Chapter 11: Liabilities and Payroll dynamic study

On January 1 of the current year, Jones Company borrowed $20,000 on a five-year, 7% note payable. On December 31 of the current year, Jones Company should record:

Interest Payable. The amount for the current year would be $20,000 * .07 = $1,400.

Jones Company's balance reflected Estimated Warranty Payable of $1,000 credit at the end of 2018, the current year. During 2019, the following year, Jones had sales of $100,000 and expects product warranties to cost the company 9% of sales. During 2019, Jones paid $8,500 for warranties. What is Jones Estimated Warranty Payable balance at the end of 2019?

$100,000 x 9% = $9,000 $1,000 + $9,000 - $8,500 = $1,500

An employee has year to date earnings of $114,000. The employee's gross pay for the next pay period is $5,000. FICA - OASDI is 6.2% and the wage base is $117,000. How much FICA - OASDI tax will be withheld from the employee's pay (answer is rounded to nearest whole dollar)?

($117,000 max - $114,000 already earned = $3,000). In this case, $3,000 * .062 = $186.

An employee has year to date earnings of $115,000. The employee's gross pay for the next pay period is $3,000. FICA - OASDI is 6.2% and the wage base is $117,000. How much FICA - OASDI tax will be withheld from the employee's pay (answer is rounded to nearest whole dollar)?

($117,000 max - $115,000 already earned = $2,000). In this case, $2,000 * .062 = $124.

Jones Company has the following financial information: Net Income for 2019 = $120,000 Income Tax Expense for 2019 = $10,000 Interest Expense for 2019 = $5,000 What is the times-interest-earned ratio?

(120,000 + 10,000 + 5,000) / 5,000 = 27.

John earns $22 per hour for a regular 40 hour work week. Any hours worked over 40 hours are paid at time and a half. What is John's gross pay if he worked 44 hour this week?

(40 hours * $22) + (4 hours * 1.5 * $22) = $1,012.

Base Electronics had sales of $14,000 this month and collected an additional 7% sales tax. Assuming all sales are cash, the journal entry to record this transaction would be:

Cash should be debited for the full amount received, $14,980 $14,000 x 7% = $980 Sales Revenue should be credited for $14,000 and Sales Tax Payable for $980.

debit Cash and credit Unearned Revenue

FICA - OASDI Tax FICA - Medicare Tax Federal and State Unemployment Taxes *All that are listed*

All of the following taxes may be withheld to arrive at the employee's net pay EXCEPT:

Federal and State Unemployment Taxes

Which of the following taxes is NOT withheld from the employee's paycheck:

Federal and State Unemployment Taxes

Which is not a main characteristic of a liability?

Liabilities can be either current or long-term

Smith Company has a lawsuit pending from a customer claiming damages of $50,000. Smith's attorney advises that the likelihood the customer will win is remote (unlikely). What information about the lawsuit does GAAP require?

No disclosure is required

To record employee payroll, all except the following are recorded as payables:

Payroll Tax

Titan Company is being sued for $200,000 and the attorney advises Titan that they will probably lose the lawsuit and is estimated Jones will pay the full amount of $200,000. Titan Company would need to record

a credit to a liability

Bigs Law Firm received $1,000 in advanced on May 1 from a client for a case to be completed next month. The journal entry to record receiving the advance payment for future service revenue would be:

debit Cash and credit Unearned Revenue

Base Electronics incurred federal income tax payable of $1,540. The journal entry to record the federal income tax owed would be:

debit Income Tax Expense and credit Income Tax Payable

Base Electronics owes $1,200 for federal income tax incurred which has been recorded as a liability. The journal entry to pay the $1,200 owed would be:

debit Income Tax Payable, credit Cash.

Jones Corporation purchased merchandise inventory with a 10%, 120 day note payable for $10,000. The company uses the perpetual inventory system. The entry to record the purchase of the merchandise with the note would be:

debit Merchandise Inventory and credit Notes Payable

Franklin Corporation purchased merchandise inventory with a 12%, 90-day note payable for $12,000. The company uses the perpetual inventory system. What is the journal entry to record payment of the note on the due date? (Round interest to the nearest dollar and assume a 360-day year.)

debit Notes Payable for the amount of the note and debit Interest Expense. Credit Cash for the total of the note and interest. 12,000 x 12% X 90/360 = $360

Base Electronics collects $1,400 in sales tax this month. To pay the sales tax, the journal entry would be:

debit Sales Tax Payable and credit Cash

Bigs Law Firm received $1,000 in advanced on May 1 from a client for a case to be completed next month. During the month of May, Bigs completed $300 worth of work. The journal entry to record the revenue earned would be:

debit Unearned Revenue for the amount earned of $300 and credit Service Revenue.

Andrew's Legal Services received $2,000 in advanced on June 1 from a client for a case to be completed next month. During the month of June, Andrew's completed $500 worth of work. The journal entry to record the revenue earned would be:

debit Unearned Revenue for the amount earned of $500 and credit Service Revenue.

Jones Company provides vacation benefits at a cost of $2,000 per month. What is the journal entry to record the accrued vacation for the month?

debit Vacation Benefits Expense, and credit Vacation Benefits Payable.