43

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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?

Accounting for contingent liabilities covers three possibilities: (1) The future event is probable and the amount cannot be reasonably estimated; (2) The future event is remote or unlikely to recur; (3) The likelihood of the liability to occur is impossible.

The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2.

An employee earned $43,300 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $117,000 maximum per year and the rate for FICA Medicare is 1.45%. The employer's total FICA payroll tax for this employee 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% and the FICA tax for Medicare is 1.45%. 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?

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:

Early Co. offers its employees a bonus equal to 2% of the company's net income. The estimated net income for the year is expected to be $800,000. Prepare the general journal entry to record the estimated employee bonus plan expense.

An employee earned $4,600 in February working for an employer. Cumulative earnings of the previous pay periods are $4,800. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 4.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. What is the amount the employer should record as payroll taxes expense for the month of February?

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

Vacation benefits is an example of a known liability.

The payroll records of a company provided the following data for the current weekly pay period ended March 12. $\begin{array} { | l | r | r | r | r | r | r | } \hline \text { Employees } & \begin{array} { r } \text { Earnings } \\\text { to End of } \\\text { Previous } \\\text { Week }\end{array} & \begin{array} { r } \text { Gross } \\\text { Pay }\end{array} & \begin{array} { r } \text { Federal } \\\text { Income } \\\text { Taxes }\end{array} & \begin{array} { r } \text { Medical } \\\text { Insurance } \\\text { Deduction }\end{array} & \begin{array} { r } \text { Union } \\\text { Dues }\end{array} & \begin{array} { r } \text { United } \\\text { Way }\end{array} \\\hline \text { D. Hui } & \$ 5,800 & \$ 800 & \$ 120 & \$ 35 & \$ 10 & \$ 10 \\\hline \text { B. Kim } & 6850 & 1,100 & 180 & 35 & 10 & 15 \\\hline \text { C. Sly } & 12,900 & 1,440 & 404 & 35 & 10 & 40 \\\hline\end{array}$ Assume that the Social Security portion of the FICA taxes is 6.2% on the first $117,000 and the Medicare portion is 1.45% of all wages paid to each employee for this pay period. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Calculate the net pay for each employee.

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

The payroll records of a company provided the following data for the weekly pay period ended December 7: $\begin{array}{|l|r|r|r|r|r|r|}\hline \text { Employee } & \begin{array}{r}\text { Earnings } \\\text { to End of } \\\text { Previous } \\\text { Week }\end{array} & \begin{array}{r}\text { Gross } \\\text { Pay }\end{array} & \begin{array}{r}\text { Federal } \\\text { Income } \\\text { Taxes }\end{array} & \begin{array}{r}\text { Medical } \\\text { Insurance } \\\text { Deduction }\end{array} & \begin{array}{r}\text { Union } \\\text { Dues }\end{array} & \begin{array}{r}\text { United } \\\text { Way }\end{array} \\\hline \text { Ronald Arthur } & \$ 54,000 & \$ 1,200 & \$ 216 & \$ 125 & \$ 15 & \$ 15 \\\hline \text { John Baines } & 40,500 & 900 & 162 & 125 & 15 & 30 \\\hline \text { Ted Carter } & 45,000 & 1,000 & 180 & 150 & 0 & 20 \\\hline\end{array}$ The FICA social security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this week's wages paid to each employee. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Prepare the journal entries to (a) accrue the payroll and (b) record payroll taxes expense.

Employers must keep individual earnings reports for each employee.

All of the following statements related to recording warranty expense are true except:

Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:

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

On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note?