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Questions
Q:
The present value factor for determining the present value of a single sum to be received three years from today at 10% interest compounded semiannually is 0.7462.
Q:
The number of periods in a present value calculation can only be expressed in years.
Q:
A company can use present and future value computations to estimate the interest component of holding assets over time.
Q:
From the perspective of a depositor, a savings account is a liability with interest.
Q:
Interest is the borrowers payment to the owner of an asset for its use.
Q:
______________ are amounts owed to suppliers for products or services purchased on credit.
Q:
Unearned revenues are amounts received _________from______ for future products or services.
Q:
_________________ are probable future payments of assets or services that a company is currently obligated to make as a result of past transactions or events.
Q:
__________ are obligations due within one year or the company's operating cycle, whichever is longer.
Q:
If a company had net income of $3,003,000; interest expense of $400,000; a tax rate of 40%; and operating income of $5,405,000, what would the times interest earned ratio be for the year?
Q:
Cooper Company borrows $785,100 cash on November 1, 2013, by signing a 120-day, 8% note. What amount of interest expense should Cooper recognize in 2013?
Q:
If Jefferson Company paid a bonus equal to 6.5% of net income after bonuses and the total bonus distributed was $560,000, how much was net income for the year?
Q:
If a company paid $820,000 in bonuses, and net income before bonus was $3,850,000, what was the bonus percentage offered to the employees during this year?
Q:
Apple Company has three employees: What is the amount that Apple Company will record as total payroll taxes for August?
Q:
A company's payroll information for the month of May follows: Administrative salaries
$2,000 Sales salaries
3,500 Shop wages
4,000 FICA taxes withheld
700 Federal income taxes withheld
1,300 Medical insurance premiums withheld
415 Union dues withheld
205 On May 31 the company issued Check No. 335 payable to the Payroll Bank Account for the May payroll. It issued payroll checks to the employees after depositing the check.
(1) Prepare the journal entry to record (accrue) the employer's payroll for May. (2) Prepare the journal entry to pay for the May payroll. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. The wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record the employer's payroll taxes.
Q:
The payroll records of a company provided the following data for the currently weekly pay period ended March 7: Employees
Earnings to End of Previous Week
Gross Pay
Federal Income Taxes
Health Insurance Deduction
Union Dues
United Way A. Poe
$ 5,800
$800
$120
$25
$10
$10 B. Rye
6,850
1,100
180
30
10
15 C. Sims
12,900
1,440
404
40
0
40 Assume that the Social Security portion of the FICA taxes is 6.2% on the first $106,800 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.
Q:
A company's employer payroll taxes are 0.8% for federal unemployment taxes, 5.4% for state unemployment taxes, 6.2% for FICA Social Security taxes on earnings up to $106,800 and 1.45% for FICA Medicare taxes on all earnings. Compute the W-2 Wage and Tax Statement information required below for the following employees: Employee
Gross Earnings
Federal Income Taxes Withheld A. Barker
$84,000
$17,600 C. Dirkson
52,000
8,200 W-2 Information
A. Baker
C. Dirkson Federal income tax withheld Wages, tips, other compensation Social Security tax withheld Social Security wages Medicare tax withheld Medicare wages
Q:
Pastimes 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 $850,000. Prepare the general journal entry to record the employee bonus plan expense.
Q:
A company sells computers with a six-month warranty. In January, the company sold 100,000 computers at $1,750 each and 1,500 computers were turned in for repairs during that same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January.
Q:
A company sells personal computers, with an included two-year warranty for $2,300 each. During the current year, the company sells 400 computers. On the basis of past experience, the warranty costs are estimated to be $250 per computer. The actual warranty costs (paid in cash) by the company during the current year were $65,000. Prepare general journal entries to record the (a) estimated warranty expense and (b) warranty repair costs during current year.
Q:
. 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 6% of sales. During the month of June, the company performed warranty work and used $12,000 worth of parts for the warranty repairs. The total sales for June were equal to $450,000.
1. Record the warranty expense for the month of June.
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 June 30?
Q:
An employer has an employee benefit package that includes employer-paid health insurance and an employer-paid retirement program. During January, the employer-paid health insurance equaled $7,500 and the amount the employer agreed to contribute to the employee retirement program was 10% of the employees' $150,000 gross salaries. Prepare the general journal entry to record these employee benefits.
Q:
. A company's employees had the following earnings records at the close of the current payroll period: Employees Earnings through Prior Pay Period Earnings This Pay Period D. Adams $11,300 $3,900 J. Hess 6,100 2,500 R. Lui 9,500 3,100 T. Morales 4,800 1,400 L. Vang 10,000 3,000 The company's payroll taxes expense on each employee's earnings includes: FICA Social Security taxes of 6.2% on the first $87,000 plus 1.45% FICA Medicare on all wages; 0.8% federal unemployment taxes on the first $7,000; and 2.5% state unemployment taxes on the first $7,000. Compute the employer's total payroll taxes expense for the current pay period.
Q:
A company's payroll for the week ended May 15 included earned salaries of $20,000. All of that week's pay is subject to FICA Social Security taxes of 6.2% and Medicare taxes of 1.45%. In addition, the company withholds the following amounts for this weekly pay period: $900 for medical insurance; $3,400 for federal income taxes; and $180 for union dues.
a. Prepare the general journal entry to accrue the payroll.
b. The company is subject to state unemployment taxes at the rate of 2% and federal unemployment taxes at the rate of 0.8%. By May 15, some employees had earned over $7,000, so only $9,000 of the $20,000 weekly gross pay was subject to unemployment tax. Prepare the general journal entry to accrue the employer's payroll tax expense.
Q:
Metro Express has five sales employees, each of whom earns $4,000 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 Metro Express include: FICA taxes, federal unemployment taxes of 0.8% on the first $7,000 paid to each employee, and state unemployment taxes of 4.0% on the first $7,000 paid to each employee. Prepare the journal entry to record the employer's payroll taxes at January 31 for Metro Express.
Q:
A company has 90 employees and a weekly payroll of $117,000. The FICA-Social Security tax is 6.2% and the FICA-Medicare tax is 1.45%. The total withholding for federal income tax is $16,500 for the current week. Calculate the amount of FICA taxes owed (assume no employee's salary is over the FICA limit) and prepare the journal entry to accrue this week's salaries expense and withholdings.
Q:
A company has two employees whose total January salaries totaled $8,000. The federal income tax rate for both employees is 15%. The FICA Social Security tax is 6.2% and the FICA Medicare tax is 1.45%. Calculate the amount of employee taxes withheld and prepare the company's journal entry to accrue the January salaries expense and withholding of January taxes.
Q:
An employee earned $3,450 wages for the current period. Calculate the total and individual amounts to be withheld for Social Security (6.2%), Medicare (1.45%) and federal income tax (15%) assuming the entire employee's pay is subject to FICA taxes.
Q:
The rate for FICA Social Security is 6.2% and the rate for FICA Medicare is 1.45%. Calculate the total amount of FICA withholding for an employee whose pay is $2,400 and is entirely subject to these FICA taxes.
Q:
A company borrowed $60,000 on a 60-day, 10% note payable from its bank. Compute the total cash payment at the note's maturity.
Q:
On December 1, 2013, Gates Company borrowed $45,000 cash from First Bank on a 90-day, 9% note payable. Gates is a calendar year company
a. Prepare Gate's general journal entry to record the issuance of the note payable.
b. Prepare Gate's general journal entry to record the accrued interest due at December 31, 2013.
c. Prepare Gate's general journal entry to record the payment of the note on March 1, 2014.
Assume no other entries related to this note were made in 2014.
Q:
On September 15, Sports World borrowed $75,000 cash from First Bank on a 12%, 60-day note payable.
a. Prepare Sports World's general journal entry to record the issuance of the note payable.
b. Prepare Sports World's general journal entry to record the payment of the note at maturity assuming no adjusting entries have been made since the note was first issued.
Q:
On June 1, 2013, Martin Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable. This company uses a calendar year to report financial activity.
a. What is the total amount of interest to be paid on this note?
b. Prepare Martin Company's general journal entry to record the issuance of the note payable,
c. Prepare Martin Company's general journal entry to record the payment of the note on
September 29, 2013 assuming no adjusting entries have been made since this note was first issued.
Q:
On November 1, 2012, Bob's Skateboards Store signed a $12,000, 3-month, 5% note payable to cover a past due account payable. This company uses a calendar year to report financial activity and updates the accounting records monthly.
a. What amount of total interest expense will the company pay on this note?
b. Prepare Bob's general journal entry to record the issuance of the note payable.
c. Prepare Bob's general journal entry to record the payment of the note on February 1, 2013.
Q:
Walmart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. Sears had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned ratio for each company and comment on the results.
Q:
Coca-Cola had income before interest expense and income taxes of $5,698 million and interest expense of $199 million. Calculate Coca-Cola's times interest earned ratio.
Q:
Home Depot had income before interest expense and income taxes of $5,909 million and interest expense of $37 million. Calculate Home Depot's times interest earned ratio.
Q:
A company's income before interest expense and income taxes was $395,000 in 2013 and $427,000 in 2014. Its fixed interest expense was $125,000 for both years. Calculate the company's times interest earned ratio and comment on its level of risk.
Q:
A company's income before interest expense and income taxes was $225,000 in 2013 and $200,000 in 2014. Its interest expense was $45,000 for both years. Calculate the company's times interest earned ratio and comment on its level of risk.
Q:
A company's income before interest expense and income taxes is $302,400 and its interest expense is $72,000. Calculate the company's times interest earned ratio.
Q:
Identify and discuss the factors involved in withholding federal income taxes from employees pay.
Q:
Identify the types of payroll records prepared for each pay period and each employee.
Q:
Describe employer responsibilities for reporting payroll taxes. (To the extent possible, reference the form to be filed for each tax.)
Q:
What are estimated liabilities? Provide at least two examples and explain why they are classified as estimated liabilities.
Q:
Explain the accounting procedures that employers must follow for employee payroll deductions.
Q:
What is a short-term note payable? Explain the accounting issues related to notes payable.
Q:
Explain how to calculate times interest earned and how this ratio is used to analyze a company.
Q:
Describe how to account for and report on contingent liabilities.
Q:
What are known current liabilities? Provide at least two examples of known current liabilities.
Q:
Define liabilities and explain the differences between current and long-term liabilities.
Q:
Classify each of the following items as a contingent liability, estimated liability, or current liability: 1. Accrued wages payable. Contingent liability 2. Payroll taxes payable. Estimated liability 3. Lawsuit against the company. Current liability 4. Warranty on products sold this year. Estimated liability 5. Accounts payable. Estimated liability 6. Vacation benefits. Current liability 7. Property taxes payable. Contingent liability 8. Income taxes payable. Estimated liability 9. Unearned revenues. Current liability 10. Debt guarantees. Current liability
Q:
Classify each of the following items as a current liability, long-term liability, or not a liability: 1. FICA taxes payable. Current liability 2. Payment of a 4-year loan due this year. Current liability 3. Payment of a 30-year loan due this year. Current liability 4. Amounts due from customers. Not a liability 5. 30-day promissory note. Current liability 6. Payment of a 30-year loan due next year (The company operating cycle is 2 months). Current liability 7. Accounts payable. Current liability 8. Income taxes payable. Long-term liability 9. Salaries payable. Not a liability 10. Warranty work completed this year. Current liability
Q:
Match each of the following terms with the appropriate definitions: 1. A table of amounts of income tax to be withheld from employees' wages. Merit rating 2. A potential obligation that depends on a future event arising from a past transaction. FICA taxes 3. A seller's obligation to repair or replace a product or service that fails to perform as expected within a specified period. Estimated liability 4. Obligations of a company not requiring payment within one year or the operating cycle, whichever is longer. Long-term liability 5. Known obligations of an uncertain amount that can be reasonably estimated. Net pay 6. A number that is used to reduce the amount of federal income tax withheld from an employee's pay. Wage bracket withholding table 7. A rating assigned to an employer by a state based on the employer's past record regarding stable employment. Contingent liability 8. Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program. Warranty 9. Gross pay less all deductions. Withholding allowance 10. Taxes assessed on both employer and employees under the Federal Insurance Contributions Act. These taxes fund Social Security and Medicare. FUTA taxes
Q:
Match each of the following terms with the appropriate definitions: 1. Additional compensation paid to or on behalf of employees, such as premiums for medical insurance and contributions to pension plans. Payroll register 2. A record for a pay period that shows the pay period dates, regular and overtime hours worked, gross pay, net pay, and deductions. Current liabilities 3. Total compensation earned by an employee. Payroll bank account 4. Income before interest expense and income taxes divided by interest expense. Warranty 5. 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. Gross pay 6. A bank authorized to accept deposits of amounts payable to the federal government, including payroll taxes. Employee benefits 7. A seller's obligation to repair or replace a product or service that fails to perform as expected within a specified period. Deferred income tax liability 8. A special bank account used solely for paying employees. Federal depository bank 9. Obligations due within one year or the company's operating cycle, whichever is longer. Times interest earned 10. Payments of income taxes that are not due until future years because of temporary differences between GAAP and tax accounting rules. Short-term note payable
Q:
If a company had net income of $1,486,875, a times interest earned ratio of 4.0, a tax rate of 35%, and operating income of $3,050,000, what is the companys interest expense for the year?
A.$1,067,500
B. $725,329
C. $371,719
D. $762,500
E. $1,564,000
Q:
If a company had net income of $2,379,600, interest expense of 234,000, a tax rate of 40%, and operating income of $4,200,000, what is the times interest earned ratio?
A.10.17
B. 17.95
C. 7.78
D. 7.18
E. 4.07
Q:
If a company had income before interest and taxes in the amount of $2,345,540 and a times interest earned ratio of 5.2, what is the total amount of the companys interest expense?
A. $451,065
B. $320,185
C. $121,968
D. $275,840
E. $230,000
Q:
On October 10, 2013, Printfast Company sells a commercial printer for $2,350 with a one-year warranty that covers parts. Warranty expense is projected to be 4% of sales. On February 28, 2014, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability for this printer at the at the end of 2014?
A. $14.00.
B. $84.80.
C. $94.00.
D. $0, there is no liability at the end of 2014.
E. $230.00.
Q:
On October 10, 2013, Printfast Company sells a commercial printer for $2,350 with a one-year warranty that covers parts. Warranty expense is projected to be 4% of sales. On February 28, 2014, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What warranty expense is recorded for this printer during 2014?
A. $14.00.
B. $84.80.
C. $94.00.
D. $0, there is no expense in 2014.
E. $230.00.
Q:
On October 10, 2013, Printfast Company sells a commercial printer for $2,350 with a one-year warranty that covers parts. Warranty expense is projected to be 4% of sales. On February 28, 2014, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability for this printer at the end of 2013?
A. $49.00
B. $84.80
C. $94.00
D. $0, there is no liability at the end of 2013
E. $230.00
Q:
Company A and Company B each borrow $2,000 from the bank. Company A signed a 60-day, 12% note. Company B signed a 90-day, 11% note. How will each of these companies record these events in their respective general journals on the day the money was borrowed?
A.
Company A Cash
2,000 Notes Payable 2,000 Company B Cash
2,000 Notes Payable 2,000 00 Notes Payableompany record this event in the general journal?
B.
Company A Cash
2,040 Interest Expense 40 Notes Payable 2,000 Company B Cash
2,055 Interest Expense 55 Notes Payable 2,000 C.
Company A Notes Payable
2,000 Cash 2,000 Company B Notes Payable
2,000 Cash 2,000 D.
Company A Interest Expense
40 Notes Payable
2,000 Cash 2,040 Company B Interest Expense
55 Notes Payable
2,000 Cash 2,055 E. .
Company A Cash
2,040 Notes Payable 2,040 Company B Cash
2,055 Notes Payable 2,055
Q:
Buyer Company asks to extend its past due $600 account payable to Seller Company. Seller Company agrees to accept $100 cash and a 60-day, 12%, $500 note payable to replace the account payable. How does Buyer Company record this event in the general journal?
A. Accounts Payable
600 Cash 100 Notes Payable 500 00 Notes Payableompany record this event in the general journal?
B. Notes Payable
500 Cash
100 Accounts Payable 600 C. Cash
100 Accounts Payable 100 D. Accounts Payable
100 Cash 100 E. Buyer Company has no entry to record for this transaction.
Q:
Conner Company borrows $185,600 cash on November 1, 2013, by signing a 120-day, 8% note. What is the total amount of interest expense that Conner will recognize for this note?
A. $4,949.
B. $14,848.
C. $2,467.
D. $0, no interest expense is recognized.
E. $1485.
Q:
If Jefferson Company paid a bonus equal to 8% of net income after bonuses and the total bonus distributed was $420,000, how much was net income for the year?
A. $5,250,000
B. $5,670,000
C. $6,250,000
D. $4,320,000
E. $4,875,000
Q:
If a company paid $350,000 in bonuses, and net income prior to the bonus was $4,200,000, what was the bonus percentage offered to the employees during 2010?
A. 6.2%
B. 5.7%
C. 9.1%
D. 8.3%
E. 6.8%
Q:
Mission Company has three employees: Gross Pay through July Gross Pay for August Smith $3,200 $1,000 Cain 25,800 3,500 Clark 94,600 13,100 The company is subject to the following taxes: Tax Rate Applied to FICASocial Security 20 % First $106,800 FICAMedicare 1.45 All gross pay FUTA .80 First $7,000 SUTA 5.40 First $7,000 What is the amount that Mission Company will withhold from Smiths August gross pay? A. $ 62.00
B. $138.50
C. $443.20
D. $581.70
E. $76.50
Q:
Mission Company has three employees: Gross Pay through July Gross Pay for August Smith $3,200 $1,000 Cain 25,800 3,500 Clark 94,600 13,100 The company is subject to the following taxes: Tax Rate Applied to FICASocial Security 20 % First $106,800 FICAMedicare 1.45 All gross pay FUTA .80 First $7,000 SUTA 5.40 First $7,000 What is the amount that Mission Company will withhold from Clarks August gross pay? A. $ 946.35
B. $1,002.15
C. $1,814.35
D. $6,234.75
E. $812.20
Q:
For the year ended December 31, 2013, Mason Company has implemented an employee bonus program equal to 7% of Mason's net income, which employees will share equally. Mason's net income (pre-bonus) is expected to be $3,500,000, and bonus expense is deducted in computing net income. What is the amount that needs to be recorded for estimated bonus liability for 2013?
A. $245,000
B. $144,118
C. $228,972
D. $50,000
E. $125,000
Q:
If a company uses a special payroll bank account:
A. The company does not need to issue paychecks.
B. The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account.
C. The company must use a federal depository bank for the payroll.
D. There is no need for a payroll register.
E. There is no need to issue W-2's.
Q:
A special bank account used solely for the purpose of paying employees is created by depositing the amount of each employees net pay into the account every pay period. This account is referred to as a(n):
A. Federal depository bank account.
B. Employee's individual earnings account.
C. Employees' bank account.
D. Payroll register account.
E. Payroll bank account.
Q:
A table that shows the amount of federal income tax to be withheld from an employee's pay is the:
A. Form 941.
B. Tax table.
C. Wage bracket withholding table.
D. W-2.
E. W-4.
Q:
The main purpose of the wage bracket withholding table is to:
A. Compute social security withholding.
B. Compute Medicare withholding.
C. Compute federal income tax withholding.
D. Prepare the W-4.
E. Compute gross earnings.
Q:
An employee earnings report:
A. Is the W-2.
B. Is the W-4.
C. Is the cumulative record of an employee's hours worked, gross earnings, deductions, and net pay.
D. Shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period.
E. Is used to compute the federal income taxes withheld from each employee's gross pay.
Q:
An employer's federal unemployment taxes (FUTA) are reported:
A. Annually
B. Semiannually
C. Quarterly
D. Monthly
E. Weekly
Q:
A bank that is authorized to accept amounts payable to the federal government is a:
A. Credit union
B. FDIC insured bank
C. Federal depository bank
D. National bank
E. Federal reserve bank
Q:
The wage and tax statement is:
A. Form 940
B. Form 941
C. Form 1040
D. Form W-2
E. Form W-4
Q:
The annual federal unemployment tax return is:
A. Form 940
B. Form 1099
C. Form 104
D. Form W-2
E. Form W-4
Q:
The Federal Insurance Contributions Act (FICA) requires that each employer file a:
A. W-4
B. Form 941
C. Form 1040
D. Form 1099
E. Form 521B
Q:
A company sells leaf blowers for $170 each. Each unit has a three-year warranty that covers replacement of defective parts. It is estimated that 4% of all leaf blowers sold will be returned under the warranty at an average cost of $30 each. During October, the company sold 400,000 leaf blowers; 800 leaf blowers were serviced under the warranty during October at a total cost of $25,000. The balance in the Estimated Warranty Liability account on October 1 was $12,500. What is the company's warranty expense for the month of October?
A. $24,000
B. $25,000
C. $37,500
D. $467,500
E. $480,000
Q:
Maryland Company offers a bonus plan to its employees equal to 3% of net income. Maryland's net income is expected to be $960,000. The amount of the employee bonus expense is estimated to be
A. $27,961
B. $28,800
C. $29,000
D. $29,691
E. $30,000