Act 201 chp 10 quizzes meta&wiley

The entry to record the issuance of an interest-bearing note includes a credit to Notes Payable for the note's

face world

The Travis Company has cash register totals of $2,100. If the company doesn't segregate sales from sales taxes, and the sales tax rate is 5%, then the amount to be credited to the account Sales is:

$2,000 -The total is divided by one plus the tax rate to determine sales, so $2,100 / 1.05 = $2,000.

An employee receives an hourly rate of $8, with time and a half for all hours in excess of 40 worked during a week. Payroll data for the current week is as follows: hours worked, 44; federal income tax withheld, $47.50; FICA tax rate, 8%; SUTA rate, 5%.

$291.06 - Gross pay is calculated as (40 hr * $8) + (4 hr * $12) = $368. Net pay is gross pay minus federal withholdings and FICA ($368 - 47.50 - 29.44 = $291.06). Unemployment taxes are paid by the employer, not the employee.

Buffon Company issues a $300,000, 10%, 20-year mortgage note on January 1. The terms provide for semiannual installment payments, exclusive of real estate taxes and insurance, of $17,483. After the first installment payment, the principal balance is:

$297,517 - Of the $17,483 payment, $15,000 goes to interest ($300,000 * 10% * 1/2), leaving $2,483 to be applied to the loan balance, so $300,000 - 2,483 = $297,517.

On the issue date, Rhoda Corporation sells $1,000,000 bonds at 103. The entry to record the sale will include a credit to Premium on Bonds Payable of:

$30,000 -Since we issued the bonds at more than 100% of their face value, the difference between the issue price of $1,030,000 and the face amount of the bonds is credited to Premium on Bonds Payable.

Which of the following statements concerning current liabilities is incorrect?

-Current liabilities include unearned revenue. -A company that has more current liabilities than current assets is usually the subject of some concern. -Current liabilities include salaries and wages payable.

Mike Kohl, an employee of Spotswood Company, has gross earnings for the month of October of $8,000. FICA taxes are 7.65% of gross earnings, federal income taxes amount to $1,270 for the month, state income taxes are 2% of gross earnings, and Mike authorizes voluntary deductions of $20 per month to the United Fund. What is the net pay for Mike Kohl?

-Gross pay is given as $8,000. -The FICA tax deduction is 7.65% of $8,000 = $612. -The federal income tax deduction is $1,270. -The state income tax deduction is 2% of $8,000 = $160. -The voluntary deduction for the United Fund is $20. Therefore total deductions = $612 + $1,270 + $160 + $20 = $2,062 and net pay = $8,000 - $2,062 = $5,938.

Maggie Sharrer Company borrows $88,500 on September 1, 2017, from Sandwich State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2017?

Accrued interest at 12/31/14 is computed as follows: $88,500 X 12% X (4/12) = $3,540. -The computation is the face value ($88,500) times the interest rate (12%) times the portion of the year the debt was outstanding (4 months out of 12).

Current liabilities include accounts payable, notes payable, and unearned revenues.

Bonds payable are generally classified as long-term liabilities.

RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. At December 31

Both the notes payable and interest payable are current liabilities. -Notes due for payment within one year of the balance sheet date are usually classified as current liabilities.

On the date of issue, ARCO Corporation sells $2 million 5-year bonds at 97. The entry to record the sale will include the following debits and credits.

Credit Bonds Payable $2,000,000; Debit Discount on Bonds Payable $60,000 -The complete entry is: debit Cash $1,940,000 and Discount on Bonds Payable $60,000; credit Bonds Payable $2,000,000.

Which of the following is not an expense to an employer?(Employer payroll taxes do not include) Select one: - State unemployment taxes. -Federal income tax withholdings. - Federal unemployment taxes. - FICA taxes.

Federal income tax withholding

Amount of interest due on a $10,000, 8%, 90 day note at maturity is

Interest due = $10,000 x 8% x 3/12 = $200.

On August 1, 2012, a company borrowed cash and signed a one-year interest-bearing note on which both the face value and interest are payable on August 1, 2013. How will the note payable and the related interest be classified in the December 31, 2012 balance sheet?

Note playable and interest payable would be a -current liability

When bonds are sold at face value, on the issue date, Bonds Payable is credited for:

face value. -Bonds Payable is always credited for face value.

The amount of sales tax collected by a retailer is recorded in the

Sales Tax payable

A retail store did not ring up sales tax separately. If the sales tax rate is 5% and the total receipts amounted to $126,000, what is the amount of the sales taxes owed to the taxing agency?

The $126,000 includes both the sales and the sales tax. $126,000/1.05 = $120,000 of sales. - Therefore, the sales tax = $126,000 - $120,000 = $6,000.

Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Service Revenue at December 31?

The monthly premium is $1,500 or $18,000 divided by 12. Sensible has recognized 9 months of insurance revenue (Apr 1-Dec 31) which is $13,500; thus 3 months insurance premium (12-9) is still unearned. The amount that Sensible should be report as Unearned Service Revenue is $4,500 or (3 months X $1,500). OR $13,500 is the amount for the 9 months of insurance then subtract it from $18,000

Four-Nine Corporation issued bonds that pay interest every July 1 and January 1. The entry to accrue bond interest at December 31 includes a

a debit to Interest Expense and credit to Interest Payable.

On October 1, 2012, Douglass Company issued a $28,000, 10%, nine-month interest-bearing note. If the company is preparing financial statements at December 31, 2012, the adjusting entry for accrued interest will include a:

debit to Interest Expense of $700. -Interest is calculated as PRT, or $28,000 * .10 * 3/12, and the entry includes a debit to Interest Expense and a credit to Interest Payable.

Discount on Bonds Payable

has a debit balance and is a contra account to Bonds Payable.

The market rate of interest for a bond issue which sells for more than its par value is:

less than the interest rate stated on the bond -If a bond sells for more than its face value, that means that the contractual interest rate is higher than the market rate.

If the market rate of interest is lower than the contractual interest rate,

the bonds will sell at a premium.

The rate of interest used to determine the amount of cash interest the borrower pays is

the contractual or stated interest rate ("Issuing Procedures").