Ch 11 SmartBook
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 $5,000x.12x(45/360)=$75.
Employee income tax depends on:
employee's income number of employee withholding allowances
Unemployment taxes are examples of (employee/employer) _____ taxes.
employer
A known obligation of an uncertain amount that can be reasonably estimated is called a(n) _____ liability
estimated
A(n) ______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated.
estimated
Jorge Lopez worked 40 hours this week and earned $1,000 in total compensation. Federal and state taxes and other withholdings totaled $350. Jorge's gross pay totals $_______
gross pay:1000
On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest 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
FUTA (Federal Unemployment Tax Act)
is an employer expense
A measurable obligation arising from agreements, contracts, or laws is called a ________ liability.
known
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 event
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
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 that extends over multiple periods is an example of a _______ known liability.
multi-period
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 $______
net pay: 650
A potential legal claim is recorded
only if payment for damages is probable and the amount can be reasonably estimated
Amounts withheld from an employee's gross pay are called:
payroll deductions
Which of the following represent reasonably possible contingent liabilities?
potential legal claims debt guarantees
The _________ of a note is the amount that the signer of a note agrees to pay back when it matures, not including interest.
principal or face value
In order for a contingent liability to be recorded as a journal entry in the financial statements, it must be (probable/reasonably possible/remote) ________ and reasonably estimable.
probable
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
Paid absences offered to employees are called ____ benefits.
vacation
A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except:
warranties
A ______ is a seller's obligation to replace or fix a product (or service) that fails to perform as expected within a specified period.
warranty
Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense is
$1,500
Winn Co. signs a 60 day note payable for a $15,000 copy machine with an interest rate of 8%. Winn will record total interest expense of
$200 $15,000 x .08 x (60/360) = $200.
Boyd's Bicycle Sales and Repairs Co. offers a 6-month warranty on all new bicycle purchases. Based on history, Boyd determines that warranty repairs are equal to approximately 2% of sales. During the month, Boyd sales total $20,000. Boyd will record Warranty Expense in the amount of ______ for the month
$400 20,000/2%
Victor's Vacuum Sales Co. sells high quality vacuums and provides a one-year warranty on all new sales. Based on history, Victor anticipates that 3% of vacuums will be returned at a cost of $30 per vacuum. During the month, Victor sold 100 vacuums for a total of $35,000. At the end of the month, Victor will record _______ in Warranty Expense
$90 100 x .03 x $30 = $90
On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest note. On April 8, Lee Co. will pay National Bank a total of $101,500. Principal on the note totals $____
100000
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 $______
15000
Trighton's Trailer Co. sells trailers and provides a one-year warranty on all new trailer sales. Based on history, Trighton anticipates that 2% of trailers will be returned and will have a warranty cost of $100 per trailer. During the month, Victor sold 300 trailers for a total of $255,000. At the end of the month, Trighton will record $________ in warranty expense.
600 300*2%*100
________ are amounts owed to suppliers for products or services purchased on credit.
Accounts payable
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 Interest is computed for 120 days. $1,000 x .06 x (120/360) = $20. Cash will be credited for $1,000 + 20. Notes payable will be debited for $1,000.
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
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
Simar Sales Co. sells and installs kitchen appliances. Simar guarantees parts and labor for one year after installation. Simar would record potential claims in a(n) _______ account.
Estimated Warranty Liability
Leo Calvin is required to have ______ taxes withheld from his pay in order to cover the cost of future retirement, disability, survivorship and medical benefits
FICA
The Federal Insurance Contributions Act 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
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
Which of the following situations is not a contingent liability?
Future natural disaster
_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes
Gross pay
______ is the difference between the amount borrowed and the amount repaid.
Interest
Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals ________ pay.
Net or take home pay
Which of the following items is not a payroll deduction?
Net pay
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
Which of the following liabilities could be a multi-period known liability?
Notes Payable Unearned Subscription Revenues
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 Notes Payable is debited for the original amount of $10,000. The interest is recorded separately in the Interest Revenue account Cash will be credited for $10,800.
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 ______
Payable; $1,000
Which of the following items are considered employee benefits?
Pension plans Medical insurance
State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as (use acronym)
SUTA
SUTA (State Unemployment Tax Act)
SUTA (State Unemployment Tax Act)
Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?
Sales tax payable
Amounts received in advance from customers for future products or services are typically recorded in a liability account called _______
Unearned Revenues
Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?
Unemployment
Abby Co. allows each employee two weeks of paid time off during each calendar year. Since employees are working for 50 weeks, rather than 52 weeks, Abby must accrue the paid time off during the 50 weeks that the employees work. The year-end adjusting entry is recorded as a credit to the ________ account.
Vacation Benefits Payable
A liability created by buying goods or services on credit is typically recorded to ________ ________
account payable
Employee ________ are perks that are provided in addition to salaries and wages, such as all or part of medical, dental, life and disability insurance.
benefits
A ___________ is when an employer provides employees with a percentage of the net income earned during the year.
bonus plan
Angela Bennett is an employee of Marks Co. This past year, Angela received 1% of Marks net income, in addition to her annual salary. This added benefit is called a:
bonus plan
When a company guarantees the payment of debt owed by a supplier, customer or another company, the guarantor usually discloses the guarantee as a ____ liability.
contingent
Amounts withheld from employee's earnings for employee income tax is considered a _____ by the employer until the government is paid.
current liability