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Exam 9: Accounting for Current Liabilities

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Question 101

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Athena Company provides employee health insurance that costs $5,000 per month.In addition,the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a retirement program.The entry to record the accrued benefits for the month would include a:

A) Debit to Medical Insurance Payable $5,000.
B) Debit to Employee Retirement Program Payable $6,000.
C) Debit to Employee Benefits Expense $11,000.
D) Credit to Employee Benefits Expense $11,000.
E) Debit to Payroll Taxes Expense $11,000.

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Question 102

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A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000.Its times interest earned ratio is 2.5.

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Question 103

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During June,Vixen Company sells $850,000 in merchandise that has a one year warranty.Experience shows that warranty expenses average about 3% of the selling price.Customers returned $14,000 of merchandise for warranty replacement during the month.The entry to settle the customer warranties is:

The Wage and Tax Statement given to each employee annually is:

Uncertainties from the development of future competing products are not contingent liabilities.

A corporation has a $40,000 credit balance in the Income Tax Payable account.Period end information shows that the actual liability is $47,000.The company should record an entry to debit Income Tax Expense for $7,000 and credit Income Taxes Payable for $7,000.

Contingent liabilities must be recorded if:

An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $128,400.The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%.The employee's annual FICA taxes amount is:

The more ________ allowances an employee claims,the less federal income tax the employer will deduct from pay.

General Co.entered into the following transactions involving short-term notes payable. On May 14,General purchased $40,000 merchandise from Steller Co.,terms are n/30.General uses the perpetual inventory system.On May 29,General replaced the May 14 account payable with a 60-day,$36,000 note bearing 8% annual along with paying $4,000 in cash.On July 28,General paid the amount due on the note at maturity. Prepare journal entries for all the preceding transactions and events.

A company had interest expense of $5,000,income before interest expense and income taxes of $17,000,and net income of $9,400.The company's times interest earned ratio equals:

A company's income before interest expense and income taxes is $302,400,and its interest expense is $62,000.Calculate the company's times interest earned ratio.

On December 1,Watson Enterprises signed a $24,000,60-day,4% note payable as replacement of an account payable with Erikson Company.What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)

A known obligation of an uncertain amount that can be reasonably estimated is reported as an estimated liability.

A ________ is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle,whichever is longer.

A company borrowed $60,000 by signing a 60-day,5% note payable from its bank.Compute the total cash payment due on the note's maturity date.

A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale.Warranty costs are estimated to be 5% of sales.During the month of July,the company performed warranty work and used $11,000 of parts to perform the warranty work.Sales for July were $450,000. 1.Record the warranty expense for the month of July. 2.Record the costs of the warranty work completed in June. 3.If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31,what is the account balance at July 31?

Portia Grant is an employee who is paid monthly.For the month of January of the current year,she earned a total of $8,260.The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The FUTA tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay.The amount of federal income tax withheld from her earnings was $1,325.17.What is the total amount of taxes withheld from the Portia's earnings? (Round your intermediate calculations to two decimal places.)

Which of the following is not true regarding the unemployment insurance program?

Employees earn vacation pay at a rate of one day per month.The company estimated and must expense $1,500 of accrued vacation benefits for the year.Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits?