Accounting Fundamentals Sessions 7-13

All of the following taxes are withheld from an employee's pay except A. Federal income tax B. SUTA tax C. Medicare tax D. Social security tax

B. SUTA tax

Freight is a(n) ___ account. A. revenue B. expense C. asset D. liability

B. expense

T or F - A purchase allowance is when a business returns the goods.

False

T or F - For the purpose of internal control, only the person who prepares payroll checks should distribute them.

False

T or F - Sending copies of Form W-2 to each employee marks the end of the payroll procedures for the year.

False

T or F - The amount of sales tax due is required to be paid just once per year, at the end of the year, for all companies.

False

T or F - The employer must issue each employee a Form W-2 by January 15 of the next year.

False

T or F - The statement of owner's equity is prepared before the balance sheet so that the beginning owner's equity balance is available for the balance sheet.

False

T or F - A sales allowance is when a firm negotiates a reduction in the sales price of merchandise for paying within a predetermined number of days.

False. A sales allowance is when customers agree to keep returned merchandise in return for a reduction in the selling price.

T or F - When an accounts payable subsidiary ledger is used, the entry to Accounts Payable requires two posting references in the general journal.

True

T or F - When prepaid expense items are intially recorded as assets, the end-of-period adjustments for these items should be reversed.

False

T or F - When the accrual basis of accounting is used, expenses are recognized only in the period during which they are paid.

False - Expenses are recognized in the period they are incurred.

T or F - To arrive at the accurate balance on a bank reconciliation statement, it is necessary to deduct an NSF check from the bank statement balance.

False.

T or F - The adjusting entry to allocate the cost of equipment to operations includes a debit to Accumulated Depreciation - Equipment and a credit to Depreciation Expense -- Equipment.

False. Credit Accumulated Depreciation and debit Depreciation Expense -- Equipment.

T or F - A receiving report is prepared to show the quantity and condition of the goods received.

True

T or F - A schedule of accounts payable is a list of all balances owed to creditors.

True

T or F - Cash short or over is an expense account when it has a debit balance

True

T or F - Earnings in excess of the social security base amount are not taxed.

True

T or F - In a firm that has a good system of control, cash receipts are deposited often.

True

T or F - Merchandise inventory is adjusted in two steps because both the beginning and ending inventory figures are needed to prepare the income statement.

True

T or F - Outstanding checks are checks that are recorded in the journal but have not been paid by the bank.

True

T or F - The Medicare tax is levied to provide medical care for the employee and the employee's spouse after they reach age 65.

True

T or F - The employee's marital status is one factor that determines the amount of the federal income tax withheld by the employer.

True

T or F - The entry to record the employer's payroll taxes would include a debit to an expense account and a credit to one or more liability accounts.

True

Alfred Spindle earned gross wages of $1,620 for the week ended June 21, 2013. His gross wages year to date, prior to his June 21 paycheck, are $38,556. He has $88 withheld from his pay for federal income taxes, and $16 for health insurance. Social Security is 6.2% and Medicare tax is 1.45%; the federal unemployment tax rate is 0.8% and the state unemployment tax rate is 4.2%, both on a maximum of $7,000 per each employee's annual earnings. What is the total employer payroll tax expense from Alfred's June 21, 2013, paycheck? A. $204.93 B. $123.93 C. $81.00 D. $0

B. $123.93

An employee whose regular hourly rate is $9 and whose overtime rate is 1.5 times the regular rate worked 44 hours one week. The employee's gross pay was A. $378 B. $396 C. $414 D. $594

C. $414

Cost of Goods Sold is classified as a(n): A. Revenue account B. Asset account C. Expense account D. Owner's Equity Account

C. Expense account

T or F - The balance of the Sales Returns and Allowances account is reported as a selling expense in Operating Expenses section of a multiple-step income statement.

False

T or F - The debit and credit amounts for the Income Summary account are combined into one number in the Income Statement section of the worksheet.

False

T or F - Transactions completed with a debit card appear on a statement separate from other banking transactions.

False

T or F - When a business makes a sale on a bank credit card, the business is responsible for collecting from the customer.

False

Which of the following forms is submitted with a copy of the Form W-2 for each employee to the Social Security Administration?

Form W-3

T or F - The Sales Returns and Allowances account has a normal debit balance.

True. It is a contra revenue account.

If Lacy's Department Store charged 8 percent sales tax, the amount of sales tax collected on a $225 sale would be A. $18.00 B. $180.00 C. $28.12 D. $2.81

A. $18.00

Which of the following would not be classified as a Current Asset? A. Equipment B. Supplies C. Accounts Receivable D. Cash

A. Equipment

Kristy earns $39,000 per year and is paid once a month. For January, she had $188 withheld from her pay for federal income taxes, and $52 withheld for health insurance. Social Security is 6.2% and Medicare tax is 1.45%; the federal unemployment tax is 0.6% and state unemployment tax rate is 4.2%. What is the total employer payroll tax expense for Kristy's January paycheck? A. $385.13 B. $162.50 C. $248.63 D. $404.63

D. $404.63

Which of the following accounts will appear on the postclosing trial balance? A. Miscellaneous Income B. Payroll Taxes Expense C. Medicare Tax Payable D. Sales

C. Medicare Tax Payable

On November 1, 2013, Paige Turner Publishing received $50,400 in cash for subscriptions covering one year, recording the entry as a debit to Cash and a credit to Unearned Subscriptions. The correct adjusting entry at December 31, 2013, is A. Debit Subscriptions Income $8,400; credit Unearned Subscriptions $8,400 B. Debit Unearned Subscriptions $8,400; credit Subscriptions Income $8,400 C. Debit Unearned Subscriptions $4,200; credit Unearned Subscriptions $4,200 D. Debit Unearned Subscriptions $50,400; credit Subscriptions Income $50,400

B. Debit Unearned Subscriptions $8,400; credit Subscriptions Income $8,400

When merchandise is needed, the purchasing department issues a form called A. a purchase invoice B. a purchase order C. a sales invoice D. a purchase requisition

B. a purchase order

Which of the following is NOT typically an employee payroll withholding? A. federal income taxes B. state unemployment taxes C. union dues D. medical insurance

B. state unemployment taxes

Which of the following statements is correct? A. Purchases should be made only after proper authorization has been given in writing. B. The person who ordered the goods should also authorize payment. C. Computations on an invoice are assumed to be correct if computer generated. D. Purchase requisitions do not need to be printed on pre-numbered forms.

A. Purchases should be made only after proper authorization has been given in writing.

____ are required to collect sales tax from customers, making periodic payments to the taxing authority, and pay the taxes due when reports are filed. A. Retailers B. Wholesalers C. Manufacturers D. Distributors

A. Retailers

The objective of internal control of purchases is to A. create written proof that purchases and payments are authorized B. create a disciplined work environment C. make the sales process more complex D. create more organized invoices

A. create written proof that purchases and payments are authorized

With the accrual basis of accounting, it is appropriate to recognize revenue from a credit sale A. on the date of the sale B. on the date the account is collected in full C. each time a payment on an account balance is received D. either on the date of the sale or when the amount of the sale is collected

A. on the date of the sale

Generally, the base earnings subject to state unemployment taxes is A. smaller than the base for social security B. the same as the base of social security C. larger than the base for social security D. the amount of total earnings

A. smaller than the base for social security

Allowance for doubtful accounts is A. subtracted from Accounts Receivable in the Assets section of the balance sheet. B. deducted from Sales in the Revenue section of the income statement C. listed in the Operating Expenses section of the income statement D. Listed in the Liabilities section of the balance sheet.

A. subtracted from Accounts Receivable in the Assets section of the balance sheet

Lacy Crawford has a regular hourly rate of $21.50. In a week when she worked 40 hours and had deductions of $110 for federal income tax, $53.50 for social security tax, and $12.50 for Medicare tax, her net pay was A. $860 B. $684 C. $750 D. $794

B. $684

On July 1, 2013, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense with this policy for the year ending December 31, 2013, is A. $600 B. $1,050 C. $900 D. $1,800

C. $900

Which of the following is not correct? A. In accounting, the term "cash" includes checks, money orders, and funds on deposit in a bank as well as currency and coins. B. The cash register proof is used to enter the cash sales and sales tax in the journal C. The entry to record the receipt of a promissory note to replace an open account is recorded in the cash receipts journal D. The cash receipts journal has separate columns for debits to Cash, credits to Accounts Receivable, and credits to Sales and Sales Tax Payable

C. The entry to record the receipt of a promissory note to replace an open account is recorded in the cash receipts journal

The entry in a firm's accounting records for a credit customer's check that was returned by the bank marked "NSF" would include A. a debit to Miscellaneous Expense and a credit to Cash B. a debit to Accounts Receivable and a credit to Accounts Payable C. a debit to Accounts Receivable and a credit to Cash D. a debit to Cash and a credit to Accounts Receivable

C. a debit to Accounts Receivable and a credit to Cash

The entry to record a return of defective merchandise on which no sales tax was charged includes A. a debit to Sales and a credit to Accounts Receivable B. a debit to Sales and a credit to Sales Returns and Allowances C. a debit to Sales Returns and Allowances and a credit to Accounts Receivable D. a debit to Accounts Receivable and a credit to Sales Returns and Allowances

C. a debit to Sales Returns and Allowances and a credit to Accounts Receivable

The journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid and added to the invoice is A. debit Purchases $2,750; credit Accounts Payable $2,750 B. debit Accounts Payable $2,875; debit Freight-In $125; credit Purchases $2,750 C. debit Purchases $2,750; debit Freight-In $125; credit Accounts Payable $2,875 D. debit Accounts Receivable $2,875; credit Sales $2,875

C. debit Purchases $2,750; debit Freight-In $125; credit Accounts Payable $2,875

The amount of the purchases for a period is presented in A. the Liabilities section of the balance sheet B. the Revenue section of the income statement C. the Cost of Goods Sold section of the income statement D. the Expenses section of the income statement

C. the Cost of Goods Sold section of the income statement

The balance of the owner's drawing account is A. listed in the Other Expenses section of the income statement B. listed in the Current Assets section of the balance sheet C. used in the calculation of ending capital on a statement of owner's equity D. listed in the Operating Expenses section of the income statement

C. used in the calculation of ending capital on a statement of owner's equity

Which of the following statements is correct? A. Income that has been earned but not yet received is called accrued income. B. Unearned Subscription Income is a liability account C. Under the accrual basis of accounting, revenue is recognized and recorded in the period when it is earned regardless of when cash related to the transaction is received. D. All of the above statements are correct.

D. All of the above statements are correct

Hugh Snow, the buyer, returned merchandise to Farley Co., the seller. The entry on the books of Farley company to record the return of merchandise from Hugh Snow would include a A. Debit to Accounts Payable B. Credit to Purchase Returns and Allowances C. Debit to Accounts Receivable D. Debit to Sales Returns and Allowances

D. Debit to Sales Returns and Allowances

Which of the following statements is correct? A. A company is required to withhold various employee taxes from amounts paid independent contractors B. The accountant who performs the independent audit for a company is an employee of the company. C. All employees must be paid at the minimum wage rate set by the Fair Labor Standards Act. D. Disability benefits for the worker and the worker's dependents are provided by the Federal Insurance Contributions Act

D. Disability benefits for the worker and the worker's dependents are provided by the Federal Insurance Contributions Act

Interest expense is classified as a(n): A. Administrative Expense B. Selling Expense C. Other Income D. Other Expense

D. Other Expense

Included with its bank statement a firm may receive a credit memorandum, which could indicate A. a bank service charge deducted from the firm's account balance. B. the bank's return of a dishonored (NSF) check that was issued by a credit customer of the firm. C. a fee for printing new business checks. D. an addition to the firm's account balance because the bank collected the amount due on a promissory note from a customer of the firm.

D. an addition to the firm's account balance because the bank collected the amount due on a promissory note from a customer of the firm.

The entry to replenish a petty cash fund includes A. a debit to Cash and a credit to Petty Cash B. a debit to Petty Cash Fund and a credit to Cash C. debits to various expense accounts and a credit to Petty Cash Fund D. debits to various expense accounts and a credit to Cash

D. debits to various expense accounts and a credit to Cash

To arrive at an accurate balance on a bank reconciliation statement, a service charge should be A. Added to the bank statement balance B. added to the book balance C. deducted from the bank statement balance D. deducted from the book balance

D. deducted from the book balance

Which of the following is a factor in the determination of the amount of social security tax to withhold from an employee's pay? A. hours worked during the pay period B. marital status C. withholding allowances claimed on Form W-4 D. gross wages

D. gross wages

A company that earns income by buying merchandise then reselling it to its customers in the same condition in which it was purchased is a A. manufacturing business B. service business C. non-for-profit business D. merchandising business

D. merchandising business

T or F - After all adjusting entries are posted, the balances of the general ledger accounts should match the amounts shown in the Adjusted Trial Balance section of the worksheet.

True

T or F - After all the transactions have been posted, the totals of the balances in the accounts receivable subsidiary ledgers should equal the balance of the Accounts Receivable account in the general ledger.

True

T or F - The entry to record the social security and Medicare taxes levied on a business includes a debit to Payroll Taxes Expense.

True

T or F - The overtime rate is one and one-half times the regular hourly rate.

True

T or F - Under the accrual basis of accounting, only income that has been earned appears on the income statement.

True

T or F - When a firm experiences a net loss, the owner's capital is decreased.

True

T or F - When a firm records its payroll, the amount of federal income tax withheld from employees is entered as a liability.

True