AC 210 chapter 10 quiz

how do you find taxable income and amount you will be taxed?

(revenues - tax allowed expense) * tax rate

what are the 2 Employer payroll taxes

1. FICA taxes 2. Unemployment taxes

3 parts to reporting liabilities

1. Initial amount of the liability 2. additional amounts owed to creditor 3. payments/services provided to creditor

what are 2 types of current liabilities?

1. accounts payable 2. accrued liabilities

What are some examples of accrued liabilities?

1. accrued advertisement 2. payroll 3. taxes 4. interest 5. other accused liabilities

How are liabilities created? (3)

1. buys goods/services on credit 2. obtains short term loans to cover gaps in cash flows 3. issues long term debt to obtain money for expanding into new regions or markets

what does the law require that payroll deductions include?

1. deduct federal/state/city income tax from gross earnings 2. FICA taxes

2 types of accrued payroll liabilities

1. payroll deductions 2. employer payroll taxes

what are the 2 Additional current liabilities?

1. sales tax and 2. unearned revenue

what is the usual income tax rate for companies

15-35 but mainly closer to 35

Record/analyze unearned revenue: 2. fulfill liability and create revenue: if EX: On October 1 IAC, an internet provider, received $30 cash for three-months of internet access. At the end of October, IAC provided one month of internet service to its customer. record the 1 month

30/3= 10$ per month Liability: unearned revenue -10 SE: subscription revenue +10 debit: unearned revenue 10 credit: subscription revenue 10

what states don't have Sales tax

Alaska, Delaware, Montana, New Hampshire, Oregon

Record/analyze employer payroll taxes if EX: GM was required to contribute $45,900 for FICA taxes and $4,750 for federal/state unemployment tax

Analyze: Asset:, Liability: FICA payable +45,900, Unemployment tax payable +4,750. SE: payroll tax expense (-SE) -50,650 Debit: Payroll tax expense 50,650 Credit: FICA payable 45,900, unemployment tax payable 4750

Analyze/record accrued income tax if EX: GM calculated taxable income to be $1,000,000 and is subject to a 35% tax rate, so income taxes owed are $350,000

Analyze: liabilities: Income Tax payable +350,000 SE: income tax expense (+E, -SE) -350,000 Debit: income tax expense 350,000 Credit: income tax payable 350,000

Analyze/record notes payable: 1. establishing the note payable if EX: GM borrowed $100,000 cash on a one year note with an interest rate of 6% on November 1, 2015.

Asset: Cash +100,000 Liability: Note payable +100,000 Debit: cash 100,000 credit: note payable 100,000

Analyze/record notes payable: 4. recording principal paid if EX: GM borrowed $100,000 with a 6% interest rate on November 1, 2015, they did the year end report and reported 2 months of interest. On October 31, 2016 GM paid the interest and principal back.

Asset: Cash -100,000 Liability: note payable -100,000 Debit: note payable 100,000 Credit: cash 100,000

Analyze/record notes payable: 3. recording interest paid if EX: GM borrowed $100,000 with a 6% interest rate on November 1, 2015, they did the year end report and reported 2 months of interest. On October 31, 2016 GM paid the interest and principal back.

Asset: Cash -6000 Liability: Interest payable - 1000 SE: interest expense (+E, -SE) -5000 Debit: Interest payable 1000, interest expense 5000 Credit: Cash 6000

record/analyze sales tax payable if EX: best buy sells a TV for 1000 cash with a 5% sales tax

Asset: cash +1050 Liability: Sales tax payable +50 SE: sales revenue (+SE) +1000 Debit: cash 1050 Credit: sales tax payable 50, sales tax revenue 1000

Record/analyze unearned revenue: 1. receive cash and create a liability: if EX: On October 1 IAC, an internet provider, received $30 cash for three-months of internet access, paid in advance.

Asset: cash +30 Liability: unearned revenue +30 debit: cash 30 credit: unearned revenue 30

What is a classified balance sheet

a balance sheet that is created by companies to help financial statement users know when liabilities must be repaid. reports when liabilities become a current liability on balance sheet

what happens during Pay roll deductions

a company deducts amounts from your gross earnings (paycheck) and the remaining amount is the net pay (amount you receive). Gross earnings= time worked * rate per hour Net pay= gross earnings - deductions

when do retailers collect this?

at the time of sale and then forward it to the gov

What are the voluntary deductions that employees can ask for?

charitable donations, parking, union dues, retirement savings

what is sales tax considered? why?

considered current liability, because it is simply collected and passed onto the government

what are the FICA taxes during employer payroll taxes?

considered matching contribution cuz 100% is required of the employee contributions

What do employers classify payroll deductions as?

current liabilities

Record/analyze accrued payroll deductions if EX: Adam earned gross pay of $600 in current period. GM withheld $60.90 in federal income taxes, $45.90 for FICA taxes, and $10 for united way resulting in net pay of $483.20, Assume GM has 1000 employees.

find total amount payable and deductible 1000*$600= $600,000 1000* indivdual deductions Asset: Cash (-A) -483,200 Liability: Withheld income tax payable +60,900, FICA payable + 45,900, United way payable +10,000. SE: Salaries/wages expense (+E) -600,000 Debit: Salaries/wages expense 600,000 Credit: withheld income 60900, FICA payable 45900, United way payable 10000, Cash 483000

Current liabilities: accounts payable: what do you debit/credit when accounts payable increases and decreases?

increases (credited) when a company receives goods or services on credit Decrease (debited) when a company pays on its accounts

Notes payable def and the 4 events that happen during a note payable

liabilities created by the company owing something to others by a promissory note. 1. establish the note 2. Accrue interest incurred but not yet paid 3. record payment of interest 4. Record payment of principal

Current liabilities: accrued liabilities def and what do you debit and credit when these additional liabilities are incurred?

liabilities that have been incurred but not yet paid. Debit expenses and credit payable accounts

Who requires the unemployment tax to be in the employers payroll taxes?

required by the Federal Unemployment Tax act (FUTA) and the State Unemployment Tax act (SUTA)

what are current liabilities?

short term obligations that will be paid or fulfilled within the current operating period or 1 year

during payroll deductions, what do FICA taxes support?

supports medicare and social security.

why does the employer do payroll deductions?

they are legally obligated to do deductions and people can request them.

what do payroll deductions create?

they create current liabilities

Analyze/record notes payable: 2. accrue interest incurred but not yet paid if EX: GM borrowed $100,000 with a 6% interest rate on November 1, 2015, and had to create a year end entry on December 31, 2015. How would they report this?

to calculate: I=P*R*T (2/12) Asset: Liability: Interest payable +1000 SE: interest expense (+E, -SE) -1000 debit: interest expense 1000 credit: interest payable 1000

What is accrued income tax for companies?

when companies must pay taxes on payroll and income they earn. Taxed only on taxable income, shown on IRS form 1120

Unearned revenue def and what are the 2 parts to it?

when companies receive cash before they provide goods/services EX: airline. 2 parts: 1. receive cash and create liability 2. fulfill liability and earn revenue

what are liabilities

when something is bought on credit