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Exam 11: Current Liabilities and Payroll

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Question 61

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The times-interest-earned ratios of four companies are given below: Which of the above companies has the highest debt-paying ability?

A) Forge Corp.
B) Fellow, Inc.
C) Stacy Corp.
D) Bennett, Inc.

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Question 62

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A contingency was evaluated at year-end. Management felt it was probable that this would become an actual liability and the amount could be reasonably estimated. If this is reported on the balance sheet, it could be considered a violation of generally accepted accounting principles.

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Question 63

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Which of the following would be included in the journal entry to record the payment of sales tax payable?

Which of the following accounts is debited when employees take paid vacation?

The journal entry to record the employer's payroll tax expense will include a debit to Employee Income Taxes Payable.

Cambridge Sales, Inc. has gross salaries and wages for March of $45,000. Provide the journal entry to record salaries and wages expense and payroll withholdings. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.) Salaries and wages to date are under the OASDI limit. Assume no federal or state income taxes are due.

________ is a pay amount stated at an hourly rate.

What is a contingent liability? Provide two examples of contingencies.

On July 1, 2017, Ferrero, Inc. purchased merchandise inventory for $350,000 by signing a note payable. The note is for 6 months and bears interest at a rate of 8%. Prepare the journal entry for this transaction, using a perpetual inventory system.

Which of the following correctly describes the accounting treatment for interest payable?

Which of the following is paid by the employer only?

FICA tax is a tax that is paid both by the employer and the employee.

Main Street Restaurant incurred salaries expense of $60,000 for 2016. The payroll expense includes employer FICA tax, in addition to state unemployment tax and federal unemployment tax. Of the total salaries, $17,000 is subject to unemployment tax. Also, the company provides the following benefits for employees: health insurance (cost to the company, $2,500), life insurance (cost to the company, $700), and retirement benefits (cost to the company, 10% of salaries expense). Journalize Main Street's expenses for employee benefits and for payroll taxes. Explanations are not required.

Employer FICA is paid by the employer and recorded as a payroll tax expense.

Harrison, an employee of Saft Associates, 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. He is also subject to federal income tax at a rate of 18%. Harrison has a deduction of $320 for health insurance and $80 for United Way. Which of the following is included in the entry to record the disbursement of his net pay?

When a company co-signs a note payable for another entity, a current liability must be recorded.

Leroy, an employee of Double Time, 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. He is also subject to federal income tax at a rate of 18%. Provide the journal entry to record salaries expense and payroll withholdings. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

Medicare is a required column in a payroll register.

Kevin, an employee of Sunbeam, Inc., has gross salary for May of $8,000. 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 20%. Which of the following is a part of the journal entry to record the disbursement of his net pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

The employee federal and state income tax and Social Security tax are optional payroll deductions.