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Exam 11: Current Liabilities and Payroll

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Question 51

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Which of the following would be included in the journal entry to record the payment of sales taxes payable?

A) a debit to Sales Tax Payable
B) a credit to Sales Tax Expense
C) a debit to Sales Tax Expense
D) a credit to Sales Tax Payable

E) All of the above
F) B) and D)

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Question 52

True/False

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Steve,an employee of Panache Inc.,has gross salary for March of $5,000.The entire amount is under the OASDI limit of $110,100,and thus subject to FICA.The total amount of employee FICA tax is $565.(Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45 %.)

A) True
B) False

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Question 53

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On October 1,2014,Ferrero Inc.borrowed $225,000 by signing a note payable.The note is for 9 months and bears interest at a rate of 8%.The company accrued interest at the end of 2014.Provide the journal entry at the end of June,2015 when the note is settled.

Which of the following liabilities is created when a company receives cash for services to be provided in the future?

Gem Corp.had sales of $3,500 for cash.The state sales tax rate is 8.2%.What amount will be debited to the Cash account?

Lawrence,an employee of Light Inc.,has gross salary for March of $4,000.The entire amount is under the OASDI limit of $110,100,and thus subject to FICA.He is also subject to federal income tax at a rate of 18%.Provide the journal entry to record salaries expense and payroll withholdings.(Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

It is mandatory for both the employer and employee to pay ________.

Notes payable are considered long-term debts,usually involving interest,if they are to be paid within 1 year or less.

A certain contingent liability was evaluated at year-end,and considered to have a reasonable possibility of becoming an actual liability.If the accountant decided not to report it on the balance sheet or in the notes to the financial statements,this could be considered a violation of generally accepted accounting principles.

Felix Sales Inc.offers warranties on all its electronic goods.Warranty expense is estimated at 3.5% of sales revenue.In 2015,Felix had $333,000 of sales.In the same year,Felix paid out $8,750 of warranty payments.Provide the journal entry to record the warranty expense.

A $40,000,four-month,6.5% note payable was issued on October 1,2015.Which of the following would be included in the journal entry required on the note's maturity date by the borrower?

The liability section of the balance sheet does not include Warranty Expense.

Synergy Appliances sells dishwashers with a 4-year warranty.In 2013,sales revenue for dishwashers is $85,000.The company estimates warranty expense at 4.5% of revenues.What is the 2013 warranty expense?

Maywood Inc.signs a $6,500,8.5%,six-month note dated November 1,2013.The interest expense recorded for this note in 2013 will be ________.

Warranties pose an accounting challenge because a company does not know which or how many products will have to be repaired.

The entry to accrue warranty payable includes a credit to Warranty Expense.

The times-interest-earned ratio is calculated as ________.

Berkley's gross pay for this month is $8,750.His gross pay year-to-date,prior to this month totaled $102,500.What is the amount of FICA tax withheld from Berkley's pay for this month? (Assume an OASDI rate of 4.2%,applicable on the first $110,100 earnings,and a Medicare rate of 1.45%,applicable on all earnings.)

Felix Sales Inc.offers warranties on all its electronic goods.Warranty expense is estimated at 3.5% of sales revenue.In 2015,Felix had $333,000 of sales.In the same year,Felix paid out $8,750 of warranty payments.Provide the journal entry to record the disbursement of warranty payments.

A contingent liability that will probably become an actual liability,and can be reasonably estimated,must be recorded as an expense and a liability.