Test 4 - Accounting 2022

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.)

- Credit to Unearned Plowing Revenue - Debit to Cash

Examples of employee voluntary deductions may include all of the following

- pension contributions. - charitable giving. - medical premiums.

A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include

- unearned revenues - notes payable - payroll obligations - 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 $__

1000

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

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

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

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

On December 31, Lazo Co. offers a bonus to its employees of $100,000 to be paid in January of the following year. The December 31 journal entry will require a credit to the ______ account in the amount of _____.

Bonus Payable; $100,000

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

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

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

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

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? (Check all that apply.)

Credit to Unearned Paving Fees Debit to Cash

SUTA and FUTA are credited or debited?

Credited

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

Current

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

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.

Payroll tax expense is credited or debited ?

Debited

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.

Employee Benefits Expense

Camelot Co. expects that bonuses for the year will be $100,000. The 12/31 entry will require a debit to the ______ account in the amount of _____.

Employee Bonus Expense; $100,000

Unemployment taxes are examples of __ tax.

Employer

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

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

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. (t/f)

False Reason: Contingent liabilities cannot be recorded for future events.

Which of the following situations is not a contingent liability?

Future natural disaster

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

Interest

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

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) —- account.

Liability

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 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

Contingent Liability

Obligation to make a future payment if, and only if, an uncertain future event occurs.

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

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 $__

Payable; 500

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

SUTA

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

SUTA

Damen's Co. sells merchandise with a list price of $500 and collects sales tax of $50. The sales tax would be recorded with a credit to which account?

Sales Tax Payable

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 contingent liabilities would require a company to record a note to the financial statements? (Check all that apply.)

The liability is possible and cannot be reasonably estimated. The liability is probable and cannot be reasonably estimated. The liability is possible and is estimated to be $35,000.

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.

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

multi-period known liability examples

Unearned Subscription Revenues and Notes Payable

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

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

Spot Co. purchases office supplies from Sally Supplies, Inc.. Spot does not pay cash for the purchase, and now owes the amount to Sally. This transaction would typically be recorded in which account in Spot's books?

accounts payable

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

accounts payable

current liability examples

accounts payable, salaries and wages payable, notes payable, interest payable, and income taxes payable (Anything due within a year/ operating cycle)

long-term liabilities examples

bonds payable, mortgages payable, long-term notes payable, lease liabilities, and pension liabilities

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

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

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 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

On June 1, Sawyer Co. borrowed $5,000 cash from Crystal Bank by signing a 45-day, 12% interest-bearing note. On July 16, 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 Interest expense is debited for $75 computed as $5,000x.12x(45/360). The credit is to Cash for $5,075.

Employee income tax depends on:

employee's income number of employee withholding allowances

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

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

expense

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

gross pay

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 events.

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

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

net

Which of the following items is not a payroll deduction?

net pay

A potential legal claim is recorded ...

only if payment for damages is probable and the amount can be reasonably estimated.

Employer taxes, such as SUTA, are recorded with a debit to Employer Tax Expense and a credit to SUTA ___ until payments are submitted to the state.

payable

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

payable

Amounts withheld from an employee's gross pay are called:

payroll deductions

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

principal

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

Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?

unemployment

Paid absences offered to employees are called __ benefits.

vacation

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