COB 241: Ch 9

Simms Accountants charged a client $2,000 cash plus tax for services provided in a state where the service sales tax rate is 6%. As a result of this event, Simms would recognize

$120 liability on the Balance sheet $2,000 of Service Revenue a $2,120 increase in total assets

Mr. Wallace earns a monthly salary of 6k. Mr W's withholding for income taxes is 650 per month. His monthly voluntary withholdings include 250 for medical insurance and 20 per month for the Red Cross. Assume a Social Security tax rate of 6%, a Medicare tax rate of 1.5% and an Unemployment tax rate of 6% on the first 7k of income. Based on this information, net pay for 1/1, Y1 is

$4,630 gross pay - deductions 6,000 - 650 - 250 - 20 - 360 - 90 = 4630

Jack Company issued a 12K note payable on 9/1, Y1, for a one year term. Interest was set at 5% per year. In Y2, Jack would recognize interest expense amounting to

$400 12,000 principal x 5% = $600 per year; $600 / 12 months = $50 per month; $50 per month x 8 months = $400 accrued interest

Jack Company issued a 12K note payable on 9/1, Y1, for a one year term. Interest was set at 5% per year. In Y2, Jack would recognize cash flow from operating activities amounting to

$600 of interest expense (12,000 x 5% = 600 per year). Although interest expense is recognized in Y1, all interest is actually paid in Y2

The journal entry to recognize accrued interest expense includes a ... to the expense account and a ... to the interest payable account

debit credit

The journal entry to recognize the issuance of a note payable includes a ... to the cash account and a ... to the notes payable account

debit credit

the journal entry to recognize a warranty obligation includes a ... to the Warranty expense account and a ... to the warranty payable account

debit credit

The journal entry to recognize accrued vacation pay includes a

debit to an expense account credit to a liability account

The journal entry to recognize a sales event that included sales tax would require a ... to the cash account, a ... to the sales tax payable account, and a ... to the sales revenue account

debit to cash credit to sales tax payable credit to sales revenue

The journal entry to recognize repaying the principal of a note payable includes a

debit to notes payable credit to cash

Janie Jones earns a monthly salary of $6,000. Janie's total withholdings amount to 1200. Based on this info, the journal entry to record the payment of salary expense for Janie would include

debit to salary expense

When a company pays a contingent liability for warranties, the balance in the Cash account ... and the balance in the Warranties Payable account ...

decreases decreases

Employers determine each employee's net pay by ... the withholdings to/from the gross earning

deducting

Gross ... is the sum of regular pay plus any bonuses, overtime, or other additions

earnings

Which of the following statements is TRUE

employers are required to withhold income taxes from employee earnings. The employers then pay the withheld taxes directly to the gov.

Recognizing a cash revenue event that is subject to state sales tax will cause a ... in the Cash account; a ... in the Sales Tax Payable account; and a ... in the Revenue account

increase increase increase

On 8/1, Y1, Star Company borrowed money from Moon Company. Due to the 12/31, Y1, adjustment to recognize accrued interest on Star's books, the balance in the Interest Expense acc ... and the balance in the Interest Payable acc ...

increases increases

When a company recognizes a contingent liability for warranties the balance in the Warranty Expense account ... and the balance in the Warranties Payable account ...

increases increases

When a business pays an individual for specific services, but the individual supervises and controls the work, then that individual is considered to be

independent contractor

Which of the following statements is TRUE

investment risk cannot be determined only by looking at the debt to assets ratio

In a note containing the terms of a lending transaction, the borrower is called the ... and the lender is called the ...

issuer payee

If the likelihood of a future obligation arising is probable and its amount can be reasonably estimated:

liability must be reported on Balance sheet estimated amount is shown as an expense on the Income statement

In a note containing the terms of a lending transaction, the party borrowing the money may be called the

maker of the note borrower issuer of the note

The average time it takes a business to convert cash to inventory, inventory to accounts receivable, and accounts receivable back to cash is commonly called the ... cycle

operating

Which of the following forms is used to document the number of withholding allowances claimed by an employee

Form W-4

A warranty is

a contingent liability reported in financial statements

Bill Seymour earns a monthly salary of $10K. Bill's total withholdings amount to 2K. Based on this info, the journal entry to record the payment of salary expense for Bill would include

a debit to Salary Expense for 10k, a credit to various liability accounts for 2k, and a credit to Cash for 8k

Mr. Wallace earns a monthly salary of 6k. Mr W's withholding for income taxes is 650 per month. His monthly voluntary withholdings include 250 for medical insurance and 20 per month for the Red Cross. Assume a Social Security tax rate of 6%, a Medicare tax rate of 1.5% and an Unemployment tax rate of 6% on the first 7k of income. Based on this information, the amount of payroll tax that Mr W's employer would pay on 1/31, Y1 is

$810 The employer must match the amount of the employee's Social Security and Medicare tax plus pay Unemployment tax. The employee's income tax and voluntary withholdings do not affect the emplyer's payroll tax expense. In this case, the payroll tax expense is $810 (360 Social Security Tax + 90 Medicare tax + 360 unemployment tax)

Miss billings earns a monthly salary of 8k. Miss billings' withholding for income taxes is 900 per month. her monthly voluntary withholdings include 380 for medical insurance and 30 per month for the Humane Society. Assuming a social security tax rate of 6%, a medicare tax rate of 1.5 %, and an unemployment tax rate of 6% on the first 7k of income. based on this info, the amount of payroll tax that Miss B's employer would pay on 1/1, Y1 is

480 + 120 + 420 = 1020

Miss billings earns a monthly salary of 8k. Miss billings' withholding for income taxes is 900 per month. her monthly voluntary withholdings include 380 for medical insurance and 30 per month for the Humane Society. Assuming a social security tax rate of 6%, a medicare tax rate of 1.5 %, and an unemployment tax rate of 6% on the first 7k of income. based on this info, net pay for 1/1, Y1 is

8,000 - 900- 380 - 30 - 480 - 120 = 6090

Assume three companies in the same industry have the following current ratios: Adams Co = 1.33 to 1 Baker Co = 1.15 to 1 Charles Co = 1.27 to 1 Based on this, which company appears to have the LOWEST liquidity

Baker

Paying off the principal balance of a note payable affects which of the following financial statements

Balance sheet Statement of cash flows

Which of the following is responsible for paying unemployment tax

Employers only

Bill Seymour earns a monthly salary of $10K. Bill's total withholdings amount to 2K. Based on this info, the recognition of the payment of salary expense will affect which of the financial statements

Income statement Statement of cash flows balance sheet

A company experienced an event that caused total assets and liabilities to decrease and caused a cash outflow to appear on the statement of cash flows. Which of the following events could have caused these effects

Paying off an accrued interest payable Paying off the principal balance of a loan

Which of the following taxes provides funding for pensions

Social security taxes

Which of the following collects unemployment tax

State gov Federal gov

Recognizing accrued interest expense would affect which of the following financial statements

Statement of changes in stockholders' equity Income statement Balance sheet

Recognizing a cash revenue event that is subject to state sales tax would

affect the statement of changes in stockholder's equity affect the Income statement

Issuing a note to borrow money is a

asset source transaction

The Warranties Payable account appears on which of he following financial statements

balance sheet

recognizing accrued interest expense would affect which of the following financial statements

balance sheet statement of changes in stockholder's equity income statement

The recognition of accrued payroll tax expense will affect which of the following financial statements

balance sheet statement of changes in stockholders' equity income statement

Jack company issued a $12,000 note payable on 9/1, Y1, for a one year term. Interest was set at 5% per year. In Y2, Jack would recognize

cash outflow from financing activities of 12K $400 of interest expense a cash outflow from operating activities of $600

Janie Jones earns a monthly salary of $6K. Janie's total withholdings amount to 1200. Based on this info, the recognition of the payment of salary expense will cause the amount of

cash outflows from operating activities shown on the statement of cash flows to increase net income shown on the income statement to decrease

Gamma Company borrowed $5,000 on 10/1, Y1. Interest was set at 6% per year. Recognizing accrued interest on 12/31, Y1 will

cause expenses and liabilities to increase by $75.

Which of the following represents a voluntary employee withholding

charity withholdings

Recognizing accrued interest expense is a

claims exchange transaction

The journal entry to record paying the employee with a $2k monthly salary and a $300 federal income tax deduction would include a

credit to a liability account

Janie Jones earns a monthly salary of $6K. Assume a Social Security tax rate of 6% Medicare tax rate of 1.5% and an Unemployment tax rate of 6% ont eh first $7K of earned income. The journal entry on 1/31, Y1 to record accrued payroll tax expense would include a

credit to various liabilities for $810

The current ratio is calculated by dividing ... ... by ... ...

current assets / current liabilities

Issuing a note to borrow money will affect which of the following financial statements

statement of cash flows balance sheet

t/f: fringe benefits are reported as expenses on the employers financial statements

true

What distinguishes contingent liabilities from general uncertainties

whether the event stems from a past event