Accounting CH 9

Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense for one year is? $750 $1,500 $15,000 $150

$1,500 Reason: $15,000 x .10 = $1,500

Winn Co. signs a 60 day note payable for a $15,000 copy machine with an interest rate of 8%. Winn will record total interest expense of $15,200 $1,200 $200 $15,000

$200 Reason: $15,000 x .08 x (60/360) = $200.

Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio. 7.5 10 0.10 0.13

10 Reason: (30,000/3000)=10

Jorge Lopez worked 40 hours this week and earned $1,000 in total compensation. Federal and state taxes and other withholdings totaled $350. Jorge's gross pay totals $_____

1000

Jorge Lopez worked 40 hours this week and earned $1,000. Federal and state taxes, and other withholdings totaled $350. Jorge's net pay totals $_____

650

Employers FUTA taxes are reported on IRS Form __________

940

The form an employer files and submits to the IRS to report FICA tax information is Form ______.

941

Spot Co. purchases office supplies from Sally Supplies, Inc.. Spot does not pay cash for the purchase, and now owes the amount to Sally. This transaction would typically be recorded in which account in Spot's books? Accounts Receivable Accounts Payable Unearned Fees Wages Payable

Accounts Payable

Star Co. reported $10,000 of net income during the month of January. Star estimates that it owes income taxes of $2,000 for the month. The month-end adjusting entry to record this estimate would require which of the following entries? Credit to Cash Debit to Cash Credit to Income Taxes Payable Debit to Income Taxes Payable Debit to Income Tax Expense Credit to Income Tax Expense

Credit to Income Taxes Payable Debit to Income Tax Expense

Niwa Co. replaced a $3,000 account payable balance to Fiona Co. with a 60-day, $3,000 note bearing 5% annual interest. Niwa's entry to record this transaction would include which of the following entries? Debit to Cash Debit to Accounts Payable Credit to Notes Payable Credit to Cash Debit to Notes Payable Credit to Accounts Payable

Debit to Accounts Payable Credit to Notes Payable

Patel Paving collected $1,000 cash in advance from a customer to provide paving services next month. The entry to record this cash receipt would include the following entries? Debit to Paving Fees Earned Credit to Paving Fees Earned Credit to Cash Debit to Cash Credit to Unearned Paving Fees Debit to Unearned Paving Fees

Debit to Cash Credit to Unearned Paving Fees

Simar Sales Co. sells and installs kitchen appliances. Simar guarantees parts and labor for one year after installation. Simar would record potential claims in a(n) _______ account. Miscellaneous Repairs Expense Customer Satisfaction Estimated Warranty Liability

Estimated Warranty Liability

Keys Co. is located in Florida. An evacuation has been ordered due to Hurricane Edward, which is headed in the direction of Keys. Keys should record a contingent liability prior to the evacuation. True false question. T/F

False

Which of the following situations is not a contingent liability? Future natural disaster Probable legal claim against a company Possible legal claim against a company Debt guarantee of owner

Future natural disaster

______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes. Gross pay Payroll deductions Net pay Hourly rate

Gross pay

Each month, a corporation will accrue income taxes based on the month's earnings. To record the income tax for the month, the company will debit the Income Tax Expense account and credit the Blank______ account. Income Taxes Payable Cash Tax Expense Net Income Payable

Income Taxes Payable

Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals _________ pay.

Net

Bushra Co. replaced a $1,000 account payable balance to Elin Co. with a 120-day, $1,000 note bearing 8% annual interest. Bushra's entry to record this transaction would include a credit to which account? Accounts Payable Accounts Receivable Notes Payable Notes Receivable Cash

Notes Payable Reason: This is an accounts payable which is being replaced with a note payable, so Notes Payable is credited to increase it.

Bushra Co. replaced a $1,000 account payable balance to Elin Co. with a 120-day, $1,000 note bearing 8% annual interest. Bushra's entry to record this transaction would include a credit to which account? Notes Receivable Accounts Payable Notes Payable Accounts Receivable Cash

Notes Payable Reason: This is an accounts payable which is being replaced with a note payable, so Notes Payable is credited to increase it.

On January 1, Avers Co. borrowed $10,000 by extending their past-due account payable with a a 60-day, 8% interest-bearing note. On March 1, the due date, Avers pays the amount due in full. This entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash) __ in the amount of __. Cash; $10,800 Notes Payable; $10,000 Notes Payable; $10,133 Cash; $10,133 Notes Receivable; $10,133 Cash; $10,000

Notes Payable; $10,000 Reason: Notes Payable will be debited for $10,000. Cash will be credited for $10,133.

Which of the following items are considered employee benefits? Pension plans State unemployment taxes Medical insurance Employee withholdings

Pension plans Medical insurance

Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account? Prepaid sales tax Sales tax payable Sales tax revenue Sales tax expense

Sales tax payable

Which of the following situations would not be required to be recorded in the financial statements or reported as a note to the financial statements? The liability is probable, but the amount cannot be reasonably estimated. The liability is possible and estimated to be $25,000. The liability is possible, but cannot be reasonably estimated. The liability is probable and estimated to be $10,000. The liability is remote and estimated to be $30,000.

The liability is remote and estimated to be $30,000.

Which of the following liabilities could be a multi-period known liability? Accounts Payable Unearned Subscription Revenues Notes Payable Wages Payable

Unearned Subscription Revenues Notes Payable

Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer? State taxes FICA Federal taxes Insurance premiums Unemployment

Unemployment

Abby Co. allows each employee two weeks of paid time off during each calendar year. Since employees are working for 50 weeks, rather than 52 weeks, Abby must accrue the paid time off during the 50 weeks that the employees work. The year-end adjusting entry is recorded as a credit to the ______ account. Employee Taxes Payable Employee Wages Payable Vacation Benefits Payable

Vacation Benefits Payable

A liability created by buying goods or services on credit is typically recorded to _________ _____________

accounts payable

Employee Blank______ are perks that are provided in addition to salaries and wages, such as all or part of medical, dental, life and disability insurance. benefits taxes withholdings

benefits

A ______ is when an employer provides employees with a percentage of the company's net income earned during the year. warranty plan benefit plan bonus plan vacation benefit plan

bonus plan

Angela Bennett is an employee of Marks Co. This past year, Angela received 1% of Marks net income, in addition to her annual salary. This added benefit is called a: warranty plan bonus plan benefit plan vacation plan

bonus plan

When a company guarantees the payment of debt owed by a supplier, customer or another company, the guarantor usually discloses the guarantee as a (known/contingent)____________ liability.

contingent

Amounts withheld from employee's earnings for employee income tax is considered a Blank______ by the employer until the government is paid. current liability current asset long-term liability long-term asset

current liability

On June 1, Sawyer Co. borrowed $5,000 by extending their past-due account payable with a 45-day, 12% interest-bearing note. On July 16, the due date, Sawyer pays the amount due in full. Sawyer would record this payment with a (debit/credit) ______ to Interest Expense in the amount of ______. credit; $600 debit; $600 credit; $75 debit; $75

debit; $75 Reason: Interest Expense is debited for $75 computed as $5,000x.12x(45/360)=$75

Which of the following represent reasonably possible contingent liabilities? debt guarantees potential legal claims accounts payable warranties

debt guarantees potential legal claims

Unemployment taxes are examples of (employee/employer) __________ required taxes.

employer

A known obligation of an uncertain amount that can be reasonably estimated is called a(n) ________ liability.

estimated

A(n) Blank______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated. uncertain unreal multi-period estimated

estimated

A measurable obligation arising from agreements, contracts, or laws is called a _____________ liability.

known

A(n) (asset/liability/revenue) ____________is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

liability

Bina Consulting Co. collected $500 from a customer in advance to provide consulting fees for the next two months. The $500 would be recorded with a debit to Cash and a credit to the Unearned Revenues, which is a(n) (asset/liability/equity) ____________ account.

liability

Bryne Co. sells merchandise and collects a 5% state sales tax. The tax is recorded on Bryne's general ledger as a(n) Blank______ account. . liability asset revenue expense

liability

When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account and a(n) Blank______ account. expense dividend liability revenue

liability

Unearned subscription revenues that extends over multiple periods is an example of a Blank______ known liability. current-period multi-period long-term

multi-period Reason: This is a multi-period liability because the unearned subscription revenue will extend over multiple periods.

Employee income tax depends on: number of employee withholding allowances employee's income number of employer withholding allowances employer's income

number of employee withholding allowances employee's income

A potential legal claim is recorded only if the claim cannot be reasonably estimated but is reasonably possible. only if payment for damages is probable and the amount can be reasonably estimated. only if the claim can be reasonably estimated. only if payment for damages is reasonably possible and the amount is reasonable.

only if payment for damages is probable and the amount can be reasonably estimated.

Most states require ______ payments and reports. quarterly annual monthly

quarterly

A written promise to pay a specified amount on a stated future date within one year or the company's operating cycle, whichever is longer, is considered a ________. long-term note receivable short-term account payable short-term note payable short-term note receivable long-term note payable long-term account payable

short-term note payable

Cadie Construction Co. signed a note promising to pay a cement supplier $1,000 60-days from now. As a result of this transaction, Cadie would record a(n) Blank______ on her balance sheet. short-term note payable long-term note payable prepaid expense account payable

short-term note payable

The ratio of income before interest expense (and any income taxes) divided by interest expense reflects the risk of a company not being able to pay fixed expenses if sales decline is called the Blank______ ratio. interest turnover times interest earned interest payment

times interest earned

Paid absences offered to employees are called (pension/vacation)_____ benefits.

vacation

A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except: warranties. payroll obligations. notes payable. accounts payable. unearned revenues.

warranties.

A (repair/warranty) ______ is a seller's obligation to replace or fix a product (or service) that fails to perform as expected within a specified period.

warranty

Form 941, which employers use to report FICA and income tax information to the IRS is due: within one month after the end of the year. within six months after the end of each calendar quarter. within one month after the end of each month. within one month after the end of each calendar quarter.

within one month after the end of each calendar quarter.