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Exam 11: Current Liabilities and Payroll Accounting

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Question 21

True/False

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Employers must pay FICA taxes equal in amount to the FICA taxes withheld from their employees.

A) True
B) False

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Question 22

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Match each of the following terms a through j with the appropriate definitions1 through 10.

Premises

Responses

A table of amounts of income tax to be withheld from employees' wages.

Wage bracket withholding table

Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program.

Long-term liability

A number that is used to reduce the amount of federal income tax withheld from an employee's pay.

Net pay

A seller's obligation to repair or replace a product or service that fails to perform as expected within a specified period.

Warranty

Taxes assessed on both employer and employees under the Federal Insurance Contributions Act.These taxes fund Social Security and Medicare.

FICA taxes

Known obligations of an uncertain amount that can be reasonably estimated.

Withholding allowance

Obligations of a company not requiring payment within one year or the operating cycle,whichever is longer.

Estimated liability

Gross pay less all deductions.

Merit rating

A potential obligation that depends on a future event arising from a past transaction.

Contingent liability

A measure that reflects a company's stability in employing workers.

FUTA taxes

Premises

A table of amounts of income tax to be withheld from employees' wages.

Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program.

A number that is used to reduce the amount of federal income tax withheld from an employee's pay.

A seller's obligation to repair or replace a product or service that fails to perform as expected within a specified period.

Taxes assessed on both employer and employees under the Federal Insurance Contributions Act.These taxes fund Social Security and Medicare.

Known obligations of an uncertain amount that can be reasonably estimated.

Obligations of a company not requiring payment within one year or the operating cycle,whichever is longer.

Gross pay less all deductions.

A potential obligation that depends on a future event arising from a past transaction.

A measure that reflects a company's stability in employing workers.

Responses

Wage bracket withholding table

Long-term liability

Net pay

Warranty

FICA taxes

Withholding allowance

Estimated liability

Merit rating

Contingent liability

FUTA taxes

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Correct Answer

Premises

Responses

A table of amounts of income tax to be withheld from employees' wages.

Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program.

A number that is used to reduce the amount of federal income tax withheld from an employee's pay.

A seller's obligation to repair or replace a product or service that fails to perform as expected within a specified period.

Taxes assessed on both employer and employees under the Federal Insurance Contributions Act.These taxes fund Social Security and Medicare.

Known obligations of an uncertain amount that can be reasonably estimated.

Obligations of a company not requiring payment within one year or the operating cycle,whichever is longer.

Gross pay less all deductions.

A potential obligation that depends on a future event arising from a past transaction.

A measure that reflects a company's stability in employing workers.

Premises

A table of amounts of income tax to be withheld from employees' wages.

Payroll taxes on employers assessed by the federal government to support the federal unemployment insurance program.

A number that is used to reduce the amount of federal income tax withheld from an employee's pay.

A seller's obligation to repair or replace a product or service that fails to perform as expected within a specified period.

Taxes assessed on both employer and employees under the Federal Insurance Contributions Act.These taxes fund Social Security and Medicare.

Known obligations of an uncertain amount that can be reasonably estimated.

Obligations of a company not requiring payment within one year or the operating cycle,whichever is longer.

Gross pay less all deductions.

A potential obligation that depends on a future event arising from a past transaction.

A measure that reflects a company's stability in employing workers.

Responses

Question 23

True/False

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Unearned revenues are liabilities.

Starling Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is $12,300).The sales tax law requires Starling to collect 8.25% sales tax on every dollar of merchandise sold.Record the entry for the sale and its applicable sales tax.

Halo Company provides you with following information for two of its employees.The company is subject to the following taxes. Compute amounts for each of these four taxes as applied to each employee's gross earnings for November.

Identify and explain the types of employer payroll taxes.

The matching principle requires that interest expense not be accrued on a note payable until the note is paid,even if the end of an accounting period occurs between the signing of a note payable and its maturity date.

To compute the amount of tax withheld from an employee's pay,employers can use a __________________________ table.

On November 1,Carter Company signed a 120-day,10% note payable,with a face value of $9,000.Carter made the appropriate year-end accrual.What is the journal entry as of March 1 to record the payment of the note assuming no reversing entry was made?

Describe how to account for and report on contingent liabilities.

The times interest earned ratio reflects:

The amount of federal income taxes withheld from an employee's paycheck is determined by:

A lawsuit is an example of a contingent liability for the defendant.

All of the following statements regarding liabilities are true except:

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 6% of sales.During the month of June,the company performed warranty work and used $12,000 of parts to perform the warranty work.Sales for June were $450,000. 1.Record the warranty expense for the month of June. 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 June 30?

A company has 2 employees.The company's total salaries for the month of January were $8,000.The federal income tax rate for both employees is 15%.The FICA-social security tax rate is 6.2% and the FICA-Medicare tax rate is 1.45%.Calculate the amount of employee taxes withheld and prepare the company's journal entry to record the January payroll assuming these were the only deductions.

A ___________________ is a potential obligation that depends on a future event arising from a past transaction or event.

A company can have a liability even if the amount of the obligation is unknown.

Phil Phoenix is paid on a monthly basis.For the month of January of the current year,he earned a total of $8,288.FICA tax for Social Security is 6.2% and the FICA tax for Medicare is 1.45%.The FUTA tax rate is 0.8%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The amount of Federal Income Tax withheld from his earnings was $1,375.17.What is the amount of the employer's payroll taxes expenses for this employee?

Federal depository banks are authorized to accept deposits of amounts payable to the federal government.