Chapter 8 Accounting

Payroll withholdings are

the items subtracted from an employee's gross pay to arrive at take-home pay.

Which of the following are not required payroll withholdings?

Federal unemployment tax (FUTA) Charitable contributions State unemployment tax (SUTA)

A contingent liability is an existing _______ situation that might result in a loss depending on the outcome of a future event.

Uncertain

Obtaining a note payable for cash results in a(n) ______.

increase in assets and an increase in liabilities

The employer's portion of FICA tax remitted to the taxing authority is:

the same as the employee's portion

Product warranties, effects of environmental problems, and lawsuits are examples of transactions or events that give rise to _______ liabilities.

contingent

Additional benefits such as health insurance, retirement benefits, or life insurance that are paid by the employer are called

Fringe benefits

Taxes subtracted from employees' pay and remitted to the government on their behalf are called

withholding taxes.

Deferred revenue should be classified as a(n)________ on the balance sheet. (Enter one word per blank)

liability

What are the two classifications for liabilities?

Long-term Current

Which of the following are long-term liabilities?

-20-year mortgage payable -Note payable due in 3 years x Common stock x Note payable due in 3 months

Rimland Corporation has employee salary expense of $10,000 on April 30, 2018. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following?

Debit payroll tax expense $1,385

Which of these payroll taxes are paid only by the employer? (Check all that apply.)

FUTA SUTA

The feature that distinguishes loss _______ from other liabilities is the uncertain outcome. (Enter one word per blank)

contingencies

The portion of a long-term liability that will be paid within the next year is referred to and reported as the:

current portion of long-term debt

Which of the following are examples of fringe benefits provided by employers to their employees?

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

A transaction or event in which the outcome is uncertain is referred to as a(n) __________

contingency

_______ portion of long-term debt is the amount that will be paid within the next year. (Enter only one word.)

current

Taxes collected for taxing authorities are recognized as

current liabilities

Which of the following payroll-related costs are incurred by employees?

federal and state income tax employee investments in retirement plans

The journal entry to record employer payroll taxes affects ______.

liabilities and stockholders' equity

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 a(n)

Accounts Payable

Which of the following are current liabilities?

Accounts payable Wages payable Note payable due in 3 months

Choose the correct formula for calculating interest.

Face amount x annual interest rate x fraction of the year

True or False: If a state has an unemployment tax program, no FUTA tax must be paid.

False

What are the two criteria used to determine whether a contingent liability is reported in the financial statements?

The likelihood of payment The ability to estimate the amount of payment

Which of the following tends to be the source of the most commonly reported contingent liability?

Warranties

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

Creates interest expense on the income statement

Cannery Company pays health insurance for its employees of $1,000 for the pay period. The journal entry to record this fringe benefit includes which of the following?

Credit accounts payable $1,000 Debit Salaries Expense $1,000

Deferred revenues and sales tax payable typically are reported as _______ liabilities.

Current / Short-term

Which of the following are payroll withholdings that are subtracted from gross pay to arrive at take-home pay?

Employee contributions to retirement plans Health insurance paid by the employee Federal income taxes

FICA is the acronym for the

Federal Insurance Contribution Act.

Which of the following payroll-related taxes must the employer pay by law?

Federal Insurance Contributions Act amounts Unemployment taxes

Which of the following are employer payroll costs?

Federal and state unemployment taxes Employer portion of Medicare tax

Which of the following must employers by law withhold from their employees' pay?

Federal income taxes

Which of the following may be classified as contingent liabilities?

Frequent flyer program awards Future litigation losses Product warranties

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. (Enter one word per blank)

Liability

Which of these payroll taxes are paid by the employer and the employee? (Check all that apply.)

Medicare Social Security

Common current liabilities include:

The current portion of long-term debt Sales tax payable Deferred revenues

Which of the following is an important criteria used to determine the reporting of a contingent liability?

The likelihood of future payment or loss

A(n) ________ payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash. (Enter only one word.)

accounts

A 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 is a(n)

liability. Liabilities expense. loss. asset.

A loss that is judged to be probable and for which the amount is reasonably estimable should be

recorded

Liabilities are classified as

revenues and expenses. operating and investing. current and long-term. operating and nonoperating. current and long-term.

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.

sales revenue of $1,000. sales taxes payable of $100

Which of the following describes the requirement to pay FUTA.

An employer must pay FUTA taxes even if the employer pays SUTA taxes

Amounts that are subtracted from an employee's gross pay are referred to as

Payroll withholdings

Payroll withholdings ______. (Select all that apply.)

are amounts subtracted from employees' gross earnings to determine their net pay decrease the amount of cash an employee receives

An ______ liability is an existing uncertain situation that might result in a loss depending on the outcome of a future event.

contingent

Deferred revenue is classified as

liability