ch 8

Warranties

(sales*%)-expenditures= Warranty Liability

6.2% Social Security Tax

* the FICA base amount

Record the receipt of cash at maturity(bank)

Jan 31 Cash 21218000 Note Receivable 20.6 Interest Receivable 515000 Interest Revenue 10300

A current ratio of 2.2 indicates that:

for every $1 of current liabilities, the company has $2.20 of current assets.

1.45% Medicare Tax

* the base salary

Liabilities that require cash payments

-Accounts payable -Notes payable -Salaries payable

Havier Corporation borrows $1 million from a bank on September 1, Year 1, by signing a 6 percent, nine-month note for the amount borrowed plus accrued interest due nine months later on June 1, Year 2. Which of the following is recorded on June 1, Year 2? Multiple Choice $25,000 debit to Interest Payable $1,045,000 credit to Cash Correct $20,000 credit to Interest Expense $1,045,000 debit to Note Payable

1045000 credit to cash

Which of the following are included in FICA taxes? Multiple select question. A 5.4% SUTA tax A 1.45% Medicare tax A 6.2% FUTA tax A 6.2% social security tax

A 1.45% Medicare tax A 6.2% social security tax

Record The Sale including the Sales Tax

Accounts Receivable 4557 Sale Revenue 4200 Sale Tax Payable 357 credit sale---->(4200)*8.5/100=357

Withholding taxes for federal and state income tax are based upon which items? Multiple select question. Number of employees at the company Size of the corporation in total assets Amounts earned by employees Number of exemptions claimed

Amounts earned by employees Number of exemptions claimed

Borrowing money causes what?

An increase in assets and liabilities

Notes payable is classified as a liability that has which of the following effects? Multiple choice question. Creates interest expense on the income statement Creates revenue on the income statement Creates an asset on the balance sheet Creates deferred revenue on the income statement

Creates interest expense on the income statement

Kevin sells $100 of goods to a customer for cash. The sales tax is 8%. The journal entry for this sale will include which of the following entries? Multiple select question. Credit sales tax payable $8 Credit revenues $108 Debit cash $108 Credit accounts payable $108 Credit revenues $100

Credit sales tax payable $8 Debit cash $108 Credit revenues $100

Record the repayment of the note at maturity

Feb 1 Note Payable(value) 51000 Interest payable(dec 31) 510 Interest expense(due) 255 Cash 51765

A contingent liability is recorded if which conditions are met? Multiple select question. It is probable that a future loss will occur. There is a remote chance that a future loss will occur. The amount of the loss can be reasonably estimated.

It is probable that a future loss will occur. The amount of the loss can be reasonably estimated.

Record the employer payroll taxes.

Jan 31 Payroll tax expense 235450 FICA Tax Payable 130050 Unemploymenttpayable105400

Record the employer-provided fringe benefits

Jan 31 Salaries Expense 51000 Accounts Payable 51000

During January, a company incurs employee salaries of $1.7 million. Withholdings in January are $130,050 for the employee portion of FICA, $255,000 for federal income tax, $106,250 for state income tax, and $17,000 for the employee portion of health insurance (payable to Company B). The company incurs an additional $105,400 for federal and state unemployment tax and $51,000 for the employer portion of health insurance. Record the employee salary expense, withholdings, and salaries payable

Jan 31 Salaries expense 1.7 Income Tax Payable 361250 FICA Tax Payable 130050 Accounts Payable 17000 Salaries Payable 1191700

On November 1, 2021, Aviation Training Corp. borrows $51,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation's year-end is December 31. Record the issuance of Note

Nov 1 Cash 51,000 Note Payable 51,000

Anastasia Company recognizes payroll for the month of May. Gross employee income is $200,000; federal taxes withheld are $40,000; state taxes withheld are $6,000; Social security and Medicare taxes are $30,000 total for employer and employees. Employees contribute $10,000 to a 401(k) retirement plan. Federal and state unemployment taxes are $12,000. Anastasia's payroll tax expense will be

Reason: Employer's portion of Social security and Medicare taxes of $15,000 plus federal and state unemployment taxes of $12,000 27000

Anastasia Company recognizes payroll for the month of May. Gross employee income is $200,000, federal taxes withheld are $40,000, state taxes withheld are $6,000, and Social Security and Medicare taxes are $15,000. Employees contribute $10,000 to a 401(k) retirement plan. Anastasia should recognize salaries and wages expense of (ignoring employer taxes) $210,000. $129,000. $154,000. $200,000.

Reason: The full amount of gross employee income is recorded as expense. Social Security and Medicare taxes are recorded as payroll tax expense, not salaries and wage expense. 200000

Which of the following transactions will increase a company's working capital? Multiple choice question. Payment of an accounts payable Purchase of inventory on account Receipt of cash on a long-term notes receivable Collection of an accounts receivable balance Receipt of cash on a short-term notes receivable

Receipt of cash on a long-term notes receivable

Which of the following are examples of fringe benefits provided by employers to their employees? Multiple select question. FICA matching contributions contributions to retirement and other savings accounts payment of insurance premiums on employees behalf reduced or no-cost company-provided services payment for services provided by employee to employer

contributions to retirement and other savings accounts payment of insurance premiums on employees behalf reduced or no-cost company-provided services

Taxes collected for taxing authorities are recognized as Multiple choice question. current liabilities. long-term liabilities. prepaid expenses. revenue. operating expenses.

current liabilities

Obtaining a note payable for cash results in a(n) ______. increase in liabilities and a decrease in stockholders' equity. increase in assets and an increase in liabilities. decrease in assets and a decrease liabilities. decrease in assets and an increase in liabilities.

increase in assets and an increase in liabilities

Ralph charges a fee of $2,180 for services performed for a new client. Assuming that the fee includes 9% of sales tax, Ralph should credit sales tax payable for: Multiple choice question. $376.20 Reason: $2,180 - ($2,180/1.09) $180 $196.20 Reason: $2,180 - ($2,180/1.09) $ 2,000 Reason: $2,180 - ($2,180/1.09)

180

Havier Corporation borrows $1 million from a bank on September 1, Year 1, by signing a 6 percent, nine-month note for the amount borrowed plus accrued interest due nine months later on June 1, Year 2. Which of the following is recorded on December 31, Year 1? $20,000 credit to Cash $25,000 debit to Interest Expense $20,000 credit to Interest Payable $20,000 credit to Note Payable

20,000 credit to interest payable

On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $20.6 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 6% promissory note. Interest is payable at maturity. FirstBanc Corp.'s year-end is December 31. (the banks journal entry) Record the acceptance of note

Aug 1 Note Receivable 20.6 Cash 20.6

Identify characteristics of notes payable that are not common to accounts payable. Based on promissory note Interest bearing Does not arise from past transaction Usually classified as current liability

Based on promissory note Interest bearing

Record The adjusting entry for interest

Dec 31 Interest Expense 510 Interest Payable 510

Record the adjusting for interest (Banks)

Dec 31 Interest Receivable 515,000 Interest Revenue 515,000

Common current liabilities include: Multiple select question. Prepaid insurance Deferred revenues Notes payable due in two years The current portion of long-term debt Sales tax payable

Deferred revenues The current portion of long-term debt Sales tax payable

Which of the following voluntary contributions by employees may employers deduct from their employees' pay? Multiple select question. unemployment taxes contributions toward retirement funds employee investments in retirement FICA contributions

contributions toward retirement funds employee investments in retirement

Abbott Corp.'s attorney estimates that the company will ultimately have to pay $400,000 related to current litigation. Abbot's journal entry should include a: Multiple select question. debit to contingent liability credit to retained earning debit to loss debit to asset credit to contingent liability

debit to loss credit to contingent liability

If a liability is classified as current, rather than noncurrent, the company's working capital will ______. Multiple choice question. decrease stay the same increase

decrease

Liability Characteristics

probable future sacrifices of economic benefits, arising from present obligations to other entities, resulting from past transactions or events.

The employer's portion of FICA tax remitted to the taxing authority is: Multiple choice question. lower than the employee's portion the same as the employee's portion higher than the employee's portion

the same as the employee's portion