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Exam 9: Accounting for Current Liabilities and Payroll

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Question 31

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During Year 1, its first year of operations, Benitez Company reported sales of $800,000. At the end of Year 1, the company estimated its warranty obligation at 3% of sales. During Year 1, the company paid $13,000 cash to settle warranty claims. Which of the following statements is true?

A) Warranty expenses would decrease net earnings by $24,000 in Year 1.
B) Cash decreased by $13,000 as a result of the accounting events associated with warranties in Year 1.
C) The warranties payable account has a balance of $11,000 at the end of Year 1.
D) All of these answer choices are correct.

E) A) and B)
F) B) and C)

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Question 32

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On September 1, Year 1, Wiggins Company issued a $66,000 note payable that had a one-year term and an annual interest rate of 8%. What amount of interest expense will be recognized on the income statement for Year 1 and for Year 2, respectively?

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$1,760 and $3,520
Year 1 (Sept...

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Question 33

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Greer Company pays Jamal Perry a salary of $3,000 per week. How much FICA tax must Greer pay with regards to this employee (including both the employee and employer portions) ? (Assume a Social Security rate of 6 percent on the first $110,000 of income and a Medicare rate of 1.5 percent on all earnings.)

Issuing a note payable is a(n) :

Taylor Tools has sales of $400,000 in Year 1. Taylor warrants its products and estimates warranty expense to be 4% of sales. Which of the following shows how the year-end adjusting entry would affect the company's assets, liabilities, and cash flow from operating activities?

Which of the following describes the effect of remitting the sales tax to the tax authority?

Wythe Company received proceeds of $141,000 from issuing a $150,000 face value discount note to Centennial Bank. The note had a one-year term to maturity. Required:a)What discount rate did the bank use?

Which of the following is not an item deducted from salary expense to arrive at net pay?

Vogel Company purchased $8,000 of equipment by making a $500 down payment and issuing a note for the remainder. As a result of this event, assets increased by $8,000.

Seattle Company issued a $90,000 face value discount note payable to First Federal Bank on September 1, Year 1. The note had a 4% discount rate and a one-year term. What is the effect of the accrual of interest expense on the financial statements?

How is the current ratio calculated?

Wilson Company earned $4,000 of cash sales. Sales tax is 6%. Which of the following shows how this event would affect the company's financial statements (ignore the effects of cost of goods sold) ?

If a company pays cash to settle a customer's warranty claim, what is the effect on the accounting equation?

What is the current ratio used to evaluate?

Seattle Company issued a $90,000 face value discount note payable to First Federal Bank on September 1, Year 1. The note had a 4% discount rate and a one-year term. What is the carrying value of the liability appearing on the December 31, Year 1 balance sheet?

Mr. Ortega earns a monthly salary of $4,000. Based on Mr. Ortega's Form W-4, the tax tables require withholding $450 per month for income taxes. Mr. Ortega has authorized his employer to deduct $190 per month for medical insurance and $15 per month for a charitable contribution to the Humane Society. Assume a FICA tax rate of 6%, a Medicare tax rate of 1.5%, and an Unemployment tax rate of 6% on the first $7,000 of income. Which of the following shows how recognizing the accrued payroll tax expense would affect the employer's financial statements?

What type of account is Discount on Notes Payable?

Which of the following terms describes the ability to generate short-term cash flows?

On December 31, Colfax Company recognized accrued interest expense in the amount of $1,500. The interest expense was related to a discount note that Colfax had issued earlier in the year.

Under what conditions should a pending lawsuit be recognized in a company's financial statements? Under what conditions should the lawsuit be disclosed in the notes to the financial statements?