Chapter 11 Smart book
Bryne Co. sells merchandise and collects a 5% state sales tax. The tax is recorded on Bryne's general ledger as a(n) ______ account.
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) ________ account.
liability
Unearned subscription revenues that extends over multiple periods is an example of a _______ known liability.
multi-period
A potential legal claim is recorded
only if payment for damages is probable and the amount can be reasonably estimated.
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) ________ on her balance sheet.
short-term note payable
A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except:
warranties.
Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense is
$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
$200
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 $______
Blank 1: 1000 or 1,000
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 $______
Blank 1: 650 or $650
_____ is the difference between the amount borrowed and the amount repaid.
Blank 1: Interest
A liability created by buying goods or services on credit is typically recorded to _______ ________.
Blank 1: accounts Blank 2: payable
Unemployment taxes are examples of (employee/employer) _____ taxes.
Blank 1: employer
A known obligation of an uncertain amount that can be reasonably estimated is called a(n) _____ liability.
Blank 1: estimated
A measurable obligation arising from agreements, contracts, or laws is called a _______ liability.
Blank 1: known
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.
Blank 1: liability
Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals ______ pay.
Blank 1: net, take-home, or take home
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
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? (Check all that apply.)
Credit to Unearned Paving Fees Debit to Cash
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
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
Which of the following items is not a payroll deduction?
Net pay
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 Payable
Which of the following items are considered employee benefits? (Check all that apply.)
Pension plans Medical insurance
Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?
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 remote and estimated to be $30,000.
Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?
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.
Vacation Benefits Payable
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
________ are amounts owed to suppliers for products or services purchased on credit.
Accounts payable
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
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 ______ expense.
Blank 1: interest
A ______ 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.
Blank 1: liability
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
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
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? (Check all that apply.)
Debit to Accounts Payable Credit to Notes Payable
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
Which of the following liabilities could be a multi-period known liability? (Check all that apply.)
Unearned Subscription Revenues Notes Payable
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
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
A(n) ______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated.
estimated
Employee income tax depends on: (Check all that apply).
number of employee withholding allowances employee's income
Amounts withheld from an employee's gross pay are called:
payroll deductions
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 __________.
short-term note payable