Accounting ch.9

Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense for one year 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. Federal and state taxes, and other withholdings totaled $350. Jorge's net pay totals $

650

Employee benefits that are paid by the employer are recorded in the Employee Benefit account.

Blank 1: Expense

Obligations due after one year or one operating cycle, whichever is longer, are considered to be:

long-term liabilities.

Damien Co. has $10,000 of unearned revenues on its balance sheet. Damien expects that it will earn $8,000 of these revenues in the upcoming twelve months. How much will be recorded in Long-Term Liabilities?

$2,000

On December 1, Hansen Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen will record an adjusting entry by debiting interest expense in the amount of ______.

$500 Reason: $100,000x.06x(30/360)=$500.

Victor's Vacuum Sales Co. sells high quality vacuums and provides a one-year warranty on all new sales. Based on history, Victor anticipates that 3% of vacuums will be returned at a cost of $30 per vacuum. During the month, Victor sold 100 vacuums for a total of $35,000. At the end of the month, Victor will record _______ in Warranty Expense.

$90 Reason: 100 x .03 x $30 = $90

Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio.

10

Trighton's Trailer Co. sells trailers and provides a one-year warranty on all new trailer sales. Based on history, Trighton anticipates that 2% of trailers will be returned and will have a warranty cost of $100 per trailer. During the month, Victor sold 300 trailers for a total of $255,000. At the end of the month, Trighton will record $ in warranty expense.

600

________ are amounts owed to suppliers for products or services purchased on credit.

Accounts payable

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

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. Principal on the note totals $.

Blank 1: 100000

On July 1, Scene Co. borrowed $15,000 cash from First Bank by signing a 30-day, 5% interest-bearing note. Scene will record this entry with a credit to Notes Payable in the amount of $

Blank 1: 15000

Anchor Co. has accrued payroll expense of $1,300 which includes employee withholdings of $400. On payday, Anchor will record the distribution of paychecks with a credit to in the amount of $.

Blank 1: Cash Blank 2: 900

Federal government taxes implemented on employers in order to provide unemployment benefits to qualified workers are known as (use acronym)

Blank 1: FUTA

is the difference between the amount borrowed and the amount repaid.

Blank 1: Interest

KRS Co. sells merchandise for $120 and collects sales tax of $12. KRS would record the $12 sales tax with a credit to the Sales Tax account.

Blank 1: Payable

Harvey Co. has current period employee salary expenses of $800. Employee withholdings total $300. The entry to accrue current period payroll will include a credit to Salaries in the amount of $.

Blank 1: Payable Blank 2: 500

A liability created by buying goods or services on credit is typically recorded to

Blank 1: accounts Blank 2: 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

A liability is a liability due within one year or the company's operating cycle, whichever is longer.

Blank 1: current, short-term, or short term

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

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 measurable obligation arising from agreements, contracts, or laws is called a liability.

Blank 1: known

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

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

The of a note is the amount that the signer of a note agrees to pay back when it matures, not including interest.

Blank 1: principal or face value

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

Paid absences offered to employees are called _ benefits.

Blank 1: vacation

Theo Co. has two full-time employees who are provided health insurance at Theo's expense. At the end of the period, the cost of the insurance totals $1,400. The entry that Theo will make to accrue these costs include a debit to the ___________ account.

Blank 1: warranty

On March 1, Young Co. borrowed $1,000 cash from Superior Bank by signing a 120-day, 6% interest-bearing note. On June 29, 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

Lyon Co. collected $1,200 in sales tax from customers during the month of March. In April, Lyon sent the $1,200 sales tax to the state government. The entry to record payment to the state would include which of the following? (Check all that apply.)

Credit to Cash Debit to Sales Tax Payable

Zilo Co. has accrued employee salary expense of $1,000 which includes employee withholdings that total $300. On payday, Zilo will record the payment with which of the following entries? (Check all that apply.)

Credit to Cash for $700. Debit to Salaries Payable for $700.

Perez Co. sells automotive supplies and warranties them for a three-month period. Perez sold $10,000 of supplies during the month and anticipates that warranty repairs for these sales will total $250. The adjusting entry that Perez will make to record the warranty expense will include which of the following? (Check all that apply.)

Credit to Estimated Warranty Liability Debit to Warranty Expense

John Grey owns Grey's Snow Plowing. In October, he collects $12,000 cash for 6 commercial accounts for which he will provide snowplowing for the next three months. John recorded the cash collection as an unearned revenue. To record the adjusting entry in November, when $4,000 has been earned, Grey will enter which of the following entries? (Check all that apply.)

Credit to Plowing Revenue Earned Debit to Unearned Plowing Revenue

Fortiz Co. receives $85 for the sale of merchandise with a sales price of $80 and sales tax of $5. The entry to record the $5 sales tax would require which of the following?

Credit to Sales Tax Payable

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

John Grey owns Grey's Snow Plowing. In October, Grey's collects $12,000 cash for 6 commercial accounts for which he will provide snowplowing for the entire season. To record this transaction, Grey will enter which of the following entries? (Check all that apply.)

Debit to Cash Credit to Unearned Plowing Revenue

Vance Co. allows employees to take a two week vacation each year. To account for the two weeks off each year, Dante will record an adjusting entry to which of the following accounts? (Check all that apply.)

Debit to Vacation Benefits Expense. Credit to Vacation Benefits Payable.

Handy Holly Co. provides a variety of household repairs and warranties her work for a six-month period. Holly provided $13,000 of service fees during the month and anticipates that warranty repairs for these sales will total $400. The entry that Holly will make to record the estimated warranty expense will include a credit which account?

Estimated Warranty Liability

Perez Co. sells lawn mowers and warranties them for one year. Perez made an adjusting entry at the end of last year to record the warranty expense. In February of the current year, a customer needed a $50 repair to a lawn mover. The entry to record the repair includes a debit to ___.

Estimated Warranty Liability

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

Leo Calvin is required to have ______ taxes withheld from his pay in order to cover the cost of future retirement, disability, survivorship and medical benefits.

FICA

The Federal Insurance Contributions Act provides retirement, disability, survivorship, and medical benefits to qualified workers. Laws require employers to withhold _____ taxes from employees' pay to cover costs of the system.

FICA

The federal government requires that employers are taxed on employee wages to provide unemployment benefits to qualified workers. These taxes are known as:

FUTA

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

_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.

Gross pay

On November 1, Lance Co. borrows $90,000 cash from First Bank by signing a 90-day, 5% interest-bearing note. On December 31, Lance will record an adjusting entry by crediting _______ in the amount of ______.

Interest Payable; $750

Employers are required to prepare and submit payroll reports to explain how they compute which of the following taxes? (Check all that apply.)

Local taxes State taxes Federal taxes

Which of the following items are considered employee benefits? (Check all that apply.)

Medical insurance Pension plans

FICA tax includes both Social Security tax and _____.

Medicare tax

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 liabilities could be a multi-period known liability? (Check all that apply.)

Notes Payable Unearned Subscription Revenues

On December 1, Campbell Co. borrowed $10,000 cash from Second Bank by signing a 90-day, 6% interest-bearing note. On December 31, Campbell accrued interest expense of $50. Campbell does not use reversing entries. On March 1, the due date of the note, Campbell will record the payment with debit entries to which of the following accounts? (Check all that apply.)

Notes Payable for $10,000 Interest Payable for $50 Interest Expense for $100

On June 1, Button Co. borrowed $1,000 cash from National Bank by signing a 120-day, 6% interest-bearing note. Button will record this transaction with a credit to _____ in the amount of ______.

Notes Payable; $1,000

On January 1, Avers Co. borrowed $10,000 cash from Main St. Bank by signing a 60-day, 8% interest-bearing note. On March 1, Avers pays the amount due in full. The March 1 entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash)_____ in the amount of _______.

Notes Payable; $10,000

Perez Co. sells lawn mowers and warranties them for one year. Perez made an adjusting entry at the end of last year to record the warranty expense. In February of the current year, a customer needed a $50 repair to a lawn mover. The entry to record the repair includes a credit to ___.

Parts Inventory

The journal entry to record employer tax accruals includes a debit to:

Payroll Tax Expense

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as (use acronym)

SUTA

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as:

SUTA

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 is a true statement concerning the employer FICA taxes:

The employer must pay FICA tax in an amount equal to that paid by the employee.

Which of the following situations would require a journal entry to record the contingent liability in the financial statements?

The liability is probable and estimated to be $10,000.

True or false: A liability can be recorded, even if there is uncertainty of when to pay, how much to pay, or whom to pay.

True

Amounts received in advance from customers for future products or services are typically recorded in a liability account called _______.

Unearned Revenues

A company sells 12-month popular magazine subscriptions. During the month of May, the company sells $12,000 in magazines, which will start in June. The adjusting entry to record the $1,000 of subscriptions earned in June will include a debit to which account?

Unearned Subscription Revenue

A company sells 12-month subscriptions to popular magazines. During the month of May, the company sells $10,000 in magazines, which will start in June. The journal entry to record the sales not yet earned will include a credit to which account?

Unearned Subscription Revenue

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

Dante Co. allows employees to take two weeks vacation during each year. To account for the two weeks off each year, Dante will accrue the Vacation Benefits with a credit to the ________ account.

Vacation Benefits Payable

Which of the following items would be considered a current liability? (Check all that apply.)

Wages payable Accounts payable, terms n/30 Notes payable, due in 3 months

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

A ___________ is when an employer provides employees with a percentage of the company's 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

Tire Co. collected $2,000 in sales tax during the month of October. The entry that shows the remittance of this sales tax to the state government in November would include a credit to the account.

cash

Teva Co. has current period employee salary expense of $2,000. Employee withholdings total $850. To accrue the current period payroll, Salaries Payable will be (debited/credited) __________ in the amount of ___________.

credited; $1,150

Amounts withheld from employee's earnings for employee income tax is considered a _____ by the employer until the government is paid.

current liability

On December 1, Hansen Co. borrowed $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen recorded an adjusting entry to record interest expense of $500. On March 1, the due date of the note, Hansen will record interest expense as a (debit/credit) ________ in the amount of ______.

debit; $1,000

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

Employee income tax depends on: (Check all that apply).

employee's income number of employee withholding allowance

A(n) ______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated.

estimated

When recording a liability, a company may not know: (Check all that apply.)

how much to pay. whom to pay. when to pay.

The formula to compute the times interest earned is income before interest expense and income taxes divided by:

interest expense

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

Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? (Check all that apply.)

long-term liabilities current liabilities

Ace Company borrowed $10,000 from Fair Rates Bank by signing a two-year note payable. Ace's operating cycle is 14 months. This note would be considered a ______ on the balance sheet.

long-term 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.

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

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

Examples of employee voluntary deductions may include all of the following except:

unemployment taxes.

Employers often withhold amounts from employees' earnings which arise from employee requests, contracts, unions, or other agreements. These withholdings are called employee __________ and include items such as medical premiums.

voluntary deductions

A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except:

warranties