Read & Interact: Wild: Chapter 9

Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio.

10

The form an employer files and submits to the IRS to report FICA tax information is Form _.

Blank 1: 941

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

Blank 1: accounts Blank 2: payable

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.

Blank 1: contingent

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

Blank 1: employer

A known obligation of an uncertain amount that can be reasonably estimated is called a(n) liability.

Blank 1: estimated

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

Blank 1: 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 events.

Blank 1: liability

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.

Blank 1: probable

A contingent liability can be ignored (not recorded in the financial statements or notes to the financial statements) if it is considered as (probable/reasonably possible/remote) possibility.

Blank 1: remote

A is a seller's obligation to replace or fix a product (or service) that fails to perform as expected within a specified period.

Blank 1: warranty

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? (Check all that apply.)

Debit to Cash Credit to Unearned Paving Fees

Star Co. reported $10,000 of net income during the month of January. Star estimates that it owes income taxes of $2,000 for the month. The month-end adjusting entry to record this estimate would require which of the following entries? (Check all that apply.)

Debit to Income Tax Expense Credit to Income Taxes Payable

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

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

Each month, a corporation will accrue income taxes based on the month's earnings. To record the income tax for the month, the company will debit the Income Tax Expense account and credit the ________ account.

Income Taxes Payable

Which of the following items are considered employee benefits? (Check all that apply.)

Medical insurance Pension plans

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

Notes Payable Unearned Subscription Revenues

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

Sales tax payable

Which of the following situations would not be required to be recorded in the financial statements or reported as a note to the financial statements?

The liability is remote and estimated to be $30,000.

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

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:

bond

A ___________ is when an employer provides employees with a percentage of the company's net income earned during the year.

bonus plan

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

current 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

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

number of employee withholding allowances employee's income

A potential legal claim is recorded

only if payment for damages is probable and the amount can be reasonably estimated.

Which of the following represent reasonably possible contingent liabilities? Select all that apply.

potential legal claims debt guarantees

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

The ratio of income before interest expense (and any income taxes) divided by interest expense reflects the risk of a company not being able to pay fixed expenses if sales decline is called the ____________ ratio.

times interest earned

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

warranties.

Form 941, which employers use to report FICA and income tax information to the IRS is due:

within one month after the end of each calendar quarter.

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?

Accounts Payable

Paid absences offered to employees are called _ benefits.

Blank 1: vacation

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

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(n) ______ liability is a known obligation that is of an uncertain amount but that can be reasonably estimated.

estimated