ACCT 2301 Chapter 9 LearnSmart Accounting for Current Liabilities and Payroll

Miss Billings earns a monthly salary of $8,000. Her income tax withholding is $900 per month. 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 the employer owes for Miss Billings in January is ______. Multiple choice question. $1,620 $1,020 $1,680 $1,080

$1,020

Mr. Wallace earns a monthly salary of $6,000. His income tax withholding is $650 per month. 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 the month of January is ______. Multiple choice question. $6,000 $4,900 $4,630 $4,270

$4,630

Miss Billings earns a monthly salary of $8,000. Her income tax withholding is $900 per month. 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, her net pay for January is ______. Multiple choice question. $5,610 $5,670 $6,990 $6,090

$6,090

Mr. Wallace earns a monthly salary of $6,000. His income tax withholding is $650 per month. 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 on his behalf for the month of January is ______. Multiple choice question. $810 $1,170 $2,120 $450

$810

Gamma Company borrowed $5,000 on October 1, Year 1. The note had a one-year term and an annual interest rate of 6%. In Year 2 Gamma will recognized accrued interest expense of $

225

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 interest expense of ______. multiple choice question 0 400 600 200

400

Gamma Company borrowed $5,000 on October 1, Year 1. The note had a one-year term and an annual interest rate of 6%. On December 31, Year 1 Gamma will recognized accrued interest expense of $

75

Recognizing accrued interest expense affects the ______. Multiple select question. Balance sheet Income statement Statement of cash flows

Balance sheet Income statement

Issuing a note to borrow money affects the ______. Multiple select question. Balance sheet Statement of cash flows Income statement

Balance sheet Statement of cash flows

Paying off the accrued interest on a note payable affects the ______. Multiple select question. Balance sheet Income statement Statement of cash flows

Balance sheet Statement of cash flows

Paying off the accrued interest on a note payable affects the ______. Multiple select question. Balance sheet Statement of cash flows Income statement

Balance sheet Statement of cash flows

Fill in the blank question. 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) _________ __________

Blank 1: independent Blank 2: contractor

The debt-to-asset ratio is one tool used to measure __________, while the primary ratio used to evaluate liquidity is the _________ _________ .

Blank 1: solvency Blank 2: current Blank 3: ratio

Which of the following statements is true? Multiple choice question. Employers are required by law to withhold income taxes from employee earnings. Employees are required by law to pay income taxes directly to the federal government. Employers must withhold federal income taxes on compensation to independent contractors. Employees may request, but are not required, to have employers withhold income taxes from their earnings.

Employers are required by law to withhold income taxes from employee earnings.

Tax expenses employers incur for their employees include ______. Multiple select question. FUTA state unemployment federal income tax FICA

FUTA state unemployment FICA

True or false: Paying off a note and accrued interest is reported as a cash outflow from financing activities on the statement of cash flows.

False

Health insurance is provided by ______. Multiple choice question. Medicare Social Security Property taxes income taxes

Medicare

The federal tax laws require employers to withhold taxes from employees for ______ taxes Multiple select question. Medicare Social Security state income federal income

Medicare Social Security federal income

The federal tax laws require employers to withhold taxes from employees for ______ taxes Multiple select question. Medicare federal income Social Security state income

Medicare federal income Social Security

Old age, survivor's, and disability insurance is provided by ______. Multiple choice question. Medicare Social Security income taxes

Social Security

True or false: All employee withholdings have the same effect on the financial statements as federal income taxes.

True

True or false: Withholding voluntary deductions from an employee's gross earnings represents a service on the employer's part.

True

At the end of the each calendar year employees are notified of the amount of gross earnings for the year and the amounts the employer withheld on Form ______. Multiple choice question. W-2 1040 Form W-4 941 W-4

W-2

The number of withholding allowances claimed by an employee is documented on Form ______. Multiple choice question. W-4 1040 W-2 941

W-4

Simms Accountants charged a client $2,000 cash plus tax for services provided in a state where the service sales tax rate is 6%. As a result of this event, Simms will recognize ______.

a $120 liability on the Balance sheet $2,120 cash flow from operating activities

When employees are paid, federal income tax withholdings increase ______. Multiple choice question. both an expense and a liability account an expense account only neither an expense or a liability account a liability account only

a liability account only

All the the following are current liabilities except ______. Multiple select question. accounts receivable accounts payable short-term notes payable long-term renewable debt short-term receivables

accounts receivable short-term receivables

Recognizing and paying salary expense for employees affects ______. Multiple choice question. only the balance sheet and statement of cash flows all financial statements only the balance sheet and income statement only the income statement and statement of cash flows

all financial statements

Recognizing and paying salary expense for employees affects ______. Multiple choice question. only the income statement and statement of cash flows all financial statements only the balance sheet and statement of cash flows only the balance sheet and income statement

all financial statements

Recognizing and paying salary expense for employees affects ______. Multiple choice question. only the income statement and statement of cash flows only the balance sheet and income statement only the balance sheet and statement of cash flows all financial statements

all financial statements

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 have been caused by ______. Multiple choice question. repaying the principal balance of a loan borrowing money with a two year term to maturity loaning money with a three year term to maturity collecting the principal balance of a note receivable

borrowing money with a two year term to maturity

Recognizing accrued interest expense is a(n) ______ transaction. Multiple choice question. asset exchange asset source asset use claims exchange

claims exchange

To enhance the usefulness of accounting information, most real-world companies provide _________ balance sheets.

classified

A potential obligation arising from a past event is called a(n) _______ ________

contingent liability

Assets that are expected to be converted to cash or consumed within one year or an operating cycle, whichever is longer are called ______ assets. Multiple choice question. current fixed intangible long term

current

Inventory is classified as a(n) ______ asset. Multiple choice question. current plant long-term intangible

current

Obligations that are payable within one year or operating cycle, whichever is longer, are called ______ liabilities. Multiple choice question. long-term operating annualized current

current

The primary purpose of classified balance sheets is to distinguish between ______ items. Multiple choice question. debt and equity operating and non-operating tangible and intangible current and noncurrent

current and noncurrent

Fill in the blank question. Obligations that are payable within one year or operating cycle, whichever is longer, are considered are called __________ ___________

current liabilities

Taxes payable are classified as ______. Multiple choice question. current asset current liability long-term liability long-term asset

current liability

Assets are usually divided into two major classifications: _______ and ________.

current noncurrent

Janie Jones earns a monthly salary of $6,000. Janie's total withholdings amount to $1,200. Based on this information, recording the payment of salary expense for Janie would include: (Select all that apply.) Multiple select question. decrease to assets of $4,800 increase to various liabilities of $1,200 cash outflow for operating activities of $6,000 decrease to net income of $6,000

decrease to assets of $4,800 increase to various liabilities of $1,200 decrease to net income of $6,000

A company is responsible for payroll taxes for ______ Multiple choice question. neither employees or independent contractors. employees only independent contractors only both employees and independent contractors

employees only

Unemployment tax is paid by the ______. Multiple choice question. employee only federal government employer only employer and employee

employer only

Unemployment tax is paid by the ______. Multiple choice question. federal government employee only employer only employer and employee

employer only

The recognition of accrued payroll tax expense will cause ______ to increase. Multiple select question. retained earnings expenses cash outflow for operating expenses liabilities

expenses liabilities

It is assumed that companies will continue to operate under the __________ __________ assumption. (Enter only one word per blank.)

going concern

Total wages or salaries earned before any deductions for withholding represent employees' _______ ________.

gross earnings

Janie Jones earns a monthly salary of $6,000. Janie's total withholdings amount to $1,200. Based on this information, recording the payment of salary expense for Janie would include: (Select all that apply.) Multiple select question. increase to various liabilities of $1,200 cash outflow for operating activities of $6,000 decrease to assets of $4,800 decrease to net income of $6,000

increase to various liabilities of $1,200 decrease to assets of $4,800 decrease to net income of $6,000

A current asset is an asset that ______. Multiple choice question. grants its owner exclusive legal rights to currently produce and sell a unique product is used in the operation of the business and whose useful life is longer than one year or an operating cycle has no physical form, but whose existence is evidenced by physical documents is expected to be converted to cash or consumed within one year or an operating cycle, whichever is longer

is expected to be converted to cash or consumed within one year or an operating cycle, whichever is longer

The ability to generate sufficient short-term cash flows to pay obligations as they come due is ______. Multiple choice question. solvency financing cash flow liquidity operating cash flow

liquidity

Long-term debt that is due within one year for which the company does not plan to use current assets to repay is classified as a ______ liability Multiple choice question. long-term current renewable

long-term

Long-term debt that is due within one year for which the company does not plan to use current assets to repay is classified as a ______ liability Multiple choice question. renewable long-term current

long-term

Voluntary employee withholdings include ______. Multiple select question. medical insurance union dues Medicare income tax Social Security

medical insurance union dues

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. Multiple choice question. less than more than the same amount as

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. Multiple choice question. the same amount as more than less than

more than

Recognizing payroll tax expense affects ______. Multiple choice question. only the income statement and statement of cash flows all financial statements only the balance sheet and income statement only the balance sheet and statement of cash flows

only the balance sheet and income statement

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. Multiple choice question. investing financing operating accounting

operating

The average time it takes a business to convert cash to inventory, inventory to accounts receivable and accounts receivable back to cash is called a(n) _________ __________.

operating cycle

A company experienced an event that caused total assets and liabilities to decrease and a cash outflow from operating activities to appear on the statement of cash flows. This could have been caused by ______. Multiple choice question. recognizing accrued interest expense paying off an accrued interest payable paying off the principal balance of a loan recognizing accrued interest revenue

paying off an accrued interest payable

A company experienced an event that caused total assets and liabilities to decrease and a cash outflow from financing activities to appear on the statement of cash flows. This could have been caused by ______. Multiple choice question. recognizing accrued interest revenue paying off an accrued interest payable paying off the principal balance of a loan recognizing accrued interest expense

paying off the principal balance of a loan

The compensation earned by employees who are paid a set amount per week, month, or other time period regardless of the number of hours worked is normally called ______. Multiple choice question. wages gross earnings salaries fringe benefits

salaries

Fill in the blank question. Current items are also referred to as __________ term and noncurrent items as __________ term.

short long

The ability to repay liabilities in the long run is ______. Multiple choice question. operating cash flow solvency liquidity financing cash flow

solvency

Current assets include ______. Multiple select question. goodwill supplies plant assets interest receivable

supplies interest receivable

The going concern assumption assumes ______. Multiple select question. expenses will be recorded in the same period that they generate revenues the cost of an asset is the amount paid for the asset that companies will pay their obligations in full that companies will continue to operate

that companies will pay their obligations in full that companies will continue to operate

If the likelihood of a future obligation arising is reasonably possible, but not likely; or if it is probable, but cannot be reasonably estimated ______. Multiple choice question. a liability must be reported on the Balance sheet the potential liability must be disclosed in the notes to the financial statements the estimated amount is shown as an expense on the Income statement it does not have to be disclosed on the financial statements or notes

the potential liability must be disclosed in the notes to the financial statements