Final

An employee earned $62,500 during the year working for an employer. The FICA tax rate for Social Security is 6.2% of the first $128,400 of employee earnings per 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. What is the amount of total unemployment taxes the employee must pay?

$0.00

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is:

$0.625.

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals:

$1,568.

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Net income equals:

$115,000.

A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals:

$217,500.

Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. His net pay for the month is:

$3,510.14

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Gross profit equals:

$390,000.

Marco Nelson opened a frame shop and completed these transactions: -Marco started the shop by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock. -Purchased $70 of office supplies on credit. -Paid $1,200 cash for the receptionist's salary. -Sold a custom frame service and collected $1,500 cash on the sale. -Completed framing services and billed the client $200. What was the balance of the cash account after these transactions were posted?

$40,300

If equity is $300,000 and liabilities are $192,000, then assets equal:

$492,000

A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an):

$800 loss.

On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value (principal plus interest) of the note on March 1? (Use 360 days a year.)

$9,240

The formula to compute annual straight-line depreciation is:

(Cost minus salvage value) divided by the useful life in years.

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total to be paid at maturity of the note is: (Use 360 days a year.)

10,450

The credit terms 2/10, n/30 are interpreted as:

2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.

All of the following statements regarding uncertainty in liabilities are true except:

A company only records liabilities when it knows whom to pay, when to pay, and how much to pay. Without all three, a liability cannot be recorded.

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

A note receivable.

A contingent liability is:

A potential obligation that depends on a future event arising from a past transaction or event.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Accrual basis accounting.

A trial balance prepared after adjustments have been recorded is called a(n):

Adjusted trial balance.

Adjusting entries:

Affect both income statement and balance sheet accounts.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and the length of time past due is the:

Aging of accounts receivable method.

Which of the following is an accounting method that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded, and (2) reports accounts receivable at the estimated amount of cash to be collected?

Allowance method of accounting for bad debts.

The accounting process begins with:

Analysis of business transactions and source documents.

Revenue expenditures:

Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.

Identify the accounts that would normally have balances in the debit column of a business's trial balance.

Assets and expenses.

If a company receives $12,000 from a stockholder, the effect on the accounting equation would be:

Assets increase $12,000 and equity increases $12,000.

A company pledges their receivables so they may

Borrow money.

A company's list of accounts and the identification numbers assigned to each account is called a:

Chart of accounts.

Palmer Company is at the end of its annual accounting period. The accountant has journalized and posted all external transactions and all adjusting entries, has prepared an adjusted trial balance, and completed the financial statements. The next step in the accounting cycle is:

Close temporary accounts.

An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n):

Contra account.

Zenith Company's Merchandise Inventory account at year-end has a balance of $91,820, but a physical count reveals that only $90,450 of inventory exists. The adjusting entry to record this $1,370 of inventory shrinkage is:

Cost of goods sold 1,370 Merchandise inventory 1,370

Victor Cruz contributed $70,000 in cash and land worth $130,000 to open a new business, VC Consulting, in exchange for common stock. Which of the following general journal entries will VC Consulting make to record this transaction?

Debit Cash $70,000; Debit Land $130,000; Credit Common Stock, $200,000.

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.

Web Consulting received $3,000 from a customer for services provided. The general journal entry to record this transaction will be:

Debit Cash, credit Services Revenue.

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:

Debit Warranty Expense $240; credit Estimated Warranty Liability $240.

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

Debit to Cash of $43,200, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $45,000.

Athena Company provides employee health insurance that costs $5,000 per month. In addition, the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:

Debit to Employee Benefits Expense $11,000.

Which of the following would be classified as a natural resource?

Diamond mine.

Failure by a promissory notes' maker to pay the amount due at maturity is known as:

Dishonoring a note.

Accounting is an information and measurement system that does all of the following except:

Eliminates the need for interpreting financial data.

Betterments are:

Expenditures making a plant asset more efficient or productive.

Closing the temporary accounts at the end of each accounting period does all of the following except:

Has no effect on the retained earnings account.

Financial statements are typically prepared in the following order:

Income statement, statement of retained earnings, balance sheet.

Operating activities:

Involve using resources to research, develop, purchase, produce, distribute and market products and services.

The accrual basis of accounting:

Is generally accepted for external reporting because it is more useful than cash basis for most business decisions.

Depreciation:

Is the process of allocating the cost of a plant asset to expense.

Cost of goods sold:

Is the term used for the expense of buying and preparing merchandise for sale.

Intangible assets do not include:

Land held as an investment.

Unearned revenues are generally:

Liabilities created when a customer pays in advance for products or services before the revenue is earned.

Unearned revenues refer to a(n):

Liability that is settled in the future when a company delivers its products or services.

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

Measurement (Cost) principle.

Beginning inventory plus net purchases is:

Merchandise (goods) available for sale.

Sales less sales discounts, less sales returns and allowances equals:

Net sales.

What are the factors of the fraud triangle?

Opportunity Pressure Rationalization

The materiality constraint, as applied to bad debts:

Permits the use of the direct write-off method when bad debts expenses are relatively small.

The primary objective of financial accounting is to:

Provide accounting information that serves external users.

A change in an accounting estimate is:

Reflected in current and future years' financial statements, not in prior statements.

If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and:

Revenue increases $10,000.

The rule that (1) requires revenue to be recognized when goods or services are provided to customers and (2) at the amount expected to be received from the customer is called the:

Revenue recognition principle.

In order to be reported, liabilities must:

Sometimes be estimated.

The basic financial statements include all of the following except:

Statement of Changes in Assets.

An adjusting entry could be made for each of the following except:

Stockholder investments.

A tool that represents a ledger account and is used to show the effects of transactions is called a:

T-account.

Contingent liabilities must be recorded if:

The future event is probable and the amount owed can be reasonably estimated.

The useful life of a plant asset is:

The length of time it is productively used in a company's operations.

The current period's ending inventory is:

The next period's beginning inventory.

Sellers allow customers to use bank (or third-party) credit cards for all of the following reasons except:

To be able to charge more due to fees and interest.

Separate accounts receivable information for each customer is important because it reveals all of the following except:

When the customer intends to pay outstanding balances.