Accounting Chapter 9

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

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

Damien Co. has $10,000 of unearned revenues on its balance sheet. Damien expects that it will earn $8,000 of these revenues in the upcoming twelve months. How much will be recorded in Long-Term Liabilities?

$2,000

Boyd's Bicycle Sales and Repairs Co. offers a 6-month warranty on all new bicycle purchases. Based on history, Boyd determines that warranty repairs are equal to approximately 2% of sales. During the month, Boyd sales total $20,000. Boyd will record Warranty Expense in the amount of ______ for the month.

$400

Victor's Vacuum Sales Co. sells high quality vacuums and provides a one-year warranty on all new sales. Based on history, Victor anticipates that 3% of vacuums will be returned at a cost of $30 per vacuum. During the month, Victor sold 100 vacuums for a total of $35,000. At the end of the month, Victor will record _______ in Warranty Expense.

$90

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.

10

On December 1, Hansen Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen will record an adjusting entry by debiting interest expense in the amount of ______.

100,000*.06(30/360)=$500

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

On July 1, Scene Co. borrowed $15,000 cash from First Bank by signing a 30-day, 5% interest-bearing note. Scene will record this entry with a credit to Notes Payable in the amount of $.

15,000

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 _.

Blank 1: 940

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

Blank 1: 941

Anchor Co. has accrued payroll expense of $1,300 which includes employee withholdings of $400. On payday, Anchor will record the distribution of paychecks with a credit to in the amount of $.

Blank 1: Cash Blank 2: 900

Employee benefits that are paid by the employer are recorded in the Employee Benefit account.

Blank 1: Expense

Federal government taxes implemented on employers in order to provide unemployment benefits to qualified workers are known as (use acronym) .

Blank 1: FUTA

Employer taxes, such as SUTA, are recorded with a debit to Employer Tax Expense and a credit to SUTA (expense/payable) until payments are submitted to the state.

Blank 1: Payable

Harvey Co. has current period employee salary expenses of $800. Employee withholdings total $300. The entry to accrue current period payroll will include a credit to Salaries( blank) in the amount of $.

Blank 1: Payable Blank 2: 500

When a company guarantees the payment of debt owed by a supplier, customer or another company, the guarantor usually discloses the guarantee as a _ liability.

Blank 1: contingent

An employee earnings report is a _ record of an employee's hours worked, gross earnings, deductions and net pay.

Blank 1: cumulative

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

Blank 1: employer

A payroll shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for each pay period.

Blank 1: register

A contingent liability can be ignored (not recorded in the financial statements or notes to the financial statements) if it is considered as (probable/reasonably possible/remote) possibility.

Blank 1: remote

Paid absences offered to employees are called _ benefits.

Blank 1: vacation

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

Blank 1: warranty

On December 31, Lazo Co. offers a bonus to its employees of $100,000 to be paid in January of the following year. The December 31 journal entry will require a credit to the ______ account in the amount of _____.

Bonus Payable; $100,000

On March 1, Young Co. borrowed $1,000 by extending their past-due account payable with a 120-day, 6% interest-bearing note. On June 29, the due date, Young pays the amount due in full. This entry would be recorded by Young with a credit to _____ in the amount of ______.

Cash; $1,020

Vance Co. allows employees to take a two week vacation each year. To account for the two weeks off each year, Dante will record an adjusting entry to which of the following accounts? (Check all that apply.)

Credit to Vacation Benefits Payable. Debit to Vacation Benefits Expense.

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? (Check all that apply.)

Debit to Income Tax Expense Credit to Income Taxes Payable

Zilo Co. has accrued employee salary expense of $1,000 which includes employee withholdings that total $300. On payday, Zilo will record the payment with which of the following entries? (Check all that apply.)

Debit to Salaries Payable for $700. Credit to Cash for $700.

Theo Co. has two full-time employees who are provided health insurance at Theo's expense. At the end of the period, the cost of the insurance totals $1,400. The entry that Theo will make to accrue these costs include a debit to the ___________ account.

Employee Benefits Expense

Camelot Co. expects that bonuses for the year will be $100,000. The 12/31 entry will require a debit to the ______ account in the amount of _____.

Employee Bonus Expense; $100,000

Handy Holly Co. provides a variety of household repairs and warranties her work for a six-month period. Holly provided $13,000 of service fees during the month and anticipates that warranty repairs for these sales will total $400. The entry that Holly will make to record the estimated warranty expense will include a credit which account?

Estimated Warranty Liability

Perez Co. sells lawn mowers and warranties them for one year. Perez made an adjusting entry at the end of last year to record the warranty expense. In February of the current year, a customer needed a $50 repair to a lawn mover. The entry to record the repair includes a debit to ___.

Estimated Warranty Liability

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.

Estimated Warranty Liability

Leo Calvin is required to have ______ taxes withheld from his pay in order to cover the cost of future retirement, disability, survivorship and medical benefits.

FICA

The Federal Insurance Contributions Act provides retirement, disability, survivorship, and medical benefits to qualified workers. Laws require employers to withhold _____ taxes from employees' pay to cover costs of the system.

FICA

Federal government taxes implemented on employers in order to provide unemployment benefits to qualified workers are known as (use acronym) .

FUTA

The federal government requires that employers are taxed on employee wages to provide unemployment benefits to qualified workers. These taxes are known as:

FUTA

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.

False

The Wage and Tax Statement, or ___________, is a report that is required to be given to employees by January 31 following the year covered by the report. This report details the employees wages subject to FICA and federal income taxes, along with the amount of these taxes withheld.

Form W-2

To compute the amount of taxes withheld from each employee's wages, an employer needs to determine both the employee's wages earned and the employee's number of withholding allowances. The employer will determine the number of withholding allowances using the ___________.

Form W-4

Which of the following situations is not a contingent liability?

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

_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.

Gross pay

During the first quarter of the year, Trina Co. accrued $6,000 of income taxes. On April 15, Trina will send in the first quarterly payment. The entry to record this payment will include a debit to the _______ account.

Income Taxes Payable

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 ________ account.

Income Taxes Payable

Which of the following formulas is used to compute the times interest earned?

Income before interest expense and income tax/interest expense

Which of the following liabilities could be a multi-period known liability? (Check all that apply.)

Notes Payable Unearned Subscription Revenues

During the second quarter of the year, Francisco Co. accrued $8,000 of income taxes. On July 15, Francisco will send in the second quarterly payment. To record this payment, Francisco will enter which of the following entries? (Check all that apply.)

Credit to Cash Debit to Income Taxes Payable

Perez Co. sells automotive supplies and warranties them for a three-month period. Perez sold $10,000 of supplies during the month and anticipates that warranty repairs for these sales will total $250. The adjusting entry that Perez will make to record the warranty expense will include which of the following? (Check all that apply.)

Credit to Estimated Warranty Liability Debit to Warranty Expense

On June 1, Button Co. borrowed $1,000 cash from National Bank by signing a 120-day, 6% interest-bearing note. Button will record this transaction with a credit to _____ in the amount of ______.

Notes Payable; $1,000

On January 1, Avers Co. borrowed $10,000 cash from Main St. Bank by signing a 60-day, 8% interest-bearing note. On March 1, Avers pays the amount due in full. The March 1 entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash)_____ in the amount of _______.

Notes Payable; $10,000

Perez Co. sells lawn mowers and warranties them for one year. Perez made an adjusting entry at the end of last year to record the warranty expense. In February of the current year, a customer needed a $50 repair to a lawn mover. The entry to record the repair includes a credit to ___.

Parts Inventory

The journal entry to record employer tax accruals includes a debit to:

Payroll Tax Expense

Amounts withheld from an employee's gross pay are called:

Payroll deductions

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as (use acronym) .

SUTA

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as:

SUTA

Employers are required to give each employee an annual report of his or her wages subject to FICA and federal income taxes, along with the amounts of these taxes withheld.This report is called a Wage and Tax Statement, or Form:

W-2

The form that an employee uses to indicate the number of withholding allowances filed with the employer is called Form _______.

W-4

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

benefits

A ___________ is when an employer provides employees with a percentage of the net income earned during the year.

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:

bonus plan

Teva Co. has current period employee salary expense of $2,000. Employee withholdings total $850. To accrue the current period payroll, Salaries Payable will be (debited/credited) __________ in the amount of ___________.

credited; $1,150

Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? (Check all that apply.)

current liabilities long-term liabilities

Amounts withheld from employee's earnings for employee income tax is considered a _____ by the employer until the government is paid.

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 _______.

debit; $75

An employee earnings report includes all of the following: (Check all that apply).

employee's gross earnings employee's hours worked employee's net pay

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

estimated

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

estimated

The formula to compute the times interest earned is income before interest expense and income taxes divided by:

interest expense

Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? (Check all that apply.)

long-term liabilities current liabilities

Unearned subscription revenues that extends over multiple periods is an example of a _______ known liability.

multi-period

Employee income tax depends on: (Check all that apply).

number of employee withholding allowances employee's income

A potential legal claim is recorded

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

The reports that employers are required to prepare to explain how they compute local, state and federal payroll taxes are called reports.

payroll

The (blank) of a note is the amount that the signer of a note agrees to pay back when it matures, not including interest.

principal or face value (could be either)

Most states require _____ payments and reports.

quarterly

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 ____________ ratio.

times interest earned

Examples of employee voluntary deductions may include all of the following except:

unemployment taxes.

Paid absences offered to employees are called _ benefits.

vacation

Employers often withhold amounts from employees' earnings which arise from employee requests, contracts, unions, or other agreements. These withholdings are called employee __________ and include items such as medical premiums.

voluntary deductions

Form 941, which employers use to report FICA and income tax information to the IRS is due:

within one month after the end of each calendar quarter.

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.

Vacation Benefits Payable

(Blank) is the difference between the amount borrowed and the amount repaid.

Interest

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest note. On April 8, Lee Co. will pay National Bank a total of $101,500. The difference between the amount paid back to National Bank of $101,500 and the amount borrowed of $100,000 (or $1,500) represents (blank) expense.

Interest

On November 1, Lance Co. borrows $90,000 cash from First Bank by signing a 90-day, 5% interest-bearing note. On December 31, Lance will record an adjusting entry by crediting _______ in the amount of ______.

Interest Payable; $750$90,000.05(60/360)=$750

Employers are required to prepare and submit payroll reports to explain how they compute which of the following taxes? (Check all that apply.)

Local taxes Federal taxes State taxes

Which of the following items are considered employee benefits? (Check all that apply.)

Medical insurance Pension plans

FICA tax includes both Social Security tax and _____.

Medicare tax

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

Net Pay

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

Net Pay

Which of the following items is not a payroll deduction?

Net Pay

Which of the following is a true statement concerning the employer FICA taxes:

The employer must pay FICA tax in an amount equal to that paid by the employee.

Dante Co. allows employees to take two weeks vacation during each year. To account for the two weeks off each year, Dante will accrue the Vacation Benefits with a credit to the ________ account.

Vacation Benefits Payable

Which of the following contingent liabilities would require a company to record a note to the financial statements? (Check all that apply.)

The liability is possible and cannot be reasonably estimated. The liability is possible and is estimated to be $35,000. The liability is probable and cannot be reasonably estimated.

Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?

Unemployment