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Exam 11: Current Liabilities and Payroll

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Question 71

Multiple Choice

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Elgin Company sells merchandise with a one year warranty. Sales consisted of 2,500 units in 2012 and 2,000 units in 2013. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013 for the 2012 sales. Similarly, 30% of repairs will be made in 2013 and 70% in 2014 for the 2013 sales. In the 2013 income statement, how much of the warranty expense shown will be due to 2012 sales?

A) $7,500
B) $17,500
C) $25,000
D) $0

E) A) and D)
F) All of the above

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Question 72

True/False

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Notes payable may be issued to creditors to satisfy accounts payable created earlier.

A) True
B) False

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Question 73

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Mobile Co. issued a $45,000, 60-day, discounted note to Guarantee Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay:

Payroll taxes are based on the employee's net pay.

Garrett Company sells merchandise with a one year warranty. In 2012, sales consisted of 3,500 units. It is estimated that warranty repairs will average $15 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Garrett should show warranty expense of

Assume that social security taxes are payable at a 6% rate on the first $100,000 of earnings and Medicare taxes are payable at a 1.5% rate with no maximum earnings, and that federal and state unemployment compensation taxes total 4.6% on the first $7,000 of earnings. If an employee, George Jones, earns $2,500 for the current week and Jones' year-to-date earnings before this week were $6,800, what is the total payroll taxes related to the current week?

Martin Services Company provides their employees vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $39,500 for the period. The pension plan requires a contribution to the plan administrator equal to 9% of employee salaries. Salaries were $750,000 during the period. Provide the journal entry for (a.) the vacation pay and (b.) the pension benefit.

An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 7.0% (on earnings up to $100,000), the Medicare tax rate was 1.5%, and the federal income tax to be withheld was $614. Required: (1) Determine the gross pay for the week. (2) Determine the net pay for the week.

Estimating and recording product warranty expense in the period of the sale best follows which of the following accounting concepts?

The employee earnings record would contain which column that the payroll register would probably not contain?

When a borrower receives the face amount of a discounted note less discount, this amount is known as:

Form W-4 is a form authorizing employers to withhold a portion of employee earnings for payment of an employee's federal income taxes.

A defined contribution plan promises employees a fixed annual pension benefit.

An employee receives an hourly rate of $40, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the gross pay for the employee?

Medicare taxes are withheld from an employee's pay only until the employee has earned a specific amount each year.

The proceeds of a discounted note are equal to the face value of the note.

Current liabilities are

The Crafter Company had the following assets and liabilities as of December 31, 2012: Determine the quick ratio for the end of the year (rounded to one decimal point) .

Which of the following is required to be withheld from employee's gross pay?

Federal unemployment compensation tax becomes an employer's liability at the time the employee is paid.