CH8 Learnsmart
A company purchases inventory or supplies and promises to pay within 30 to 45 days. No formal agreement is signed. This transaction is recorded as a(n)
accounts payable.
Which of the following are not required to be deducted from an employee's paycheck?
Charitable contributions State unemployment tax (SUTA) Federal unemployment tax (FUTA)
Which of the following payroll-related taxes must the employer pay by law?
Federal Insurance Contributions Act amounts Unemployment taxes
Which of the following must employers by law withhold from their employees' pay?
Federal income taxes
Liabilities are classified as
current and long-term.
Deferred revenues and sales tax payable typically are reported as________ liabilities.
current or short-term
Obtaining a note payable for cash results in a(n) ______.
increase in assets and an increase in liabilities
The term referring to a company having a sufficient amount of cash to pay its current debts is
liquidity.
Payroll withholdings are
the items subtracted from an employee's gross pay to arrive at take-home pay.
Identify a primary reason why financial statement users assess a company's liquidity.
Lack of liquidity can lead to the bankruptcy of a company that otherwise may have been successful.
Deferred revenue is classified as
Liability
Which of these payroll taxes are paid by the employer and the employee? (Check all that apply.)
Social Security Medicare
Common current liabilities include:
The current portion of long-term debt Sales tax payable Deferred revenues
Poppy Corporation has a current ratio of 2.0 and a quick ratio of 1.6. Poppy purchases additional inventory for cash. Which of the following occurs?
The current ratio will remain the same.
Which of the following are examples of fringe benefits provided by employers to their employees?
contributions to retirement and other savings accounts payment of insurance premiums on employees behalf reduced or no-cost company-provided services
A probable future sacrifice of economic benefits arising from present obligations of an entity to transfer assets or provide services as a result of past transactions or events is a(n)
liability
Amounts that are subtracted from an employee's gross pay are referred to as
payroll withholdings.
Payroll withholdings ______. (Select all that apply.)
decrease the amount of cash an employee receives are amounts subtracted from employees' gross earnings to determine their net pay
__________refers to a company's cash position and overall ability to obtain cash in the normal course of business. (Enter one word per blank)
Liquidity
Notes payable is classified as a liability that has which of the following effects?
Creates interest expense on the income statement
True or false: Your employer is allowed to keep the amounts withheld from your gross pay.
False
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. (Enter one word per blank)
Liability
Additional benefits such as health insurance, retirement benefits, or life insurance that are paid by the employer are called____________ benefits.
fringe or employee
A(n)______________payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash. (Enter only one word.)
accounts
Deferred revenue should be classified as a(n)__________ on the balance sheet. (Enter one word per blank)
: liability or liabilities
What will be the effect of paying off an accounts payable balance on the current and the acid-test ratios? Assume that both ratios are greater than 1.
Acid-test ratio will increase Current ratio will increase
Which of these payroll taxes are paid only by the employer? (Check all that apply.)
SUTA FUTA
What are the two classifications for liabilities?
Long-term Current
By law, an employer is required to pay which of the following amounts as payroll taxes?
Medicare contributions Federal unemployment tax Social Security contributions