Chapter 8 LS Assignment
incurred
Interest expense is recorded in the period when it is _.
Face amount x annual interest rate x fraction of the year
choose the correct formula for calculating interest.
amount earned by employees number of excemptions claimed
Withholding taxes for federal and state income tax are based upon which items?
line, credit
a _ of _ is an informal agreement that permits a company to borrow up to a prearranged amount without having to following loan procedures.
long-term
Given a choice, most companies will prefer classifying liabilities as
creates interest expense on the income statement
Notes payable is classified as a liability that has which of the following effects?
debit to warranty liability
Rauch corporation estimated warranty expense in year 1 of $10,000. in year 2, rauch performed warranty work of $8,000. The journal entry to record the performance of warranty work would include a
They are not accrued
Which of the following is correct regarding gain contingencies?
employee - state and federal income tax employer - state and federal unemployment tax
correctly match the salary-related costs with the payee
interest bearing based on promissory note
identity characteristics of notes payable that are not common to accounts payable
credit accounts payable 1000 debit salaries expense 1000
Cannery company pays health insurance for its employees for $1,000 for the pay period. the journal entry to record this fringe benefit includes which of the following?
probability
Classifying liabilities as current or long term helps creditors and investors assess the _ that the liability will require expenditure of cash or another asset.
certain
Consistent with GAAP, we do not record contingent gains until the gain is _.
withholding taxes
Taxes subtract from employee's pay and remitted to the government on their behalf are called
state unemployment tax (suta) charitable contributions federal unemployment tax (futa)
Which of the following are not required payroll withholdings?
Federal income taxes Health insurance paid by employees Employee contributions to retirement plans
Which of the following are payroll withholdings that are subtracted from gross pay to arrive at net pay?
The likelihood of future payment or loss
Which of the following is an important criteria used to determine the reporting of a contingent liability?
operating and non-operating
Which of the following may be a proper income statement classification of contingent events?
Product warranties, Frequent flier program awards, future litigation losses
Which of the following may be classified as contingent liabilities?
FICA unemployment taxes
Which of the following payroll-related taxes must the employer pay by law?
warranties
Which of the following tends to be the source of the most commonly reported contingent liability?
union dues contributions toward retirement funds charitable contributions
Which of the following voluntary contributions by employees may employers deduct from their employees' pay?
social security medicare
Which of these payroll taxes are paid by the employer and the employee?
suta futa
Which of these payroll taxes are paid only by the employer?
long-term notes payable with quarterly payments of principle and interest mortgage requiring monthly payments of principle and interest
Which of the following are common examples of long-term liabilities that require reporting of a current portion of the liability?
accounts payable taxes payable deferred revenues
Which of the following are current liabilities?
federal taxes FICA contributions
Which of the following must employers by law withhold from their employee's pay?
Note payable due in 3 years
Which of the following obligations is NOT commonly classified as a current liability?
(c) A future loss is probable. (e) The amount of the future loss can be reasonably estimated.
a contingent liability typically is accrued for product warranties because it meets which of the following criteria?
300
volker company signs a 3-months, $10,000 note. stated interest rate is 12% payable at the maturity date. Interest incurred on the note is:
debit warranty expense $4,000; credit warranty liability $4,000
wang corporation sells $200,000 goods on account to customers. wang estimates that warranties will be 2% of sales. at the end of the year, wang will require which of the following entries for warranties?
present, assets, past
A liability is a(n) _ responsibility to sacrifice _ in the future due to a transactions or other event that happened in the _.
current
Current maturities of long-term debt should be classified as _ liabilities.
remote
Disclosure related to a contingent event is usually not required if the likelihood of payment is _.
debt to wages expense of $600 credit to state and federal income tax payable of $68 credit to cash of $486.10 credit to FICA( social security and medicare) payable of $45.90
John smith works 40 hours for abc corp. for $15 per hour. Required payroll deductions are: social security $37.50, Medicare $8.70, federal income tax $58, and state income tax $10. Assuming that john gets paid in cash, ABC would record a journal entry that includes a _.
credit to contingent liability for lawsuit $10,000.
Lark corporation believes it is probable the company will lose a lawsuit for $10,000. the journal entry to record the contingent loss will include a
Debit to Cash $100,000 Credit to Note Payable $100,000
On November 1,2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following?
$7,000 (24000/24 months = 1000 per month x 7 month = 7000 revenue)
On june 1,2018, Oxian corp. receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the income statement for 2018?
600
On october 1, 2018, perry corporation signed a 12-month, 8% interest bearing promissory note for 10,000. assume that all appropriate adjusting journal entries were made at 12/31. The journal entry requireed when the note matures on october 1, 2019 would include a debit to interest expense for
next
The current portion of long-term debt is the amount that will be paid within the _ year.
balance, sheet
The financial statement where the deferred revenue account is found is the _ _.
note payable due in 3 months wages payable accounts payable
which of the following are current liabilities?
liability
Deferred revenue should be classified as a(n) _ on the balance sheet.
current
Deferred revenues and sales tax typically are reported as _ liabilities.
uncertain, future
A contingent liability is an existing _ situation that might result in a loss depending on the outcome of a(n) _ event.
accounts, note
A(n) _ payable results from an agreement with a supplier to pay within 30 to 60 days, whereas a(n) _ payable is a signed contract that promises to pay a specific amount with interest at a specific maturity date.
a debit to cash of $300 and a credit to deferred revenue to $300.
ABC airlines collect $300 for a round-trip ticket from Chicago to Los Angeles and back. How does ABC airlines record the $300 collected in advance?
fringe
Additional benefits such as health insurance, retirement benefits, or life insurance that are paid by the employer are called _ benefits.
payroll withholdings
Amounts that are subtracted from an employee's gross pay are referred to as
annual
An interest rate, unless otherwise specified, is typically a(n) _ rate.
medicare contributions social security contributions federal unemployment tax
By law, an employer is required to pay which of the following amounts as payroll taxes?
100,000 debit to wages expense
Gross earnings for the pay period are $100,000. required payroll deductions are: social security $6,700, medicare $1,450, federal income tax $18,000 and state income tax $3,850. The journal entry to record wages paid includes a _.
20000 &* 0.08 &* 6/12
Jingle Company signs a 6-month, $20,000 note. Stated interest rate is 8% payable at the maturity date. Interest incurred on the note is calculated as
Current liability - normally payable within one year. Long-term liability - Normally payable more than one year from now
Match the classification with the correct description.
liability
deferred revenue is classified as a(n)
Debit account receivable $108 Credit revenue $100 Credit sales tax payable $8
kevin sells $100 of goods to a customer on account. The sales tax is 8%. the journal entry for this sale will include which of the following entries?
credit cash $106,000 debit note payable $100,000 debit interest expense $2,000 debit interest payable $4,000
on September 1,2018, kale corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required March 1, 2019 at the maturity date includes which of the following entries?
debit interest expense $4,000
on September 1,2018, kale corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required december 31, 2018 would include which of the following entries?
false
true or false: current liabilities are always payable within one year.
accrued
A loss that judged to be probable and for which the amount is reasonably estimable should be
contingent gain
A(n) _ _ is an existing uncertainty that might result in a gain.
liability
A(n) _ is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events.
accounts
A(n) _ payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash.
both the employee and employer
FICA tax is paid by
debit payroll expense 100,000 credit fica payable 5,000 credit wages payable 73000
Jenco Company's gross pay for employees at the end of the pay period is $100,000. Jenco withholds the following amounts: federal withholding tax 20000 fica withholding-employee portion - 5000 health insurance premiums 2000
(a) sales tax payable of $100 (b) sales revenue of $1,000
Lester Corp. sells merchandise to a customer for $1,000. The company also collects state and local sales taxes of 6% and 4%, respectively. At the time of sale, Lester should record the following credit amounts.
current and long-term.
Liabilities are classified as
current, long-term
Liabilities that are payable within one year commonly are classified as _ liabilities, while those payable more than one year from now commonly are classified as _ liabilities.
debit to interest payable of $1,000 credit to cash of $52,250 debit to notes payable of $50,000 debit to interest expense of $1,250
On september 1, abc company borrowed $50,000 on a 6%, 9-month note payable to xyz national bank. the entry abc would record at maturity, assuming all year-end (decemeber 31) adjusting entries were made correctly, would include a _.
are amounts subtracted from employees' gross earnings to determine their net pay decrease the amount of cash an employee receives
Payroll withholdings _.
$180
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:
warranty
Sally Company manufactures large kitchen appliances. For the first year of purchase, the company will repair any manufacturing defect free of charge. Sally apparently sells its appliances with a(n)_.
$250,000
Spencer Corp.'s attorney estimates that the company will ultimately have to pay between $250,000 and $500,000 relating to current litigation. Spencer should accrue a contingent liability and loss of
Disclose the contingency and state that an estimate cannot be made.
Taylor company's attorney informs its client that it is possible, but not probable, that the company will lose a currently litigated lawsuit. No reliable estimate of the potential loss is currently available. How should Taylor accrue and/or disclose this potential loss?
the same as the employee's portion
The employer's portion of FICA tax remitted to the taxing authority is:
chance
The feature that distinguishes loss contingencies from other liabilities is the _ that a loss will occur.
liabilities and stockholders's equity
The journal entry to record employer payroll taxes affects _.
current portion of long-term debt
The portion of a long-term liability that will be paid within the next year is referred to and reported as the:
b. $129,000 Calculation: (Employee Income - federal taxes withheld - state taxes withheld - Social Security and Medicare taxes - 401(k) employee contributions)
Anastasia company recognizes payroll for the month of May. Gross employee income is $200,000; federal tax withheld are $40,000; state taxes withheld are $6,000; Social security and medicare taxes are $15,000. Employees contribute $10,000 to a 401(k) retirement plan. Anastasia will pay which net amount to its employees (ignore employer payroll taxes)?
operating cycle
The time it takes to produce is referred to as the company's _ _.
credit to cash debt to accounts payable
When a company pays for items that were previously purchased on account, the journal entry includes:
probable
When a contingent event that may give rise to a future loss is likely to occur, it is said to be
IFRS
Which accounting standards provides a lower threshold for accruing contingent liabilities?
the loan period is between 30 and 270 days the loan is between two companies
Which of the following are common characteristics of commercial papers?