Week 6 Accounting Reading

On November 1, Wright Co. borrowed $20,000 cash from Third Bank by signing a 90-day, 6% interest-bearing note. On December 31, Wright recorded an adjusting entry to interest expense of $200. On January 30, the due date of the note, Wright will record the payment with a debit to Interest Expense in the amount of $ .

100

Jorge Lopez worked 40 hours this week and earned $1,000 gross salary. Federal and state taxes and other withholdings totaled $350. Jorge's gross pay totals $ .

1000

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing 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

Damien Co. has $10,000 of unearned revenues on its balance sheet. Damien expects that it will earn $8,000 of these revenues in the upcoming twelve months. How much will be recorded in Long-Term Liabilities?

2,000

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

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 $ .

650

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

Lazo Co. offers a bonus to its employees of $100,000 to be paid in January. This entry will require a credit to the ______ account in the amount of _____.

Bonus Payable; $100,000

Anchor Co. has accrued payroll expense of $1,300 which includes employee withholdings of $400. On payday, Anchor will record the distribution of paychecks with a credit to in the amount of $ .

Cash 900

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

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

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

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

Star Co. reported $10,000 of net income during the month of January. Star estimates that it owes income taxes of $2,000 for the month. The month-end adjusting entry to record this estimate would require which of the following entries? (Check all that apply.)

Debit to Income Tax Expense Credit to Income Taxes 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.

Employers use a special account for payroll for which of the following reasons? (Check all that apply.)

Ease of reconciling Internal control

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

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

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

Expense

Leo Calvin is required to have ______ taxes withheld from his pay in order to cover the cost of future retirement, disability, and survivorship and medical expenses.

FICA

The federal Social Security system 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

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

Gross pay

During the first quarter of the year, Trina Co. accrued $6,000 of income taxes. On April 15, Trina will send in the first quarterly payment. The entry to record this payment will include a debit to the _______ account.

Income Taxes Payable

Each month, a corporation will accrue income taxes based on the month's earnings. To record the income tax for the month, the company will debit the Income Tax Expense account and credit the ________ account.

Income Taxes Payable

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

During the second quarter of the year, Francisco Co. accrued $8,000 of income taxes. On July 15, Francisco will send in the second quarterly payment. To record this payment, Francisco will enter which of the following entries? (Check all that apply.)

Credit to Cash Debit to Income Taxes Payable

Lyon Co. collected $1,200 in sales tax from customers during the month of March. In April, Lyon sent the $1,200 sales tax to the state government. The entry to record payment to the state would include which of the following? (Check all that apply.)

Credit to Cash Debit to Sales Tax Payable

Zilo Co. has accrued employee salary expense of $1,000 which includes employee withholdings that total $300. On payday, Zilo will record the payment with which of the following entries? (Check all that apply.)

Credit to Cash for $700. Debit to Salaries Payable for $700.

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.)

Credit to Notes Payable Debit to Accounts Payable

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

Mary's Magazine Sales sells popular magazine subscriptions. During January, Mary collected $1,200 from various customers to provide magazines over the next 12 months. At the end of February, Mary would make an adjusting entry to record one month of magazines subscriptions earned. This transaction would include which of the following entries? (Check all that apply.)

Credit to Subscriptions Earned Debit to Unearned Subscriptions

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

Employer taxes, such as SUTA, are recorded with a debit to Employer Tax Expense and a credit to SUTA (expense/payable) 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

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

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

SUTA

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

SUTA

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

SUTA

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

The form that an employee uses to indicate the number of withholding allowances filed with the employer is called Form _______.

W-4

Which of the following items would be considered a current liability? (Check all that apply.)

Wages payable Accounts payable, terms n/30 Notes payable, due in 3 months

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

accounts 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

Tire Co. collected $2,000 in sales tax during the month of October. The entry that shows the remittance of this sales tax to the state government in November would include a credit to the account.

cash

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

A liability is a liability due to be paid or settled within one year or the company's operating cycle, whichever is longer.

current

Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? (Check all that apply.)

current liabilities long-term liabilities

On December 1, Hansen Co. borrowed $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen recorded an adjusting entry to record interest expense of $500. On March 1, the due date of the note, Hansen will record interest expense as a (debit/credit) ________ in the amount of ______.

debit; $1,000

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

FICA and unemployment taxes are examples of (employee/employer) taxes.

employee

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

Most employers are required to withhold ________ from an employee's paycheck. The amount withheld is computed using tables published by the IRS. The amount depends on the employee's annual earnings rate and the number of withholding allowances the employee claims.

federal income taxes

Rachel Ryder is an employee working at Brand-Mart. Rachel earns $35,000 per year and claims three withholding allowances. The amount withheld from her paycheck, using this information, is called federal taxes.

income

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing 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

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

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) (asset/liability/equity) account.

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

Obligations not due to be paid within one year or one operating cycle, whichever is longer, are considered to be:

long-term liabilities.

Ace Company borrowed $10,000 from Fair Rates Bank by signing a two-year note payable. Ace's operating cycle is 14 months. This note would be considered a ______ on the balance sheet.

long-term liability

Unearned subscription revenues often consist of liabilities that will come due within one year and beyond one year. This is an example of a _______ known liability.

multi-period

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

net

A ________ register is a report that shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for each pay period.

payroll

The reports that employers are required to prepare to explain how they compute local, state and federal payroll taxes are called reports.

payroll

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

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

Examples of employee voluntary deductions may include all of the following except:

unemployment taxes.

Employers often withhold other 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

A known liability arises from a situation with little uncertainty, with set agreements, contracts, or laws. These liabilities are measurable. Known liabilities would include all of the following items, except:

warranties

When recording a liability, a company may not know: (Check all that apply.)

whom to pay. how much to pay. when to pay.

On December 1, Campbell Co. borrowed $10,000 cash from Second Bank by signing a 90-day, 6% interest-bearing note. On December 31, Campbell accrued interest expense of $50. Campbell does not use reversing entries. On March 1, the due date of the note, Campbell will record the payment with debit entries to which of the following accounts? (Check all that apply.)

Notes Payable for $10,000 Interest Expense for $100 Interest Payable for $50

Paid absences that are accrued throughout the year are recorded in the _____________ account.

Vacation Benefit Expense

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

Which of the following items are considered employee benefits? (Check all that apply.)

Medical insurance Pension plans

FICA tax includes both Social Security tax and _____.

Medicare tax

Which of the following items is not a payroll deduction?

Net pay

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

Stalz Co. collected $2,500 in sales tax from customers during the month of February. In March, Stallon sends the $2,500 to the state government. The payment to the state would be recorded with a debit 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 is a true statement concerning the employer FICA taxes:

The employer must pay FICA tax in an amount equal to that paid by the employee.

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. This accrual is recorded under the ________ account.

Vacation Benefits Payable

True or false: A liability can be recorded, even if there is uncertainty of when to pay, how much to pay, or whom to pay.

True

True or false: Most large companies use a separate bank account for payroll purposes.

True

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

Unearned Revenues

A company sells 12-month popular magazine subscriptions. During the month of May, the company sells $12,000 in magazines, which will start in June. The adjusting entry to record the $1,000 of subscriptions earned in June will include a debit to which account?

Unearned Subscription Revenue

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

Which of the following liabilities could be a multi-period known liability? (Check all that apply.)

Unearned Subscription Revenues Notes Payable