accounting test multiple choice questions ch. 8-11

C. Federal depository bank

100. A bank that is authorized to accept amounts payable to the federal government is a: A. Credit union B. FDIC insured bank C. Federal depository bank D. National bank E. Federal reserve bank

A. Annually

101. An employer's federal unemployment taxes (FUTA) are reported: A. Annually B. Semiannually C. Quarterly D. Monthly E. Weekly

C. Organization costs

14. The costs of bringing a corporation into existence, including legal fees, promoter fees, and amounts paid to obtain a charter, are called: A. Minimum legal capital B. Stock subscriptions C. Organization costs D. Cumulative costs E. Prepaid fees

A. Preemptive right

15. The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a: A. Preemptive right B. Proxy right C. Right to call D. Financial leverage E. Voting right

A. A legal document that gives a designated agent of a stockholder the power to vote the stock.

16. A proxy is: A. A legal document that gives a designated agent of a stockholder the power to vote the stock. B. A contractual commitment by an investor to purchase unissued shares of stock. C. An amount of assets defined by state law that stockholders must invest and leave invested in a corporation. D. The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation. E. An arbitrary amount assigned to no-par stock by the corporation's board of directors.

E. Authorized stock

17. The total amount of stock that a corporation's charter allows it to issue is referred to as: A. Issued stock B. Outstanding stock C. Common stock D. Preferred stock E. Authorized stock

B. Value assigned to a share of stock by the corporate charter.

18. Par value of a stock refers to the: A. Issue price of the stock. B. Value assigned to a share of stock by the corporate charter. C. Market value of the stock on the date of the financial statements. D. Maximum selling price of the stock. E. Dividend value of the stock.

B. Common stock

19. When all of the authorized shares have the same rights and characteristics, the stock is called: A. Preferred stock B. Common stock C. Par value stock D. Stated value stock E. No-par value stock

B. Minimum legal capital.

20. An amount of assets defined by state law that stockholders must invest and leave invested in a corporation is called the: A. Par value of preferred. B. Minimum legal capital. C. Premium capital. D. Stated value. E. Working capital.

C. Referred to as contributed capital.

21. The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is: A. Always equal to its par value. B. Always equal to its stated value. C. Referred to as contributed capital. D. Referred to as retained earnings. E. Always below its stated value.

E. An amount assigned to no-par stock by the corporation's board of directors.

22. Stated value of no-par stock is: A. Another name for redemption value. B. An amount assigned to par value stock by the state of incorporation. C. The market value of the stock on the date of issuance. D. The difference between the par value of stock and the amount below or above par value contributed by the stockholder. E. An amount assigned to no-par stock by the corporation's board of directors.

B. Mortgages

33. To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: A. Safe deposit boxes B. Mortgages C. Equity D. The FASB E. Debentures

C. Installment notes

34. Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: A. Debentures B. Discounted notes C. Installment notes D. Indentures E. Investment notes

C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.

35. The carrying value of a long-term note payable: A. Is computed as the future value of all remaining future payments, using the market rate as interest. B. Is the face value of the long-term note less the total of all future interest payments. C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance. D. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest. E. Decreases each time period the discount on the note is amortized.

A. Periodic total payments that gradually decrease in amount.

36. Installment notes payable that require periodic payments of accrued interest plus equal amounts of principal result in: A. Periodic total payments that gradually decrease in amount. B. Periodic total payments that are equal. C. Periodic total payments that gradually increase in amount. D. Increasing amounts of interest each period. E. Increasing amounts of principal each period.

A. Tangible assets used in the operation of a business that have a useful life of more than one accounting period.

39. Plant assets are: A. Tangible assets used in the operation of a business that have a useful life of more than one accounting period. B. Current assets. C. Held for sale. D. Intangible assets used in the operations of a business that have a useful life of more than one accounting period. E. Tangible assets used in the operation of business that have a useful life of less than one accounting period.

B. Used in operations

40. Plant assets are: A. Current assets B. Used in operations C. Natural resources D. Long-term investments E. Intangible

C. Is the process of allocating to expense the cost of a plant asset.

41. Depreciation: A. Measures the decline in market value of an asset. B. Measures physical deterioration of an asset. C. Is the process of allocating to expense the cost of a plant asset. D. Is an outflow of cash from the use of a plant asset. E. Is applied to land.

E. The buyer normally pays the issuer the purchase price plus any interest accrued since the last interest payment date.

41. If an issuer sells a bond at any other date than the interest payment date: A. This means the bond sells at a premium. B. This means the bond sells at a discount. C. The issuing company will report a loss on the sale of the bond. D. The issuing company will report a gain on the sale of the bond. E. The buyer normally pays the issuer the purchase price plus any interest accrued since the last interest payment date.

D. $3,000 Feedback: $100,000 x .09 x 4/12 year = $3,000

42. A company issues bonds at par on April 1. These 9% bonds have a par value of $100,000 and pay interest annually. April 1,is four months after the most recent interest payment date. How much total cash interest is received on April 1 by the bond issuer? A. $750 B. $5,250 C. $1,500 D. $3,000 E. $6,000

A. The length of time it is used productively in a company's operations.

42. The useful life of a plant asset is: A. The length of time it is used productively in a company's operations. B. Never related to its physical life. C. Its productive life, but not to exceed one year. D. Determined by the FASB. E. Determined by law.

A. The insufficient capacity of a company's plant assets to meet the company's growing production demands.

43. Inadequacy refers to: A. The insufficient capacity of a company's plant assets to meet the company's growing production demands. B. An asset that is worn out. C. An asset that is no longer useful in producing goods and services. D. The condition where the salvage value is too small to replace the asset. E. The condition where the asset's salvage value is less than its cost.

B. Refers to a plant asset that is no longer useful in producing goods and services.

44. Obsolescence: A. Occurs when an asset is at the end of its useful life. B. Refers to a plant asset that is no longer useful in producing goods and services. C. Refers to the insufficient capacity of a company's plant assets to meet the company's productive demands. D. Occurs when an asset's salvage value is less than its replacement cost. E. Does not affect plant assets.

D. Operating leases do not transfer ownership of the asset under the lease, but capital leases often do.

44. Operating leases differ from capital leases in that A. For a capital lease, the lessee records the lease payments as rent expense, but for an operating lease, the lessee reports the lease payments as depreciation expense. B. For an operating lease, the lessee depreciates the asset acquired under lease, but for the capital lease, the lessee does not. C. Operating leases create a long-term liability on the balance sheet, but capital leases do not. D. Operating leases do not transfer ownership of the asset under the lease, but capital leases often do. E. Operating lease payments are generally greater than capital lease payments.

B. It may be revised based on new information.

45. Once the estimated depreciation expense for an asset is calculated: A. It cannot be changed due to the historical cost principle. B. It may be revised based on new information. C. Any changes are accumulated and recognized when the asset is sold. D. The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes. E. It cannot be changed due to the consistency principle.

A. Interest paid on bonds is tax deductible.

45. Which of the following statements is true? For the issuer: A. Interest paid on bonds is tax deductible. B. Interest paid on bonds is not tax deductible. C. Dividends paid to stockholders are tax deductible. D. Bonds are assets. E. Bonds always decrease return on equity.

C. The right to receive $1,000 at maturity.

46. A bondholder that owns a $1,000, 10%, 10-year bond has: A. Ownership rights in the company who issued the bond. B. The right to receive $10 per year until maturity. C. The right to receive $1,000 at maturity. D. The right to receive $10,000 at maturity. E. The right to receive dividends of $1,000 per year.

C. 7 years 10 years total new estimate of life - 3 years already depreciated = 7 years

46. A machine originally had an estimated useful life of 5 years, but after 3 complete years it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining: A. 2 years B. 5 years C. 7 years D. 8 years E. 10 years

C. A change in a calculated amount that is part of current and future financial statements that results from new information or subsequent developments and from better insight or improved judgment.

47. A change in an accounting estimate is: A. Reflected in past financial statements. B. Reflected in future financial statements and also requires modification of past statements. C. A change in a calculated amount that is part of current and future financial statements that results from new information or subsequent developments and from better insight or improved judgment. D. Not allowed under current accounting rules. E. Considered an error in the financial statements.

A. Require the issuer to set aside assets in order to retire the bonds at maturity.

47. Sinking fund bonds: A. Require the issuer to set aside assets in order to retire the bonds at maturity. B. Require equal payments of both principal and interest over the life of the bond issue. C. Decline in value over time. D. Are registered bonds. E. Are bearer bonds.

C. Callable bonds

48. Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as: A. Convertible bonds B. Sinking fund bonds C. Callable bonds D. Serial bonds E. Junk bonds

B. The bond traded at $1,025 per $1,000 bond.

49. A bond traded at 102½ means that: A. The bond pays 2.5% interest. B. The bond traded at $1,025 per $1,000 bond. C. The market rate of interest is 2.5%. D. The bonds were retired at $1,025 each. E. The market rate of interest is 2½% above the contract rate.

B. Have specific assets of the issuing company pledged as collateral.

50. Secured bonds: A. Are also referred to as debentures. B. Have specific assets of the issuing company pledged as collateral. C. Are backed by the issuer's bank. D. Are subordinated to those of other unsecured liabilities. E. Are the same as sinking fund bonds.

A. Coupon bonds.

51. Bonds that have interest coupons attached to their certificates, which the bondholders detach during each interest period and present to a bank for collection, are called: A. Coupon bonds. B. Callable bonds. C. Serial bonds. D. Convertible bonds. E. Clip and Carry bonds.

C. Registered bonds

52. Bonds owned by investors whose names and addresses are recorded by the issuing company and for which interest payments are made with checks to the bondholders, are called: A. Callable bonds B. Serial bonds C. Registered bonds D. Coupon bonds E. Bearer bonds

C. It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due.

53. Many companies use accelerated depreciation in computing taxable income because: A. It is required by the tax rules. B. It is required by financial reporting rules. C. It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due. D. Using it causes a company to use higher income in the early years of the asset's useful life. E. The results are identical to straight-line depreciation.

B. Bond indenture

53. The contract between the bond issuer and the bondholders, which identifies the rights and obligations of the parties, is called a(n): A. Debenture B. Bond indenture C. Mortgage D. Installment note E. Mortgage contract

E. Serial bonds

54. Bonds that mature at different dates and end up with the total principal repaid gradually over a number of periods are referred to as: A. Registered bonds B. Bearer bonds C. Callable bonds D. Sinking fund bonds E. Serial bonds

A. Produce the same total depreciation over an asset's useful life.

54. Both the straight-line depreciation method and the double-declining-balance depreciation method: A. Produce the same total depreciation over an asset's useful life. B. Produce the same depreciation expense each year. C. Produce the same book value each year. D. Are acceptable for tax purposes only. E. Are the only acceptable methods of depreciation for financial reporting.

B. Baby bonds

55. Bonds with a par value of less than $1,000 are known as: A. Junk bonds B. Baby bonds C. Callable bonds D. Unsecured bonds E. Convertible bonds

A. The efficiency of management's use of assets to generate sales.

55. Total asset turnover is used to evaluate: A. The efficiency of management's use of assets to generate sales. B. The need for asset replacement. C. The number of times operating assets were sold during the year. D. The cash flows used to acquire assets. E. The relation between asset cost and book value.

B. Current liabilities

56. Obligations due to be paid within one year or within the company's operating cycle, whichever is longer, are: A. Current assets B. Current liabilities C. Earned revenues D. Operating cycle liabilities E. Bills

C. Net sales by average total assets.

56. Total asset turnover is calculated by dividing: A. Gross profit by average total assets. B. Average total assets by gross profit. C. Net sales by average total assets. D. Average total assets by net sales. E. Net assets by total assets.

D. 1.11 Feedback: $1,000,000/$897,000 = 1.11

57. A company had average total assets of $897,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company's total asset turnover is equal to: A. 0.82 B. 0.90 C. 1.09 D. 1.11 E. 1.26

C. Long-term liabilities

57. Obligations not expected to be paid within one year (or the company's operating cycle if longer than one year) are reported as: A. Current assets B. Current liabilities C. Long-term liabilities D. Operating cycle liabilities E. Bills

D. 2.44 Feedback: $35,404/$14,502 = 2.44

58. Dell had net sales of $35,404 million. Its average total assets for the period were $14,502 million. Dell's total asset turnover is equal to: A. 0.40 B. 0.35 C. 1.45 D. 2.44 E. 3.50

B. Must sometimes be estimated.

58. Liabilities: A. Must be certain. B. Must sometimes be estimated. C. Must be for a specific amount. D. Must always have a definite date for payment. E. Must involve an outflow of cash.

A. The contract rate is above the market rate.

58. When a bond sells at a premium: A. The contract rate is above the market rate. B. The contract rate is equal to the market rate. C. The contract rate is below the market rate. D. It means that the bond is a zero coupon bond. E. The bond pays no interest.

C. Contract rate is below the market rate.

59. A bond sells at a discount when the: A. Contract rate is above the market rate. B. Contract rate is equal to the market rate. C. Contract rate is below the market rate. D. Bond has a short-term life. E. Bond pays interest only once a year.

A. Are amounts owed to suppliers for products and/or services purchased on credit.

59. Accounts payable: A. Are amounts owed to suppliers for products and/or services purchased on credit. B. Are long-term liabilities. C. Are estimated liabilities. D. Do not include specific due dates. E. Must be paid within 30 days.

B. $33,750 Feedback: $750,000 x .09 x ½ year = $33,750

60. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. A. $0 B. $33,750 C. $67,500 D. $750,000 E. $1,550,000

C. Are liabilities.

60. Amounts received in advance from customers for future products or services: A. Are revenues. B. Increase income. C. Are liabilities. D. Are not allowed under GAAP. E. Require an outlay of cash in the future.

B. Assets that increase the usefulness of land but that have a limited useful life and are subject to depreciation.

60. Land improvements are: A. Assets that increase the usefulness of land and, like land, are not depreciated. B. Assets that increase the usefulness of land but that have a limited useful life and are subject to depreciation. C. Included in the cost of the land account. D. Expensed in the period incurred. E. Also called basket purchases.

C. Is a current liability for retailers.

61. Sales taxes payable: A. Is an estimated liability. B. Is a contingent liability. C. Is a current liability for retailers. D. Is a business expense. E. Is a long-term liability.

A. Allocates a part of the total discount to each interest period.

62. Amortizing a bond discount: A. Allocates a part of the total discount to each interest period. B. Increases the market value of the Bonds Payable. C. Decreases the Bonds Payable account. D. Decreases interest expense each period. E. Increases cash flows from the bond.

A. Credit to unearned revenue.

62. Unearned revenue is initially recognized with a: A. Credit to unearned revenue. B. Credit to revenue. C. Debit to revenue payable. D. Debit to revenue. E. Debit to unearned revenue.

C. Debit Cash, credit Unearned Revenue.

63. Advance ticket sales totaling $6,000,000 cash would be recognized as follows: A. Debit Sales, credit Unearned Revenue. B. Debit Unearned Revenue, credit Sales. C. Debit Cash, credit Unearned Revenue. D. Debit Unearned Revenue, credit Cash. E. Debit Cash, credit Revenue Payable.

B. A contra liability

63. The Discount on Bonds Payable account is: A. A liability B. A contra liability C. An expense D. A contra expense E. A contra equity

B. Is a potential obligation that depends on a future event arising out of a past transaction or event.

64. A contingent liability: A. Is always of a specific amount. B. Is a potential obligation that depends on a future event arising out of a past transaction or event. C. Is an obligation not requiring future payment. D. Is an obligation arising from the purchase of goods or services on credit. E. Is an obligation arising from a future event.

A. Occurs when a company issues bonds with a contract rate less than the market rate.

64. A discount on bonds payable: A. Occurs when a company issues bonds with a contract rate less than the market rate. B. Occurs when a company issues bonds with a contract rate more than the market rate. C. Increases the Bond Payable account. D. Decreases the total bond interest expense. E. Is not allowed in many states to protect creditors.

C. Cost less salvage value divided by the useful life in years.

64. The formula for computing annual straight-line depreciation is: A. Depreciable cost divided by useful life in units. B. Cost plus salvage value divided by the useful life in years C. Cost less salvage value divided by the useful life in years. D. Cost divided by useful life in years. E. Cost divided by useful life in units.

B. Book value

65. The total cost of an asset less its accumulated depreciation is called: A. Historical cost B. Book value C. Present value D. Current (market) value E. Replacement cost

D. Both GAAP and IFRS treat these accounts as known liabilities.

65. Which of the following is a true statement regarding the treatment of accounts payable, sales tax payable, and unearned revenues? A. Both GAAP and IFRS treat these accounts as estimated liabilities. B. GAAP treats them as estimated liabilities, while IFRS treats these accounts as contingent liabilities. C. IFRS treats them as estimated liabilities, while GAAP treats theses accounts as contingent liabilities. D. Both GAAP and IFRS treat these accounts as known liabilities. E. IFRS treats them as known liabilities, while GAAP treats these accounts as contingent liabilities.

C. Straight-line depreciation.

66. A method that charges the same amount of expense over each period of the asset's useful life is called: A. Accelerated depreciation. B. Declining-balance depreciation. C. Straight-line depreciation. D. Units-of-production depreciation. E. Modified accelerated cost recovery system (MACRS) depreciation.

D. Should be recorded if payment for damages is probable and the amount can be reasonably estimated,

66. In the accounting records of a defendant, lawsuits: A. Are estimated liabilities, B. Should always be recorded, C. Should always be disclosed, D. Should be recorded if payment for damages is probable and the amount can be reasonably estimated, E. Should never be recorded,

D. Units-of-production depreciation.

67. A method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called: A. Accelerated depreciation. B. Declining-balance depreciation. C. Straight-line depreciation. D. Units-of-production depreciation. E. Modified accelerated cost recovery system (MACRS) depreciation.

A. Are not contingent liabilities because they are future events not arising out of past transactions or events.

67. Uncertainties such as natural disasters that could happen in the future: A. Are not contingent liabilities because they are future events not arising out of past transactions or events. B. Are contingent liabilities because they are future events arising from past transactions or events. C. Should be disclosed because of their usefulness to financial statements. D. Are estimated liabilities because the amounts are uncertain. E. Arise out of transactions such as debt guarantees.

B. Declining-balance depreciation.

68. A depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate each period to the asset's beginning book value is called: A. Book value depreciation. B. Declining-balance depreciation. C. Straight-line depreciation. D. Units-of-production depreciation. E. Modified accelerated cost recovery system (MACRS) depreciation.

B. A company's ability to pay interest incurred even if sales decline.

68. The times interest earned ratio is a measure of: A. A company's ability to pay its operating expenses on time. B. A company's ability to pay interest incurred even if sales decline. C. A company's profitability. D. The relation between income and debt. E. The relation between assets and liabilities.

A. Accelerated depreciation method

69. A depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(n): A. Accelerated depreciation method B. Book value depreciation method C. Straight-line depreciation method D. Units-of-production depreciation method E. Unrealized depreciation method

C. Dividing income before interest expense and any income tax by interest expense.

69. Times interest earned is calculated by: A. Multiplying interest expense times income. B. Dividing interest expense by income before interest expense. C. Dividing income before interest expense and any income tax by interest expense. D. Dividing interest and income tax expense by income before interest and income tax expense. E. Dividing income before interest expense by interest expense and income taxes.

B. Allocates bond interest expense using a constant interest rate.

69. Which of the following is true regarding the effective interest amortization method? A. Allocates bond interest expense using a changing interest rate. B. Allocates bond interest expense using a constant interest rate. C. Allocates a decreasing amount of interest over the life of a discounted bond. D. Allocates bond interest expense using the current market rate for each period. E. Is not allowed by the FASB.

B. $3,673.01 Feedback: $97,947 x .075 x ½ year = $3,673.01

70. A company issued 7%, five-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is: A. $3,750.00 B. $3,673.01 C. $3,705.30 D. $3,428.15 E. $7,346.03

B. Increases, then risk decreases.

70. If the times interest ratio: A. Increases, then risk increases. B. Increases, then risk decreases. C. Is greater than 1.5, then the company is in default. D. Is less than 1.5, the company is carrying too little debt. E. Is greater than 1.5, the company is likely carrying too much debt.

A. The present value of all future cash payments provided by a bond.

72. The market value of a bond is equal to: A. The present value of all future cash payments provided by a bond. B. The present value of all future interest payments provided by a bond. C. The present value of the principal for an interest-bearing bond. D. The future value of all future cash payments provided by a bond. E. The future value of all future interest payments provided by a bond.

A. (Net income + Interest expense + Income taxes)/Interest expense.

72. The times interest earned computation is: A. (Net income + Interest expense + Income taxes)/Interest expense. B. (Net income + Interest expense - Income taxes)/Interest expense. C. (Net income - Interest expense - Income taxes)/Interest expense. D. (Net income - Interest expense + Income taxes)/Interest expense. E. Interest expense/(Net income + Interest expense + Income taxes expense).

B. Adjunct or accretion liability account.

73. The Premium on Bonds Payable account is a(n): A. Revenue account. B. Adjunct or accretion liability account. C. Contra revenue account. D. Asset account. E. Contra expense account.

B. Credit to Premium on Bonds Payable.

75. A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a: A. Credit to Interest Income. B. Credit to Premium on Bonds Payable. C. Credit to Discount on Bonds Payable. D. Debit to Premium on Bonds Payable. E. Debit to Discount on Bonds Payable.

A. Interest

75. The difference between the amount received from issuing a note payable and the amount repaid is referred to as: A. Interest B. Principle C. Face value D. Cash E. Accounts payable

A. Is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.

76. A short-term note payable: A. Is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer. B. Is a contingent liability. C. Is an estimated liability. D. Is not a liability until the due date. E. Cannot be used to extend the payment period for an account payable.

A. Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.

76. Revenue expenditures: A. Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities. B. Are known as balance sheet expenditures. C. Extend the asset's useful life. D. Substantially benefit future periods. E. Are debited to asset accounts.

E. Balance sheet expenditure

77. Another name for a capital expenditure is: A. Revenue expenditure B. Asset expenditure C. Long-term expenditure D. Contributed capital expenditure E. Balance sheet expenditure

B. $25 Feedback: $5,000 x 0.06 x 1/12 = $25

77. On December 1, Martin Company signed a $5,000, 3-month, 6% note payable, with the principle plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note? A. $0 B. $25 C. $50 D. $75 E. $300

B. Extend an asset's useful life beyond its original estimate.

78. Extraordinary repairs: A. Are revenue expenditures. B. Extend an asset's useful life beyond its original estimate. C. Are credited to accumulated depreciation. D. Are additional costs of plant assets that do not materially increase the asset's life. E. Are expensed as incurred.

B. Total compensation earned by an employee before any deductions.

78. Gross pay is: A. Take-home pay. B. Total compensation earned by an employee before any deductions. C. Salaries after taxes are deducted. D. Deductions withheld by an employer. E. The amount of the paycheck.

C. Current liabilities

79. The employer should record payroll deductions as: A. Employee receivables B. Payroll taxes C. Current liabilities D. Wages payable E. Employee payables

A. Social Security taxes

80. FICA taxes include: A. Social Security taxes B. Charitable giving C. Employee income taxes D. Unemployment taxes E. Federal taxes

E. Callable bonds

81. Bonds that give the issuer an option of retiring them prior to the date of maturity are: A. Debentures B. Serial bonds C. Sinking fund bonds D. Registered bonds E. Callable bonds

C. $3,595.50. Feedback: $47,000 x (.062 + .0145) = $3,595.50

82. An employee earned $47,000 during the year working for an employer. The FICA tax for social security is 6.2%, and the FICA tax for Medicare is 1.45%. The employee's share of FICA taxes is: A. $681.50. B. $2,914.00. C. $3,595.50. D. $7,191.00. E. Zero, since the employee's pay exceeds the FICA limit.

D. $51,000. 3,901.50/(.062 + .0145) = 51,000

83. The FICA tax for Social Security is 6.2% and the FICA tax for Medicare is 1.45%. An employee's share of both FICA taxes was $3,901.50. Given that this employee did not exceed the FICA earnings limitation, compute gross pay. A. $269,068.96. B. $62,927.42. C. $29,846.48. D. $51,000. E. Zero, since the employee's pay did not exceed the FICA limit.

D. Unemployment taxes

84. FUTA taxes are: A. Social Security taxes B. Medicare taxes C. Employee income taxes D. Unemployment taxes E. Employee deductions

A. Is the process of allocating the cost of natural resources to periods in which they are consumed.

85. Depletion: A. Is the process of allocating the cost of natural resources to periods in which they are consumed. B. Is also called depreciation. C. Is also called amortization. D. Is an unrealized expense reported in equity. E. Is the process of allocating the cost of intangibles to periods in which they are used.

A. Debit to Premium on Bonds.

86. A company retires its bonds at 105. The carrying value of the bonds at the date of is $103,745. The issuer's journal entry to record the retirement will include a: A. Debit to Premium on Bonds. B. Credit to Premium on Bonds. C. Debit to Discount on Bonds. D. Credit to Gain on Bond Retirement. E. Credit to Bonds Payable.

A. Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life.

88. Amortization: A. Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life. B. Is the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use. C. Is the process of allocating the cost of natural resources to periods when they are consumed. D. Is an accelerated form of expensing an asset's cost. E. Is the same as depletion.

B. Is a known obligation of an uncertain amount that can be reasonably estimated.

88. An estimated liability: A. Is an unknown liability of a certain amount. B. Is a known obligation of an uncertain amount that can be reasonably estimated. C. Is a liability that may occur if a future event occurs. D. Can be the result of a lawsuit. E. Is not recorded until the amount is known for certain.

B. Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 20 years.

89. A patent: A. Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. B. Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 20 years. C. Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 50 years. D. Is the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately. E. Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years.

A. Are estimated liabilities.

90. Employee vacation benefits: A. Are estimated liabilities. B. Are contingent liabilities. C. Are recorded as an expense when the employee takes a vacation. D. Are recorded as an expense when the employee retires. E. Increase net income.

C. Are the rights granted to the lessee by the lessor of a lease.

91. A leasehold: A. Is a short-term rental agreement. B. Is the same as a patent. C. Are the rights granted to the lessee by the lessor of a lease. D. Is recorded as rent expense. E. Is an investment asset.

A. Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules.

92. The deferred income tax liability: A. Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. B. Is a contingent liability. C. Can result in a deferred income tax asset. D. Is never recorded. E. Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary.