Ch 11 SmartBook

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 $5,000x.12x(45/360)=$75.

Employee income tax depends on:

employee's income number of employee withholding allowances

Unemployment taxes are examples of (employee/employer) _____ taxes.

employer

A known obligation of an uncertain amount that can be reasonably estimated is called a(n) _____ liability

estimated

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

estimated

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 $_______

gross pay:1000

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.

interest

FUTA (Federal Unemployment Tax Act)

is an employer expense

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

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 event

liability

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

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 $______

net pay: 650

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

Which of the following represent reasonably possible contingent liabilities?

potential legal claims debt guarantees

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

principal or face value

In order for a contingent liability to be recorded as a journal entry in the financial statements, it must be (probable/reasonably possible/remote) ________ and reasonably estimable.

probable

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

Paid absences offered to employees are called ____ benefits.

vacation

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

warranties

A ______ is a seller's obligation to replace or fix a product (or service) that fails to perform as expected within a specified period.

warranty

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 $15,000 x .08 x (60/360) = $200.

Boyd's Bicycle Sales and Repairs Co. offers a 6-month warranty on all new bicycle purchases. Based on history, Boyd determines that warranty repairs are equal to approximately 2% of sales. During the month, Boyd sales total $20,000. Boyd will record Warranty Expense in the amount of ______ for the month

$400 20,000/2%

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

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

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 $____

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 $______

15000

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.

600 300*2%*100

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

Accounts payable

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 Interest is computed for 120 days. $1,000 x .06 x (120/360) = $20. Cash will be credited for $1,000 + 20. Notes payable will be debited for $1,000.

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?

Debit to Accounts Payable Credit to Notes Payable

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?

Debit to Cash Credit to Unearned Paving Fees

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

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

FUTA

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

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

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

Interest

Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals ________ pay.

Net or take home 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 liabilities could be a multi-period known liability?

Notes Payable Unearned Subscription Revenues

On January 1, Avers Co. borrowed $10,000 by extending their past-due account payable with a a 60-day, 8% interest-bearing note. On March 1, the due date, Avers pays the amount due in full. This entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash)_____ in the amount of _______.

Notes Payable; $10,000 Notes Payable is debited for the original amount of $10,000. The interest is recorded separately in the Interest Revenue account Cash will be credited for $10,800.

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 ______

Payable; $1,000

Which of the following items are considered employee benefits?

Pension plans Medical insurance

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

SUTA

SUTA (State Unemployment Tax Act)

SUTA (State Unemployment Tax Act)

Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?

Sales tax payable

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

Unearned Revenues

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

account 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

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

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.

contingent

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

current liability