Acc Ch 9 Smartbook Exam 3 Prep
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 $_____.
$1,000
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
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
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
Note Payable
A _____ _____ is similar to a bond payable but is normally transacted with a single lender such as a bank
Liability
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
Current
A _____ liability is a liability due to be paid or settled within one year or the company's operating cycle, whichever is longer.
bond
A _________ is the issuer's written promise to pay an amount equaling the par value. The par value is paid at a specified future date. Most often, the issuer is required to make semiannual interest payments.
________ are amounts owed to suppliers for products or services purchased on credit.
Accounts payable
Liabilities
Because of a past event, the company has a present obligation for future sacrifices.
bond carrying value
Can be determined by taking the bond par value minus the discount on bonds payable.
Stocks
Convertible bondholders have the right to convert their bonds to _____.
Deductions
Employee FICA Social Security Taxes Employee FICA Medicare Taxes Federal Income Tax State and Local Income Tax Voluntary Deductions C9
Mandatory Deductions
Employee FICA Social Security Taxes Employee FICA Medicare Taxes Federal Income Tax State and Local Income Tax C9
Voluntary
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
Net Pay
Equal to gross pay minus deductions (Salaries Payable) C9
long-term liabilities
Expected not to be paid within one year or the company's operating cycle, whichever is longer. C9
Current Liabilities
Expected to be paid within one year or the company's operating cycle, whichever is longer.
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
Net
Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions—equals _____ pay
Convertible
Holders of __________ bonds have the right to convert their bonds to stock. When conversion occurs, the bonds' carrying value is transferred to equity accounts and no gain or loss is recognized.
_____ is the difference between the amount borrowed and the amount repaid.
Interest
Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?
SUTA
Gross Pay
Salaries/Wages expense before deductions are made. C9
Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?
Sales tax payable
Principal
The _____ of a note is the amount that the signer of a note agrees to pay back when it matures, not including interest.
straight-line
The ________ bond amortization method allocates an equal portion of the total bond interest expense to each interest period
Contract
The ________ rate is the interest rate specified in the indenture—sometimes referred to as the coupon rate, stated rate, or nominal rate.
Par value - discount on bonds payable
The bond carrying value can be determined by what formula?
Market
The bond's _______ rate of interest is the rate that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level
Voluntary Deductions
Union Dues Savings Accounts Pension Contributions Insurance Premiums Charities C9
Discount
When a bond contract rate is less than the current market rate on the date of issuance, the bond will be sold at a(n) _____________
Carrying
When a bond is sold at a discount, the ________ value will increase at each semi-annual interest payment by the amortization of bond discount
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.
Premium
When the current market rate is less than the bond contract rate on the date of issuance, the bond will be sold at a(n)
Known (Determinable) Liabilities
Who to pay, when to pay, and how much to pay are all known. Accounts Payable Short-term Notes Payable Sales tax payable Unearned revenues Payroll Liabilities C9
Interest
_____ is the difference between the amount borrowed and the amount repaid
Gross Pay
_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.
A _____ liability is a liability due to be paid or settled within one year or the company's operating cycle, whichever is longer.
current
FICA and unemployment taxes are examples of _____ (employee/employer) taxes.
employer
Payroll Liabilities
employers incur expenses and liabilities from having employees. 1. Salaries/Wages 2. Payroll Taxes 3. Benefits: Vacation, Medical Ins., Retirement, etc. 1+2+3 = Total Payroll Related Expense. C9
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.
false
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
_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.
gross pay
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
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
Which of the following items is not a payroll deduction?
net pay
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
A contingent liability can be ignored (not recorded in the financial statements or notes to the financial statements) if it is considered as _____ (probable/reasonably possible/remote) possibility.
remote
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
The ratio of income before interest expense (and any income taxes) divided by interest expense—which reflects the risk of covering interest commitments when income varies—is called the ____________ ratio.
times interest earned
Amounts received in advance from customers for future products or services are typically recorded in a liability account called _______.
unearned revenues
Examples of employee voluntary deductions may include all of the following except:
unemployment taxes
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?
-Debit to Accounts Payable -Credit to Notes Payable
Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio.
10
short-term notes payable
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 __________.
Installment
A(n) _____ note is an obligation requiring a series of payments to the lenders.
mortgage
A(n) _______ is a legal agreement that helps to protect a lender if a borrower fails to make required payments on notes or bonds. This agreement gives the lender the right to be paid from the cash proceeds of the sale of the borrower's assets, as identified in the agreement.
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
Employee Voluntary Deductions
Amounts withheld depend on the specific employees' request. Examples include union dues, savings accounts, pension contributions, insurance premiums, and charities. Employers owe voluntary amounts withheld from employees' gross pay to the designated agency. C9
FICA
Federal Insurance Contributions Act C9
Which of the following situations is not a contingent liability?
Future natural disaster
at the maturity date; semiannually
Most bonds require par value to be repaid _______ and interest to be paid _________.
State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as (use acronym) _____.
SUTA
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.
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
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
Which of the following liabilities could be a multi-period known liability?
-Notes Payable -Unearned Subscription Revenue
Expense
Total bond interest __________ is the sum of the interest payments plus the bond discount.
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?
-Debit to Cash -Credit to Unearned Paving Fees
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
Which of the following items would be considered a current liability?
-Wages payable -Accounts payable, terms n/30 -Notes payable, due in 3 months
Par
A bond is its issuer's written promise to pay an amount equaling the _____ value of the bond with interest.
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
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
On January 1, Avers Co. borrowed $10,000 cash from Main St. Bank by signing a 60-day, 8% interest-bearing note. On March 1, Avers pays the amount due in full. The March 1 entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash)_____ in the amount of _______.
-Notes Payable -$10,000
Unearned Revenues
Amounts received in advance from customers for future products or services are typically recorded in a liability account called _______.
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 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 $_____
100,000
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 $_____.
100,000
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 $_____
15,000
Interest expense
A bond discount increases __________ at each semi-annual interest payment.
Estimated Liabilities
A known obligation of an uncertain amount, but one that can be reasonably estimated. Uncertainties about who to pay, when to pay, or how much to pay. Health/Pension Benefits Vacation Benefits Bonus Plans Warranty Liabilities C9
Known
A measurable obligation arising from agreements, contracts, or laws is called a _____ liability.
short-term notes payable
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. Notes are issued: 1) When cash is borrowed 2) To extend the credit period C9
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
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.
indenture
The legal document that describes the rights and obligations of both the bondholders and the issuer is called the bond
Maturity
The par value of a bond, also called the face amount or face value, is paid at a stated future date, known as the bond's _________ date
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
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
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
