Financial Accounting Chapter 11

________ is pay stated as a percentage of a sale amount. A) Salary B) Wage C) Commission D) Bonus

Commission

On August 31, 2016, Peter Services received $3,500 in advance of performing the service. Which journal entry is needed to record the receipt of cash? A) Debit Unearned Revenue $3,500, and credit Cash $3,500. B) Debit Cash $3,500, and credit Service Revenue $3,500. C) Debit Unearned Revenue $3,500, and credit Service Revenue $3,500. D) Debit Cash $3,500, and credit Unearned Revenue $3,500.

Debit Cash $3,500, and credit Unearned Revenue $3,500.

If a long-term debt is paid in installments, the business will report the current portion of the note payable as a current liability.

True

Investors use the times-interest-earned ratio to evaluate a company's ability to pay interest expense.

True

Net pay is the total amount of compensation that an employee takes home after the deductions are made.

True

Unearned revenues are current liabilities until they are earned.

True

the social security system is funded by contributions from both the employer and employee.

True

________ is a pay amount stated at an hourly rate. A) Salary B) Wage C) Commission D) Bonus

Wage

The journal entry for accrued interest on a note payable includes ________. A) a debit to Interest Expense and credit to Cash B) a debit to Interest Expense and credit to Interest Payable C) a debit to Interest Payable and credit to Cash D) a credit to Interest Expense and debit to Notes Payable

a debit to Interest Expense and credit to Interest Payable

Unearned revenue, for services to be performed in six months, appears on the balance sheet as ________. A) long-term investments B) current liabilities C) current assets D) long-term assets

current liabilities

The times-interest-earned ratios of four companies are given below Forge Corp 8.9 Fellow, Inc 9.2 Stacy Corp 6.7 Bennett, Inc 13.5 Which of the above companies has the highest debt-paying ability? A) Forge Corp. B) Fellow, Inc. C) Stacy Corp. D) Bennett, Inc.

Bennett, Inc.

if the likelihood of a future event is remote, how should the company report the contingency?

Do not disclose

It is mandatory for both the employer and employee to pay ________. A) FICA B) SUTA C) employee income tax D) federal unemployment tax

FICA

Which of the following taxes has a ceiling on the amount of annual earnings subject to tax? A) FICA-OASDI taxes B) sales tax C) federal income tax D) FICA-Medicare taxes

FICA-OASDI taxes

Short-term notes payable represent a written promise by the business to pay a debt, without the addition of interest, within one year or less.

False

Which of the following is pay over and above base salary, usually paid for exceptional performance? A) FICA B) benefits C) wages D) bonuses

bonuses

Aaron earns $24.00 per hour with time-and-a-half for hours in excess of 40 per week. He worked 50 hours at his job during the first week of March 2017. Aaron pays income taxes at 15% and 7.65% for OASDI and Medicare. All of his income is taxable under FICA. Determine Aaron's net pay for the week. A) $1,122.00 B) $1,021.02 C) $835.80 D) $799.80

$1,021.02

Gem Corp. had cash sales of $10,000. The state sales tax rate is 10.8%. What amount is debited to the Cash account? A) $10,000 B) $11,080 C) $1,080 D) $1,000

$11,080

A $43,000, two-month, 10% note payable was issued on December 1, 2016. What is the amount of interest expense recorded in the year 2017? A) $494 B) $358 C) $717 D) $42,994

$358

Timothy's gross pay for this month is $8,950 His gross year-to-date pay, prior to this month, totaled $112,000. What is the amount of FICA tax withheld from Timothy's pay for this month? (Assume an OASDI rate of 6.2%, applicable on the first $117,000 earnings, and a Medicare rate of 1.45%, applicable on all earnings.) A) $310.00 B) $129.78 C) $439.78 D) $554.90

$439.78

On October 1, 2017, Carlos, Inc. borrowed $225,000 by signing a nine-month, 8% note payable. Interest was accrued on December 31, 2017. Prepare the journal entry July, 1, 2017, the date the note was paid. What will be an ideal response

Notes Payable 225,000 Interest Payable (225,000 x 8% x 3/12) 4,500 Interest Expense ($225,000 x 8% x 6/12) 9,000 Cash 238,500

Database Services sells service plans for commercial computer maintenance The price for each plan is $1,350 per year, paid in advance. On October 1, 2017, a service plan was sold to a new customer for cash, and the plan covers the period October 1, 2017 to September 30, 2018. Prepare the December 31, 2017 adjusting entry. What will be an ideal response

Unearned Revenue ($1,350 x 3/12 ) 337.50 Service Revenue 337.50

The times-interest-earned ratio is calculated as ________. A) earnings before interest and tax divided by interest expense B) profit before tax divided by interest expense C) net income divided by interest expense D) income tax expense plus interest expense divided by interest expense

earnings before interest and tax divided by interest expense

Which of the following is required to be deducted from employees' paychecks? A) federal income tax B) SUTA C) FUTA D) charitable contributions

federal income tax

Isabelle's gross pay for the week is $920.00. Her deduction for federal income tax is based on a rate of 22%. She has voluntary deductions of $190.00. Her yearly pay is under the limit for OASDI. What is her net pay? (Assume an FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.) A) $527.60 B) $717.60 C) $647.22 D) $457.22

$457.22

A $49,000, three-month, 12% note payable was issued on December 1, 2017. What is the amount of accrued interest on December 31, 2017? A) $490 B) $708 C) $354 D) $823

$490

Rocco earns $14.50 per hour for straight time (40 hours), and the company pays him time-and-a-half for overtime. He worked 46 hours at his job during the first week of March 2017. What was Rocco's gross pay for the week? A) $667.00 B) $671.50 C) $710.50 D) $1,000.50

$710.50

Barter, Inc. sold goods for $883,500 on account. The company operates in a state that imposes a 9% sales tax. What is the amount of the sales tax payable to the state? A) $79,515 B) $39,758 C) $19,879 D) $159,030

$79,515

Which of the following is a characteristic of a current liability? A) It creates a present obligation for future payment of cash or services. B) It cannot be settled with services. C) It is an avoidable obligation. D) It occurs because of a future transaction or event.

It creates a present obligation for future payment of cash or services.

Which of the following is true of a contingent liability? A) It is a potential liability that depends on a future event. B) It is an actual liability that is difficult to estimate. C) It is an actual liability that depends on a past event. D) It is a liability resulting from a lawsuit settled in court.

It is a potential liability that depends on a future event.

For the month of September, Countrywide Sales, Inc. recorded gross pay of $74,500. The net pay for the month amounted to $59,500. The salaries are paid on October 5. Which of the following is the journal entry for the payment of salaries? A) Salaries and Wages Payable 59,500 Cash 59,500 B) Salaries and Wages Payable 74,500 Cash 74,500 C) Salaries and Wages Expense 59,500 Cash 59,500 D) Cash 74,500 Salaries and Wages Expense 74,500

Salaries and Wages Payable 59,500 Cash 59,500

A contingency was evaluated at year-end. Management felt it was probable that this would become an actual liability and the amount could be reasonably estimated. If this was not reported on the balance sheet or in the notes of the financial statements, what is the effect on the financial reporting of the company? A) The information about the transaction would be inadequately disclosed in the notes. B) The net income of the company would be understated. C) There would be no effect D) The liabilities on the balance sheet would be understated.

The liabilities on the balance sheet would be understated.

Which of the following statements about the times-interest-earned ratio is true? A) A lower ratio indicates a higher debt paying ability. B) Debt reduction leads to an increase in interest expense. C) The times-interest-earned ratio is also called the interest-coverage ratio. D) The times-interest-earned ratio is calculated by dividing gross income by interest expense.

The times-interest-earned ratio is also called the interest-coverage ratio.

A contingency was evaluated at year-end and considered to have a remote possibility of becoming an actual liability. If this is not reported on the balance sheet or in the notes to the financial statements, what effect would this have on the financial reporting of the company? A) There would be no effect. B) The information about the transaction would be inadequately disclosed in the notes. C) The net income of the company would be understated. D) The liabilities on the balance sheet would be inderstated.

There would be no effect.

A payroll register is a schedule that summarizes the earnings, withholdings, and net pay for each employee.

True

Establishing controls for efficiency of the payroll process is one of the two key controls for payroll.

True

Federal unemployment compensation tax (FUTA), is not withheld from employees' gross earnings.

True

If a contingency that is probable can be reasonably estimated, a liability is recorded and an expense is accrued.

True

The amount of income taxes ________. A) required by the federal government for a corporation is calculated on a Form 1120 B) paid by the corporation, when it files the Form 1120, is recorded as a debit to the Income Tax Expense account and a credit to the Cash account C) the corporation owes, but has not yet paid, is recorded as a debit to the Income Tax Payable account D) the corporation owes, but has not yet paid, is reported as a long-term liability on the balance sheet

required by the federal government for a corporation is calculated on a Form 1120

Which of the following is a reason why many corporations require photo ID when employees pick up their paychecks. A) to avoid writing a paycheck for a fictitious person B) to make sure all employees are legal adults C) to make sure an employee's work hours have been accurately reported D) to improve efficiency of the payroll disbursement process

to avoid writing a paycheck for a fictitious person