Chapter 8 LS Assignment

The financial statement where the deferred revenue account is found is the _ _.

balance, sheet

FICA tax is paid by

both the employee and employer

The current portion of long-term debt is the amount that will be paid within the _ year.

next

A liability is a(n) _ responsibility to sacrifice _ in the future due to a transactions or other event that happened in the _.

present, assets, past

Which of these payroll taxes are paid only by the employer?

suta futa

The employer's portion of FICA tax remitted to the taxing authority is:

the same as the employee's portion

Which accounting standards provides a lower threshold for accruing contingent liabilities?

IFRS

A(n) _ payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash.

accounts

deferred revenue is classified as a(n)

liability

Disclosure related to a contingent event is usually not required if the likelihood of payment is _.

remote

Taxes subtract from employee's pay and remitted to the government on their behalf are called

withholding taxes

Withholding taxes for federal and state income tax are based upon which items?

amount earned by employees number of excemptions claimed

Which of the following voluntary contributions by employees may employers deduct from their employees' pay?

union dues contributions toward retirement funds charitable contributions

Payroll withholdings _.

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

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?

credit cash $106,000 debit note payable $100,000 debit interest expense $2,000 debit interest payable $4,000

Which of the following are current liabilities?

accounts payable taxes payable deferred revenues

true or false: current liabilities are always payable within one year.

false

Sally Company manufactures large kitchen appliances. For the first year of purchase, the company will repair any manufacturing defect free of charge. Sally apparently sells its appliances with a(n)_.

warranty

Which of the following must employers by law withhold from their employee's pay?

federal taxes FICA contributions

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

fringe

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

20000 &* 0.08 &* 6/12

Match the classification with the correct description.

Current liability - normally payable within one year. Long-term liability - Normally payable more than one year from now

Taylor company's attorney informs its client that it is possible, but not probable, that the company will lose a currently litigated lawsuit. No reliable estimate of the potential loss is currently available. How should Taylor accrue and/or disclose this potential loss?

Disclose the contingency and state that an estimate cannot be made.

Liabilities are classified as

current and long-term.

Interest expense is recorded in the period when it is _.

incurred

identity characteristics of notes payable that are not common to accounts payable

interest bearing based on promissory note

On june 1,2018, Oxian corp. receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the income statement for 2018?

$7,000 (24000/24 months = 1000 per month x 7 month = 7000 revenue)

Which of the following is correct regarding gain contingencies?

They are not accrued

An interest rate, unless otherwise specified, is typically a(n) _ rate.

annual

correctly match the salary-related costs with the payee

employee - state and federal income tax employer - state and federal unemployment tax

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 wages expense

Which of the following may be classified as contingent liabilities?

Product warranties, Frequent flier program awards, future litigation losses

A(n) _ _ is an existing uncertainty that might result in a gain.

contingent gain

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

creates interest expense on the income statement

Ralph charges a fee of $2,180 for services performed for a new client. Assuming that the fee includes 9% of sales tax, Ralph should credit sales tax payable for:

$180

Spencer Corp.'s attorney estimates that the company will ultimately have to pay between $250,000 and $500,000 relating to current litigation. Spencer should accrue a contingent liability and loss of

$250,000

volker company signs a 3-months, $10,000 note. stated interest rate is 12% payable at the maturity date. Interest incurred on the note is:

300

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 requireed when the note matures on october 1, 2019 would include a debit to interest expense for

600

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?

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

Which of the following payroll-related taxes must the employer pay by law?

FICA unemployment taxes

choose the correct formula for calculating interest.

Face amount x annual interest rate x fraction of the year

Cannery company pays health insurance for its employees for $1,000 for the pay period. the journal entry to record this fringe benefit includes which of the following?

credit accounts payable 1000 debit salaries expense 1000

The portion of a long-term liability that will be paid within the next year is referred to and reported as the:

current portion of long-term debt

Liabilities that are payable within one year commonly are classified as _ liabilities, while those payable more than one year from now commonly are classified as _ liabilities.

current, long-term

The journal entry to record employer payroll taxes affects _.

liabilities and stockholders's equity

Deferred revenue should be classified as a(n) _ on the balance sheet.

liability

a _ of _ is an informal agreement that permits a company to borrow up to a prearranged amount without having to following loan procedures.

line, credit

Given a choice, most companies will prefer classifying liabilities as

long-term

Which of the following are common examples of long-term liabilities that require reporting of a current portion of the liability?

long-term notes payable with quarterly payments of principle and interest mortgage requiring monthly payments of principle and interest

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

payroll withholdings

Which of these payroll taxes are paid by the employer and the employee?

social security medicare

Anastasia company recognizes payroll for the month of May. Gross employee income is $200,000; federal tax withheld are $40,000; state taxes withheld are $6,000; Social security and medicare taxes are $15,000. Employees contribute $10,000 to a 401(k) retirement plan. Anastasia will pay which net amount to its employees (ignore employer payroll taxes)?

b. $129,000 Calculation: (Employee Income - federal taxes withheld - state taxes withheld - Social Security and Medicare taxes - 401(k) employee contributions)

A(n) _ payable results from an agreement with a supplier to pay within 30 to 60 days, whereas a(n) _ payable is a signed contract that promises to pay a specific amount with interest at a specific maturity date.

accounts, note

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

accrued

Lark corporation believes it is probable the company will lose a lawsuit for $10,000. the journal entry to record the contingent loss will include a

credit to contingent liability for lawsuit $10,000.

Which of the following are not required payroll withholdings?

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

Lester Corp. sells merchandise to a customer for $1,000. The company also collects state and local sales taxes of 6% and 4%, respectively. At the time of sale, Lester should record the following credit amounts.

(a) sales tax payable of $100 (b) sales revenue of $1,000

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

uncertain, future

kevin sells $100 of goods to a customer on account. The sales tax is 8%. the journal entry for this sale will include which of the following entries?

Debit account receivable $108 Credit revenue $100 Credit sales tax payable $8

ABC airlines collect $300 for a round-trip ticket from Chicago to Los Angeles and back. How does ABC airlines record the $300 collected in advance?

a debit to cash of $300 and a credit to deferred revenue to $300.

When a company pays for items that were previously purchased on account, the journal entry includes:

credit to cash debt to accounts payable

on September 1,2018, kale corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required december 31, 2018 would include which of the following entries?

debit interest expense $4,000

Jenco Company's gross pay for employees at the end of the pay period is $100,000. Jenco withholds the following amounts: federal withholding tax 20000 fica withholding-employee portion - 5000 health insurance premiums 2000

debit payroll expense 100,000 credit fica payable 5,000 credit wages payable 73000

On september 1, abc company borrowed $50,000 on a 6%, 9-month note payable to xyz national bank. the entry abc would record at maturity, assuming all year-end (decemeber 31) adjusting entries were made correctly, would include a _.

debit to interest payable of $1,000 credit to cash of $52,250 debit to notes payable of $50,000 debit to interest expense of $1,250

Rauch corporation estimated warranty expense in year 1 of $10,000. in year 2, rauch performed warranty work of $8,000. The journal entry to record the performance of warranty work would include a

debit to warranty liability

wang corporation sells $200,000 goods on account to customers. wang estimates that warranties will be 2% of sales. at the end of the year, wang will require which of the following entries for warranties?

debit warranty expense $4,000; credit warranty liability $4,000

which of the following are current liabilities?

note payable due in 3 months wages payable accounts payable

Which of the following may be a proper income statement classification of contingent events?

operating and non-operating

The time it takes to produce is referred to as the company's _ _.

operating cycle

Classifying liabilities as current or long term helps creditors and investors assess the _ that the liability will require expenditure of cash or another asset.

probability

When a contingent event that may give rise to a future loss is likely to occur, it is said to be

probable

a contingent liability typically is accrued for product warranties because it meets which of the following criteria?

(c) A future loss is probable. (e) The amount of the future loss can be reasonably estimated.

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

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

Which of the following obligations is NOT commonly classified as a current liability?

Note payable due in 3 years

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

The likelihood of future payment or loss

Consistent with GAAP, we do not record contingent gains until the gain is _.

certain

The feature that distinguishes loss contingencies from other liabilities is the _ that a loss will occur.

chance

Current maturities of long-term debt should be classified as _ liabilities.

current

Deferred revenues and sales tax typically are reported as _ liabilities.

current

John smith works 40 hours for abc corp. for $15 per hour. Required payroll deductions are: social security $37.50, 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 _.

debt to wages expense of $600 credit to state and federal income tax payable of $68 credit to cash of $486.10 credit to FICA( social security and medicare) payable of $45.90

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.

liability

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

medicare contributions social security contributions federal unemployment tax

Which of the following are common characteristics of commercial papers?

the loan period is between 30 and 270 days the loan is between two companies

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

warranties