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Exam 11: Current Liabilities and Payroll Accounting

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Question 61

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During the first week of January, an employee works 46 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour, and her wages are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current 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 employee has $80 in federal income taxes withheld. -What is the amount of this employee's net pay for the first week of January?

A) $784.00
B) $139.98
C) $923.98
D) $724.02
E) $644.02

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

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Question 62

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A company's income before interest expense and income taxes is $350,000 and its interest expense is $100,000. Its times interest earned ratio is:

A) 1.75
B) 0.29
C) 2.50
D) 3.50
E) 0.50

F) C) and D)
G) A) and B)

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Question 63

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A bank that is authorized to accept deposits of amounts payable to the federal government is a:

When a company is obligated for sales taxes payable, it is reported as a(n) :

During June, Vixen Company sells $850,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. Customers returned $14,000 of merchandise for warranty replacement during the month. -The entry to record the estimated warranty provision at the end of the month is:

Times interest earned is computed by dividing income before interest expense and income taxes by ________.

What are known current liabilities? Cite at least two examples of known current liabilities.

An employee earned $4,600 in February working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned during each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The employee has $644 in federal income taxes withheld and has voluntary deductions for health insurance of $50 and contributes 10% of gross pay to a retirement plan each month. The employer pays the $200 remainder of the health insurance premium and an equal amount of contribution to the retirement fund. What is the amount of net pay for the employee for the month of February?

A company had income before interest expense and income taxes of $186,000, and its interest expense is $55,000. Calculate the company's times interest earned ratio.

A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 5% of sales. During the month of July, the company performed warranty work and used $11,000 of parts to perform the warranty work. Sales for July were $450,000. 1. Record the warranty expense for the month of July. 2. Record the costs of the warranty work completed in June. 3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the account balance at July 31?

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:

Santa Barbara Express has 4 sales employees, each of whom earns $5,000 per month and is paid on the last working day of the month. Each employee's wages are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $110 for each employee. a. Prepare the general journal entry to accrue the monthly sales salaries expense at January 31. b. The employer payroll taxes for Santa Barbara Express include FICA taxes, federal unemployment taxes of 0.6% of the first $7,000 paid each employee, and state unemployment taxes of 4.0% of the first $7,000 paid to each employee. Prepare the journal entry to record the employer's payroll taxes at January 31 for Santa Barbara Express. (Assume that none of the employees has reached the unemployment limit of $7,000.)

Match each of the following terms a through j with the appropriate definitions 1 - 10. a. FUTA taxes b. Contingent liability c. Merit rating d. Long-term liability e. Estimated liability f. Net pay g. Wage bracket withholding table h. Warranty i. Withholding allowance j. FICA taxes _____ 1. A measure provided by a state to employers that reflects a company's stability in employing workers. _____ 2. Taxes that fund Social Security and Medicare, assessed on both employer and employees under the Federal Insurance Contributions Act. _____ 3. Known obligations of an uncertain amount that can be reasonably estimated. _____ 4. Obligations of a company requiring payment in more than one year or operating cycle. _____ 5. Gross pay less all tax and voluntary deductions. _____ 6. A table of amounts of income tax to be withheld from employees' wages. _____ 7. A potential obligation that depends on a future event arising from a past transaction. _____ 8. A seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period. _____ 9. A number indicated on an employee's Form W-4 that is used to reduce the amount of federal income tax withheld from an employee's pay. _____ 10. Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program.

A company has a selling price of $1,800 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $150 each. During November, the company sold 30,000 printers, and 400 printers were serviced under the warranty at a total cost of $55,000. The balance in the Estimated Warranty Liability account at November 1 was $29,000. What is the company's warranty expense for the month of November?

The times interest earned ratio reflects:

Sparks Company entered into the following transactions involving short-term notes payable. On June 18, Sparks purchased $25,000 merchandise from EquipCo., terms 2/10, n/30. Sparks uses the perpetual inventory system. On July 19, Sparks replaced the June 18 account payable with a 60-day, $12,000 note bearing 4% annual interest in addition to paying $13,000 in cash. Sparks paid the amount due on the note at maturity. 1. Determine the maturity date for the note. 2. Prepare journal entries for all the preceding transactions and events.

When the number of withholding allowances claimed on Form W-4 increases, the amount of income tax withheld decreases.

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

__________are probable future payments of assets or services that a company is presently obligated to make as a result of past transactions or events.

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 current period's entry to record the warranty expense is: