Accounting 225- Chapter 8

liability

Probable future sacrifice of economic benefits arising from present obligations of an entity to transfer assets or provide services as a result of past transactions or events

Payroll withholdings:

-are amounts subtracted from employees' gross earning to determine their net pay -decrease he amount of cash an employee receives

Payroll taxes ONLY paid by employer

-futa -suta

The 2 Classifications for Liabilities:

-long term -current

examples of fringe benefits

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

By law, an employer is required to pay which of the following amounts as payroll taxes?

-social security contributions -medicare contributions -federal unemployment tax

accounts payable

a short term liability that occurs when a company purchases goods and does not immediately pay cash

A company purchases inventory or supplies and promises to pay within 30 to 45 days. No formal agreement is signed. This transaction is recorded as:

accounts payable

payroll withholdings

amounts that are subtracted from an employee's gross pay

An interest rate, unless otherwise specified, is typically a _________ rate

annual

Notes payable is classified as a liability that has which of the following effects?

creates interest expense on the income statement

current ratio formula

current assets divided by current liabilities

formula for calculating interest

face amount x annual interest rate x fraction of the year

In addition to reporting information about the assets controlled by a company, the balance sheet reports information about a company's:

liabilities and owners' equity

long-term liabilities

liabilities payable in more than one year from now

current liabilities

liabilities that are payable within one year

An obligation that is NOT classified as a current liability?

notes payable due in 3 years

A company's "operating cycle" refers to the time required for the company to:

produce revenue

acid test or quick ratio formula

quick assets/current liabilities

employee pays:

state and federal income tax

employer pays:

state and federal unemployment tax

Withholding taxes

taxes subtracted from employees' pay and remitted to the government on their behalf

Payroll withholdings

the items subtracted from an employer's gross pay to arrive at net pay