CH 8 ACCT

certain

we do not record contingent gains until the gain is

b,d

Which of these payroll taxes are paid only by the employer? (Check all that apply.) a. Social Security b. SUTA c. Medicare d. FUTA

B,C

Withholding taxes for federal and state income tax are based upon which items? A. Size of the corporation in total assets B. Amounts earned by employees C. Number of exemptions claimed D. Number of employees at the company

a

Which of the following tends to be the source of the most commonly reported contingent liability? a. warranties b. natural disasters c. lawsuits

CONTINGENCIES

The feature that distinguishes loss ________, from other liabilities is the uncertain outcome. (Enter one word per blank)

false

True or false: An employer pays federal unemployment tax as a percentage of an employee's total pay for the year.

b,d

Which of the following are long-term liabilities? a. Common stock b. Note payable due in 3 years c. Note payable due in 3 months d. 20-year mortgage payable e. Wages payable

A,D,F

Which of the following are not required payroll withholdings? A. State unemployment tax (SUTA) B. Medicare taxes C. Federal income tax D. Federal unemployment tax (FUTA) E. Social Security F. Charitable contributions

a

The employer's portion of FICA tax remitted to the taxing authority is: a. the same as the employee's portion b. lower than the employee's portion c. higher than the employee's portion

loss

The flipside of a contingent gain is a contingent _____

Current portion of long-term debt

Debt that will be within the next year.

b

Liabilities are classified as a. revenues and expenses. b. current and long-term. c. operating and nonoperating. d. operating and investing.

b

Which of the following is an important criteria used to determine the reporting of a contingent liability? a. The classification of the related expense or loss b. The likelihood of future payment or loss c. The effect on key balance sheet ratios d. The potential effect on financial statement users

uncertain

A contingent liability is an existing ________ situation that might result in a loss depending on the outcome of a future event.

b,c

A contingent liability is recorded if which conditions are met? a. There is a remote chance that a future loss will occur. b. It is probable that a future loss will occur. c. The amount of the loss can be reasonably estimated.

A

On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required at December 31, 2018 would include which of the following? A. Debit interest expense $4,000 B. Debit interest expense $3,000 C. Credit cash $6,000 D. Credit notes payable $4,000

contingency

A transaction or event in which the outcome is uncertain is referred to as a(n) _______

Quick Assets

Includes only cash, current investments, and accounts receivable.

C

Payroll withholdings are A. the employer's portion of taxes paid for social security and Medicare. B. the payments submitted for both the employee and employer to the government for taxes. C. the items subtracted from an employee's gross pay to arrive at take-home pay.

c

Which of the following describes the requirement to pay FUTA. a. An employer must pay FUTA taxes only if no SUTA taxes are due b. Both FUTA and SUTA taxes are optional taxes c. An employer must pay FUTA taxes even if the employer pays SUTA taxes

$486.10

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal Income tax $58, and state income tax $10. What is John's net pay? $600 $532 $494.80 $713.90 $486.10

a

Choose the correct formula for calculating interest. a. Face amount x annual interest rate x fraction of the year b. Present value x rate per interest period c. Face amount x rate per interest period

B,C,E

Which of the following may be classified as contingent liabilities? A. Deferred revenues B. Frequent flier program awards C. Future litigation losses D. Deposits from customers E. Product warranties

c,d,e

Which of the following are current liabilities? a. Note payable due in 23 months b. Accounts receivable c. Accounts payable d. Note payable due in 3 months e. Wages payable

c

FICA is the acronym for the a. Federal Insurance Copayment Agency. b. Federal Income Company's Act. c. Federal Insurance Contribution Act. d. Federal Income Comprehensive Act.

warranties

For a manufacturer, the most commonly reported contingent liabilities relate to product _________

contingent

A ____________ liability is an existing uncertain situation that might result in a loss depending on the outcome of a future event.

A

A company purchases inventory or supplies and promises to pay within 30 to 45 days. No formal agreement is signed. This transaction is recorded as a(n) A. accounts payable. B. accounts receivable. C. notes payable. D. notes receivable.

a

A loss that is judged to be probable and for which the amount is reasonably estimable should be a. recorded. b. deferred until the related uncertainly is resolved. c. disclosed only in the notes. d. ignored.

fringe

Additional benefits such as health insurance, retirement benefits, or life insurance that are paid by the employer are called ________ benefits

B

Amounts that are subtracted from an employee's gross pay are referred to as A. net pay. B. payroll withholdings. C. employee costs. D. payroll taxes.

Debt Covenant

An agreement between a borrower and a lender that requires that certain minimum financial measures be met or the lender can recall the debt.

Commercial Paper

Borrowing from another company rather than from a bank.

a,c,d

By law, an employer is required to pay which of the following amounts as payroll taxes? a. Medicare contributions b. Life insurance premiums c. Social Security contributions d. Federal unemployment tax e. Health insurance premiums

d

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700, Medicare $1,450, federal income tax $18,000 and state income tax $3,850. The journal entry to record wages paid includes a ______. a. $70,000 debit to Salaries expense b. $100,000 credit to Cash c. $6,700 debit to FICA payable d. $100,000 debit to Salaries expense

$70000

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. What is the net pay to employees?

C

Issuing a note payable for cash results in a(n) ______. A. decrease in assets and a decrease liabilities B. increase in liabilities and a decrease in stockholders' equity C. increase in assets and an increase in liabilities D. decrease in assets and an increase in liabilities

a,b,c,d

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal income tax $58, and state income tax $10. Assuming that John gets paid in cash, ABC would record a journal entry that includes a ______. a. credit to State and Federal Income Tax Payable of $68 b. debit to Wages Expense of $600 c. credit to FICA (Social Security and Medicare) Payable of $45.90 d. credit to Cash of $486.10 e. debit to Wages Expense of $486.10

A,B,D

Lambert Corporation has employee salary expense of $100,000 on May 31. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following entries? A. Credit FICA payable $7,650 B. Debit payroll tax expense $13,850 C. Debit Salary expense $100,000 D. Credit FUTA payable $6,200 E. Credit wages payable $86,150

d

Notes payable is classified as a liability that has which of the following effects? a. Creates deferred revenue on the income statement b. Creates an asset on the balance sheet c. Creates revenue on the income statement d. Creates interest expense on the income statement

C,D

On November 1, 2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following? A. Debit to Interest Expense $6,000 B. Credit to Note Payable $106,000 C. Credit to Note Payable $100,000 D. Debit to Cash $100,000

C

On October 1, 2018, Perry Corporation signed a 12-month, 8% interest-bearing promissory note for $10,000. Assume that all appropriate adjusting journal entries were made at 12/31. The journal entry required when the note matures on October 1, 2019 would include a debit to interest expense for A. $200 B. $400 C. $600 D. $800

C,D,E,G

On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required March 1, 2019 at the maturity date includes which of the following entries? A. Debit interest expense $4,000 B. Debit interest expense $6,000 C. Debit interest payable $4,000 D. Credit cash $106,000 E. Debit note payable $100,000 F. Credit interest expense $4,000 G. Debit interest expense $2,000

b

On September 1, ABC Company borrowed $50,000 on a 6%, 9-month note payable to XYZ National Bank. Given no previous adjusting entries have been recorded, ABC's adjusting entry at December 31 would include a ______. a. debit to Interest expense of $2,250 b. debit to Interest expense of $1,000 c. debit to Interest expense of $3,000 d. debit to Interest expense of $750

a,c,d,e

On September 1, ABC Company borrowed $50,000 on a 6%, 9-month note payable to XYZ National Bank. The entry ABC would record at maturity, assuming all year-end (December 31) adjusting entries were made correctly, would include a ______. a. debit to Interest payable of $1,000 b. credit to Cash of $50,000 c. debit to Interest expense of $1,250 d. debit to Notes payable of $50,000 e. credit to Cash of $52,250 f. debit to Interest expense of $2,250

B,D

Payroll withholdings ______. (Select all that apply.) A. are amounts added to employees' gross earnings to determine their net pay B. decrease the amount of cash an employee receives C. increase the amount of cash an employee receives D. are amounts subtracted from employees' gross E. earnings to determine their net pay are voluntary

contingent

Product warranties, effects of environmental problems, and lawsuits are examples of transactions or events that give rise to _____________ liabilities.

b

Rhodes borrowed $5,000 by signing a 5-year note with an interest rate of 8%. On the date the note is signed, Rhodes should a. debit notes receivable $5,000. b. credit notes payable $5,000. c. credit notes expense $5,000. d. debit notes payable $5,000.

a

Rimland Corporation has employee salary expense of $10,000 on April 30, 2018. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following? a. Debit payroll tax expense $1,385 b. Credit cash $10,000 c. Debit Salary expense $1,385 d. Credit wages payable $8,615

b

The journal entry to record employer payroll taxes affects ______. a. liabilities only b. liabilities and stockholders' equity c. assets and liabilities d. assets only

false

True or False: If a state has an unemployment tax program, no FUTA tax must be paid.

true

True or False: The Federal Unemployment Tax Act (FUTA) requires employers to pay a tax of 6.2% of the first $7,000 earned by each employee reduced by a maximum 5.4% credit for contributions to a state unemployment program.

b,c

West Company pays health insurance for its employees of $2,000 for the pay period. The journal entry to record this fringe benefit includes which of the following? a. Debit Payroll Tax Expense $2,000 b. Credit accounts payable $2,000 c. Debit Salaries Expense $2,000 d. Credit wages payable $2,000

C,D

What are the two criteria used to determine whether a contingent liability is reported in the financial statements? A. The payment date B. The percentage of the payment to total income C. The ability to estimate the amount of payment D. The likelihood of payment

a,d

Which of the following are employer payroll costs? a. Employer portion of Medicare tax b. Federal income tax withholding c. Employee contributions to retirement savings d. Federal and state unemployment taxes

b,c,e

Which of the following are examples of fringe benefits provided by employers to their employees? a. FICA matching contributions b. contributions to retirement and other savings accounts c. reduced or no-cost company-provided services d. payment for services provided by employee to employer e. payment of insurance premiums on employees behalf

a,c

Which of the following are included in FICA taxes? a. A 6.2% social security tax b. A 6.2% FUTA tax c. A 1.45% Medicare tax d. A 5.4% SUTA tax

C,D,E

Which of the following are payroll withholdings that are subtracted from gross pay to arrive at take-home pay? A. Federal and state unemployment taxes B. Employer contribution for social security taxes C. Employee contributions to retirement plans D. Health insurance paid by the employee E. Federal income taxes

a

Which of the following must employers by law withhold from their employees' pay? a. Federal income taxes b. Health insurance contributions c. contributions toward retirement funds d. unemployment taxes

B,C

Which of the following payroll-related costs are incurred by employees? A. contributions to state unemployment taxes B. federal and state income tax C. employee investments in retirement plans D. contributions to federal unemployment taxes

B,C

Which of these payroll taxes are paid by the employer and the employee? (Check all that apply.) A. SUTA B. Social Security C. Medicare D. FUTA

contingent gain

_____ ____ is an existing uncertainty that might result in a gain.

liability

________ is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events. (Enter one word per blank)

account

an _______ payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash. (Enter only one word.)

Long term debt

debt maturing to be paid in current period.