Chapter 11-LearnSmart Bonus

Amounts received in advance from customers for future products or services are typically recorded in a liability account called _______.

1. Unearned Revenues

True or false: A liability can be recorded, even if there is uncertainty of when to pay, how much to pay, or whom to pay.

1. True

Sheldon has a $15,000 liability for a machine that has an interest rate of 10%. The interest expense for one year is?

1. 1,500 2. $15,000 x .10 = $1,500

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 $

1. 100,000

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 $

1. 1000

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 $

1. 15000

Damien Co. has $10,000 of unearned revenues on its balance sheet. Damien expects that it will earn $8,000 of these revenues in the upcoming twelve months. How much will be recorded in Long-Term Liabilities?

1. 2,000 2. $2,000. $8,000 is reported in the current liabilities section.

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

1. 200 2. $15,000 x .08 x (60/360) = $200.

On December 1, Hansen Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen will record an adjusting entry by debiting interest expense in the amount of ______.

1. 500 2. $100,000x.06x(30/360)=$500.

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 $

1. 650 2. 1000-350=650

A liability created by buying goods or services on credit is typically recorded to

1. Accounts 2. Payable

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?

1. Accounts Payable

Tire Co. collected $2,000 in sales tax during the month of October. The entry that shows the remittance of this sales tax to the state government in November would include a credit to the_____account.

1. Cash

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 ______.

1. Cash 2. 1,020 3. Interest is computed for 120 days. $1,000 x .06 x (120/360) = $20. Cash will be credited for $1,000 + 20.

Anchor Co. has accrued payroll expense of $1,300 which includes employee withholdings of $400. On payday, Anchor will record the distribution of paychecks with a credit to______in the amount of $______.

1. Cash 2. 900

Fortiz Co. receives $85 for the sale of merchandise with a sales price of $80 and sales tax of $5. The entry to record the $5 sales tax would require which of the following?

1. Credit to Sales Tax Payable

A_____liability is a liability due within one year or the company's operating cycle, whichever is longer.

1. Current

On December 1, Hansen Co. borrowed $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen recorded an adjusting entry to record interest expense of $500. On March 1, the due date of the note, Hansen will record interest expense as a (debit/credit) ________ in the amount of ______.

1. Debit 2. 1000 3. 90 day note. 30 days of interest was recorded at December 31. 60 days of interest is recorded on 3/1. $100,000 x .06 x (60/360) = $1,000. Debit interest expense for $1,000.

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 _______.

1. Debit 2. 75$

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? (Check all that apply.)

1. Debit to Accounts Payable 2. Credit to Notes Payable

John Grey owns Grey's Snow Plowing. In October, Grey's collects $12,000 cash for 6 commercial accounts for which he will provide snowplowing for the entire season. To record this transaction, Grey will enter which of the following entries? (Check all that apply.)

1. Debit to Cash 2. Credit to Unearned Plowing Revenue

Zilo Co. has accrued employee salary expense of $1,000 which includes employee withholdings that total $300. On payday, Zilo will record the payment with which of the following entries? (Check all that apply.)

1. Debit to Salaries Payable for $700. 2. Credit to Cash for $700.

Which of the following is a true statement concerning the employer FICA taxes:

1. The employer must pay FICA tax in an amount equal to that paid by the employee.

Mary's Magazine Sales sells popular magazine subscriptions. During January, Mary collected $1,200 from various customers to provide magazines over the next 12 months. At the end of February, Mary would make an adjusting entry to record one month of magazines subscriptions earned. This transaction would include which of the following entries? (Check all that apply.)

1. Debit to Unearned Subscriptions 2. Credit to Subscriptions Earned

Unemployment taxes are examples of (employee/employer)______taxes.

1. Employeer

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.

1. 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.

1. FICA

Federal government taxes implemented on employers in order to provide unemployment benefits to qualified workers are known as (use acronym)_________.

1. FUTA

The federal government requires that employers are taxed on employee wages to provide unemployment benefits to qualified workers. These taxes are known as:

1. FUTA

_______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.

1. Gross pay

_______is the difference between the amount borrowed and the amount repaid.

1. Interest

On November 1, Lance Co. borrows $90,000 cash from First Bank by signing a 90-day, 5% interest-bearing note. On December 31, Lance will record an adjusting entry by crediting _______ in the amount of ______.

1. Interest Payable 2. $750

On December 1, Campbell Co. borrowed $10,000 cash from Second Bank by signing a 90-day, 6% interest-bearing note. On December 31, Campbell accrued interest expense of $50. Campbell does not use reversing entries. On March 1, the due date of the note, Campbell will record the payment with debit entries to which of the following accounts? (Check all that apply.)

1. Interest Payable for $50 2. Interest Expense for $100 3. Notes Payable for $10,000

A measurable obligation arising from agreements, contracts, or laws is called a______ liability.

1. Known

Bina Consulting Co. collected $500 from a customer in advance to provide consulting fees for the next two months. The $500 would be recorded with a debit to Cash and a credit to the Unearned Revenues, which is a(n) (asset/liability/equity)__________account.

1. 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.

1. Liability

Unearned subscription revenues that extends over multiple periods is an example of a _______ known liability.

1. Multi-Period

Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals_______pay

1. Net

Which of the following items is not a payroll deduction?

1. 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?

1. Notes Payable

Which of the following liabilities could be a multi-period known liability? (Check all that apply.)

1. Notes Payable 2. Unearned Subscription Revenues

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 ______.

1. Notes Payable; $1,000

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 _______.

1. Notes Payable; $10,000

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 _______.

1. Notes Payable; $10,000

Employer taxes, such as SUTA, are recorded with a debit to Employer Tax Expense and a credit to SUTA (expense/payable)_____until payments are submitted to the state.

1. Payable

KRS Co. sells merchandise for $120 and collects sales tax of $12. KRS would record the $12 sales tax with a credit to the Sales Tax______________account

1. Payable

Harvey Co. has current period employee salary expenses of $800. Employee withholdings total $300. The entry to accrue current period payroll will include a credit to Salaries_____in the amount of $

1. Payable 2. 500

The journal entry to record employer tax accruals includes a debit to:

1. Payroll Tax Expense

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as (use acronym)

1. SUTA

State unemployment taxes imposed on employers in order to provide unemployment benefits to qualified workers are known as:

1. SUTA

Stalz Co. collected $2,500 in sales tax from customers during the month of February. In March, Stallon sends the $2,500 to the state government. The payment to the state would be recorded with a debit to which account?

1. Sales Tax Payable

Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?

1. Sales tax payable

A company sells 12-month popular magazine subscriptions. During the month of May, the company sells $12,000 in magazines, which will start in June. The adjusting entry to record the $1,000 of subscriptions earned in June will include a debit to which account?

1. Unearned Subscription Revenue

A company sells 12-month subscriptions to popular magazines. During the month of May, the company sells $10,000 in magazines, which will start in June. The journal entry to record the sales not yet earned will include a credit to which account?

1. Unearned Subscription Revenue

Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?

1. Unemployment

Which of the following items would be considered a current liability? (Check all that apply.)

1. Wages payable 2. Accounts payable, terms n/30 3. Notes payable, due in 3 months

Teva Co. has current period employee salary expense of $2,000. Employee withholdings total $850. To accrue the current period payroll, Salaries Payable will be (debited/credited) __________ in the amount of ___________.

1. credited 2. $1,150

Amounts withheld from employee's earnings for employee income tax is considered a _____ by the employer until the government is paid.

1. current liability

Unemployment taxes are examples of (employee/employer)_______ taxes.

1. employer

When recording a liability, a company may not know: (Check all that apply.)

1. how much to pay. 2. whom to pay. 3. whom to pay.

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.

1. 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.

1. 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.

1. liability

Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? (Check all that apply.)

1. long-term liabilities 2. current liabilities

Obligations due after one year or one operating cycle, whichever is longer, are considered to be:

1. long-term liabilities.

Ace Company borrowed $10,000 from Fair Rates Bank by signing a two-year note payable. Ace's operating cycle is 14 months. This note would be considered a ______ on the balance sheet.

1. long-term liability

Employee income tax depends on: (Check all that apply).

1. number of employee withholding allowances 2. employee's income

Amounts withheld from an employee's gross pay are called:

1. 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.

1. principal

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 __________.

1. 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.

1. short-term note payable

Examples of employee voluntary deductions may include all of the following except:

1. unemployment taxes.

Employers often withhold 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.

1. voluntary deductions

A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except:

1. warranties.

FICA tax includes both Social Security tax and _____.

1.Medicare tax