Accounting Ch 8 Quiz

Liabilities are classified as

current and long-term.

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

federal and state income tax employee investments in retirement plans

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

recorded.

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

warranties

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal income tax $58, and state income tax $10. Assuming that John gets paid in cash, ABC would record a journal entry that includes a ______.

debit to Salaries and Wages Expense of $600 credit to State and Federal Income Tax Payable $68 credit to FICA Payable of $45.90 credit to cash $486.10

The flipside of a contingent gain is a contingent ___________

loss

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

The likelihood of future payment or loss

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

withholding taxes.

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

FUTA SUTA

On September 1, ABC Company borrowed $50,000 on a 6%, 9-month note payable to XYZ National Bank. Given no previous adjusting entries have been recorded, ABC's adjusting entry at December 31 would include a ______.

debit to Interest expense of $1,000

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

uncertain

For a manufacturer, the most commonly reported contingent liabilities relate to product ____________.

warranties

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700, Medicare $1,450, federal income tax $18,000 and state income tax $3,850. The journal entry to record wages paid includes a ______.

$100,000 debit to Salaries expense

On November 1, 2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following?

Credit to Note Payable $100,000 Debit to Cash $100,000

What are the two classifications for liabilities?

Current Long-term

Which of the following may be classified as contingent liabilities?

Frequent flier program awards Future litigation losses Product warranties

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

contingencies, contingency, or contingent

A transaction or event in which the outcome is uncertain is referred to as a(n) __________. (Enter one word per blank)

contingency

A(n) __________ liability is an existing uncertain situation that might result in a loss depending on the outcome of a future event.

contingent

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

contingent

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

contingent

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal Income tax $58, and state income tax $10. What is John's net pay?

$486.10

On October 1, 2018, Perry Corporation signed a 12-month, 8% interest-bearing promissory note for $10,000. Assume that all appropriate adjusting journal entries were made at 12/31. The journal entry required when the note matures on October 1, 2019 would include a debit to interest expense for

$600

Payroll withholdings ______. (Select all that apply.)

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

Which of the following describes the requirement to pay FUTA.

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

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

Creates interest expense on the income statement

Lambert Corporation has employee salary expense of $100,000 on May 31. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following entries?

Credit FUTA payable $6,200 Credit FICA payable $7,650 Debit payroll tax expense $13,850

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

employee

A(n) __________ ______________is an existing uncertainty that might result in a gain.

contingent gain

Rhodes borrowed $5,000 by signing a 5-year note with an interest rate of 8%. On the date the note is signed, Rhodes should

credit notes payable $5,000.

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. What is the net pay to employees?

$70,000

Which of the following are included in FICA taxes?

A 1.45% Medicare tax A 6.2% social security tax

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

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

Medicare Social Security

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

Medicare contributions Social Security contributions Federal unemployment tax

Jingle Company signs a 6-month, $20,000 note. Stated interest rate is 8% payable at the maturity date. Interest incurred on the note is calculated as

$20,000 x 0.08 x 6/12

On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required at December 31, 2018 would include which of the following?

Debit interest expense $4,000

On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required March 1, 2019 at the maturity date includes which of the following entries?

Debit interest payable $4,000 Debit note payable $100,000 Debit interest expense $2,000 Credit cash $106,000

A contingent liability is recorded if which conditions are met?

The amount of the loss can be reasonably estimated. It is probable that a future loss will occur.

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

True or False: The Federal Unemployment Tax Act (FUTA) requires employers to pay a tax of 6.2% of the first $7,000 earned by each employee reduced by a maximum 5.4% credit for contributions to a state unemployment program.

True

Which of the following are current liabilities?

Wages payable Note payable due in 3 months Accounts payable

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 examples of fringe benefits provided by employers to their employees?

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

The journal entry to record employer payroll taxes affects ______.

liabilities and stockholders' equity

On October 1, 2018, Logan Corporation signed a 6-month, 8% interest-bearing promissory note for $10,000. The journal entry required at December 31, 2018 would include which of the following?

Debit interest expense $200

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

increase in assets and an increase in liabilities

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

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 the following are employer payroll costs?

Federal and state unemployment taxes Employer portion of Medicare tax

Payroll withholdings are

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

West Company pays health insurance for its employees of $2,000 for the pay period. The journal entry to record this fringe benefit includes which of the following?

Credit accounts payable $2,000 Debit Salaries Expense $2,000

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

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

Choose the correct formula for calculating interest.

Face amount x annual interest rate x fraction of the year

True or false: Your employer is allowed to keep the amounts withheld from your gross pay.

False

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 long-term liabilities?

Note payable due in 3 years 20-year mortgage payable

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.)

account

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

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

payroll withholdings.

Which of the following are not required payroll withholdings?

state unemployment tax (suta) charitable contributions federal unemployment tax (futa)