accounting 3 chapter 9
less than one year
For most businesses, the operating cycle is
vacation pay insurance coverage sick leave
Fringe benefits include ______.
and liabilities to increase by $75
Gamma Company borrowed $5,000 on October 1, Year 1 at 6% annual interest.. Recognizing accrued interest on December 31, Year 1 will cause expenses ______.
W-2
Gross earnings for the year and the amount of taxes the employer withheld are reported to employees each year on Form ______.
1.45
If a company has current assets of $145,000, total assets of $1,200,000, current liabilities of $100,000, and total liabilities of $660,000, its current ratio is ______ to 1.
1.25 to 1
If a company has current liabilities of $176,000, total liabilities of $1,065,000, current assets of $220,000, and total assets of $1,500,000, its current ratio is ______.
a liability must be reported on the Balance sheet the estimated amount is shown as an expense on the Income statement
If the likelihood of a future obligation arising is probable (likely) and its amount can be reasonably estimated ______.
the estimated amount must be disclosed in the notes to the financial statements
If the likelihood of a future obligation arising is reasonably possible, but not likely; or if it is probable, but cannot be reasonably estimated, ______.
issuer
In a note containing the terms of a lending transaction, the maker of the note is called the
borrower maker of the note issuer of the note
In a note containing the terms of a lending transaction, the party borrowing the money may be called the ______.
credit to the sales revenue debit to the cash credit to the sales tax payable
The journal entry to recognize a cash sales event that includes sales tax requires a ______ account.
debit to the cash credit to the notes payable
The journal entry to recognize the issuance of a note payable includes a ______ account.
credit to a liability
The journal entry to record federal income taxes withheld from an employee's paycheck includes a ______ account.
W-4
The number of withholding allowances claimed by an employee is documented on Form ______.
Statement of changes in stockholders' equity Income statement Balance sheet
The recognition of accrued payroll tax expense affects the ______.
liabilities to increase net income to decrease
The recognition of accrued payroll tax expense causes ______.
gross
The sum of regular pay plus any bonuses, overtime, or other additions is called ________ earnings.
false
True or false: Employers are only required to pay unemployment taxes to the federal government.
true
True or false: Fringe benefits are reported as expenses on the employer's financial statements.
false
True or false: The cash payment for a warranty repair is recorded as an expense.
false
True or false: The current ratio is the primary ratio used to evaluate solvency.
True
True or false: Withholding voluntary deductions from an employee's gross earnings represents a service on the employer's part.
true
True or false: Withholding voluntary deductions from an employee's gross earnings represents a service on the employer's part.
employer only
Unemployment tax is paid by the ______.
guarantee repair or replacement cover a specific time period are based on estimates
Warranties normally ______.
when the guaranteed merchandise is sold
Warranty expense is recognized ______.
paying
West Company experienced an accounting event that caused liabilities and cash flows to decrease. The event had no affect on the income statement. This could be a result of ______ employee income tax.
recognizing warranty expense
West Company experienced an accounting event that caused liabilities to increase and stockholders' equity to decrease. The event had no affect on cash flow. This could be a result of ______.
paying a warranty claim
West Company experienced an accounting event that caused liabilities, assets, and cash flow from operating activities to decrease. This could be a result of ______.
Whether they arise from a past event.
What distinguishes contingent liabilities from general uncertainties?
independent contractor
When a business pays an individual for specific services, but the individual supervises and controls the work, then that individual is considered to be a(n)
employee
When a business supervises, directs and controls an individual's work, that person is considered to be a(n)
more than
When a company recognizes a cash revenue event that is subject to state sales tax, the balance in the Cash account increases by ______ the amount of revenue.
Potential decline in earnings due to competition Potential storm damage
Which of the following are general uncertainties?
Social Security taxes
Which of the following provides for old age, survivor's and disability insurance (OASDI)?
charity
Which of the following represents a voluntary employee withholding?
cash and warranty liability
_____ and ____ ______ are not equity accounts.
employers
_________ are required by law to withhold income taxes from employee earnings.
contingent liability
a potential obligation arising from a past event. are sorted into three categories depending on the likelihood of their becoming actual liabilities. The amount or existence of it depends on some future event.
borrowing money with a two year term to maturity
A company experienced an event that caused assets, liabilities and cash flow from financing activities to increase, but had no affect on net income. This could be due to ______.
paying off the principal balance of a loan paying off an accrued interest payable
A company experienced an event that caused total assets and liabilities to decrease and caused a cash outflow to appear on the statement of cash flows. This could have been due to ______.
baker
Assume three companies in the same industry have the following current ratios: Adams Co. = 1.33 to 1 Baker Co. = 1.15 to 1 Charles Co. = 1.27 to 1 Based on this information alone, which company appears to have the lowest liquidity?
$10,000, a credit to various liability accounts for $2,000 and a credit to Cash for $8,000
Bill Seymour earns a monthly salary of $10,000 with total withholdings of $2,000. Based on this information, the journal entry to record the payment of salary expense for Bill includes a debit to Salary Expense for ______.
various liability accounts for $1,170
Bill Seymour earns a monthly salary of $10,000. Assume a Social Security tax rate of 6%, Medicare tax rate of 1.5%, and an Unemployment tax rate of 6% on the first $7,000 of earned income. The journal entry on January 31, Year 1 to record accrued payroll tax expense includes a debit to Payroll Tax Expense and a credit to ______.
current and noncurrent liabilities current and long-term assets
Classified balance sheets distinguish between ______.
Balance sheet Statement of cash flows
Issuing a note to borrow money affects the ______.
asset source
Issuing a note to borrow money is a(n) ______ transaction.
$600
Jack Company issued a $12,000 note payable on September 1, Year 1 for a one year term. Interest was set at 5% per year. In Year 2, Jack would recognize cash outflow from operating activities of ______.
credit to various liabilities for $1,200 debit to Salary Expense for $6,000 credit to Cash for $4,800
Janie Jones earns a monthly salary of $6,000 and total withholdings are $1,200. The journal entry to record the payment of salary expense for Janie includes a ______.
various liabilities for $810
Janie Jones earns a monthly salary of $6,000. Assume a Social Security tax rate of 6%, Medicare tax rate of 1.5%, and an Unemployment tax rate of 6% on the first $7,000 of earned income. The journal entry on January 31, Year 1 to record accrued payroll tax expense includes a credit to ______.
$6,090
Miss Billings earns a monthly salary of $8,000 and has withholding for income taxes of $900 per month. Her monthly voluntary withholdings include $380 for medical insurance and $30 per month for the Humane Society. Assume a Social Security tax rate of 6%, a Medicare tax rate of 1.5%, and an Unemployment tax rate of 6% on the first $7,000 of income. Based on this information, Miss Billings's net pay for January 31, Year 1 is ______.
$1,020
Miss Billings earns a monthly salary of $8,000 and has withholding for income taxes of $900 per month. Her monthly voluntary withholdings include $380 for medical insurance and $30 per month for the Humane Society. Assume a Social Security tax rate of 6%, a Medicare tax rate of 1.5%, and an Unemployment tax rate of 6% on the first $7,000 of income. Based on this information, the amount of payroll tax that Miss Billings' employer owes for January is ______.
$4,630
Mr. Wallace earns a monthly salary of $6,000 and has withholding for income taxes of $650 per month. His monthly voluntary withholdings include $250 for medical insurance and $20 per month for the Red Cross. Assume a Social Security tax rate of 6%, a Medicare tax rate of 1.5%, and an Unemployment tax rate of 6% on the first $7,000 of income. Based on this information, Mr. Wallace's net pay for January 31, Year 1 is ______.
$810
Mr. Wallace earns a monthly salary of $6,000 and has withholding for income taxes of $650 per month. His monthly voluntary withholdings include $250 for medical insurance and $20 per month for the Red Cross. Assume a Social Security tax rate of 6%, a Medicare tax rate of 1.5%, and an Unemployment tax rate of 6% on the first $7,000 of income. Based on this information, the amount of payroll tax that Mr. Wallace's employer owes for January, Year 1 is ______.
higher
Other things being equal, the higher a company's current ratio, the ______ its liquidity.
Balance sheet Statement of cash flows
Paying a warranty claim affects the ______.
Statement of cash flows Balance sheet
Paying employee income taxes payable affects the ______.
Statement of cash flows Balance sheet
Paying off a sales tax liability affects the ______.
employees only
Payroll taxes apply to ______.
affect the Statement of changes in stockholders' equity affect the Income statement
Recognizing a cash revenue event that is subject to state sales tax will ______.
increases liabilities and decreases
Recognizing a warranty obligation ______ stockholders' equity.
Income statement Balance sheet Statement of changes in stockholders' equity
Recognizing accrued interest expense affects the ______.
claims exchange
Recognizing accrued interest expense is a(n) ______ transaction.
asset use
Remitting sales tax to the tax authority is a(n) ______ transaction.
a $120 liability on the Balance sheet $2,000 of Service Revenue a $2,120 increase in total assets
Simms Accountants charged a client $2,000 cash plus tax for services in a state where the service sales tax rate is 6%. As a result of this event, Simms recognized ______,
cash account increases by $2,120 sales tax liability account increases by $120
Simms Accountants charged a client $2,000 cash plus tax for services in a state where the service sales tax rate is 6%. As a result of this event, the ______.
Medicare
The FICA component that provides health insurance is called
liquidity solvency
The ability to generate sufficient short-term cash flows to pay obligations as they become due is called _________ and the ability to repay liabilities in the long-term is called __________
operating
The average time it takes a business to convert cash to inventory, inventory to accounts receivable, and accounts receivable back to cash is commonly called the ______ cycle.
salaries
The compensation earned by employees who are paid a set amount per week regardless of the number of hours they work is normally called ______.
wages
The compensation earned by employees who are paid based on the number of hours they work is normally called ______.
current assets ÷ current liabilities
The current ratio is =______.
fringe benefits
what are are sacrifices (expenses) that an employer incurs to compensate (benefit) its employees.
warranty
what is a contingent liability reported in financial statements
current ratio
what is the primary ratio used to evaluate liquidity
Short-term debt
what will be refinanced is listed as long-term on a classified balance sheet.
