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Exam 11: Current Liabilities and Payroll

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Question 1

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The current period earnings column of the payroll register only includes regular and overtime earnings.

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Question 2

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Joe, an employee of Time Travel, Inc., has gross salary for March of $5,200. The entire amount is under the OASDI limit of $117,000, and thus subject to FICA. He is also subject to federal income tax at a rate of 21%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The journal entry to record employer's payroll tax expense includes a credit to FICA-Medicare Taxes Payable for $150.80. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

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Question 3

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________ is pay stated as a percentage of a sale amount.

A corporation has been sued for product failures allegedly resulting in injuries to the individuals bringing the lawsuit. The company's lawyers believe it is more than remote, but less than probable, that the lawsuit will result in an actual liability. Which of the following actions should be taken by the company's management?

Bespoke, Inc. offers warranties on all their bikes. They estimate warranty expense at 4.5% of sales. At the beginning of 2017, the Estimated Warranty Payable account had a credit balance of $1,200. During the year, Bespoke had $305,000 in sales and had to pay out $5,700 in warranty payments. At the end of the year, what is the closing balance in the Estimated Warranty Payable accounts?

On October 1, 2017, Carlos, Inc. borrowed $225,000 by signing a nine-month, 8% note payable. Interest was accrued on December 31, 2017. Prepare the journal entry July, 1, 2017, the date the note was paid.

Which of the following is a control procedure to prevent a dishonest employee from cashing a paycheck that was written to a fictitious person?

Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?

Gross pay is the total amount of compensation earned by an employee after the deductions are made.

A contingency was evaluated at year-end and considered to have a remote possibility of becoming an actual liability. If this was not reported on the balance sheet or in the notes to the financial statements, what effect would this have on the financial reporting of the company?

Katie Pereira and Ferro Schwartz are employees of Free Star, Inc. In February 2017, Katie's gross pay was $8,500, and Ferro's gross pay was $10,900. All earnings are subject to FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Which of the following would be included in the entry to record the salaries expense for February?

Rosewood, Inc. recently signed a $356,000, six-month note on August 22, 2017. The interest rate is 12.5%. How much interest will be due at maturity?

Net pay is the total amount of compensation that an employee takes home after the deductions are made.

The expense for warranty costs is recorded in the period ________.

Jason's gross pay for the week is $1,300. His yearly pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is 6% and that Jason's year-to-date pay has not yet exceeded the $7,000 cap. His yearly pay is under the limit for OASDI. What is the total amount of payroll taxes that his employer must record as payroll tax expenses? (Do not round your intermediate calculations. Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

William Baker works for Jones Restaurant Supply all year and earns a monthly salary of $8,000. There is no overtime pay and Jones withholds income taxes at 12% of gross pay. Jones deducts $200 monthly fo the co-payment of the health insurance premium. Employees are paid on the fifth day of each month. As of October, 31, William had $80,000 of cumulative earnings. Journalize the accrual of salaries expense on October 31. Omit explanations.

Grant, an employee of Fitzgerald, Inc., has gross salary for March of $4,000. The entire amount is under the OASDI limit of $117,000, and thus subject to FICA. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. Which of the following is a part of the journal entry to record the employer's payroll taxes?

Amounts owed for products or services purchased on account are accounts receivable.

Mayfield, Inc. withholds $720 from Stephen's paycheck for federal income tax. This amount is part of the company's payroll tax expense.

Federal unemployment compensation tax is paid by the employer and is not deducted from an employee's gross earnings.