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Exam 9: Current Liabilities

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Question 61

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Companies with many employees often use a special ____________________ account to pay employees.

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Question 62

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Experience shows that when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods, the default rate on liabilities increases sharply.

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Question 63

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Maryland Company offers a bonus plan to its employees equal to 3% of net income. Maryland's net income is expected to be $960,000. The amount of the employee bonus expense is estimated to be

Required employee payroll deductions include income taxes, Social Security taxes, pension and health contributions, union dues and charitable giving.

__________ are obligations due within one year or the company's operating cycle, whichever is longer.

A company sells computers at a selling price of $1,800 each. Each computer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all computers sold will be returned under the warranty with an average cost of $150 each. During November, the company sold 30,000 computers and 400 computers were serviced under the warranty during November at a total cost of $55,000. The balance in the Estimated Warranty Liability account at November 1 was $29,000. What is the company's warranty expense for the month of November?

On October 10, 2010, Printfast Company sells a commercial printer for $2,350 with a one year warranty that covers parts. Warranty expense is project to be 4% of sales. On February 28, 2011, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty expense at the end of 2011?

A short-term note payable:

A company's income before interest expense and income taxes is $302,400 and its interest expense is $72,000. Calculate the company's times interest earned ratio.

____________________________ are banks authorized to accept deposits of amounts payable to the federal government, including amounts due for payroll taxes.

Cooper Company borrows $785,100 cash on November 1, 2010, by signing a 120-day, 8% note. What is the total amount of interest expense that Cooper will recognize in 2010?

Gross pay is:

A company's payroll for the week ended May 15 and included earned salaries of $20,000. All of that week's pay is subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45%. In addition, the company withholds the following amounts for this weekly pay period: $900 for medical insurance, $3,400 for federal income taxes and $180 for union dues. a. Prepare the general journal entry to accrue the payroll b. The company is subject to state unemployment taxes at the rate of 2% and federal unemployment taxes at the rate of 0.8%. By May 15, some employees had earned over $7,000, so only $9,000 of the $20,000 weekly gross pay was subject to unemployment tax. Prepare the general journal entry to accrue the employer's payroll tax expense.

A company had income before interest expense and income taxes of $176,000 and its interest expense is $55,000. Calculate the company's times interest earned ratio.

The current FUTA tax rate is 0.8% and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned $8,900. What is the amount of total unemployment taxes the employer must pay on this employee's wages?

Mission Company has three employees: $\begin{array} { c c c } & \text { Gross Pay through July } & \text { Gross Pay for August } \\\text { Smith } & \$ 3,200 & \$ 1,000 \\\text { Cain } & 25,800 & 3,500 \\\text { Clark } & 94,600 & 13,100\end{array}$ $\begin{array} { l c l } \text { Tax } & \text { Rate } & { \text { Applied To } } \\\text { FICA-Social Security } & 6.20 \% & \text { First } \$ 106,800 \\\text { FICA-Medicare } & 1.45 & \text { All gross pay } \\\text { FUTA } & .80 & \text { First } \$ 7,000 \\\text { SUTA } & 5.40 & \text { First } \$ 7,000\end{array}$ What is Mission Company's amount for payroll taxes for Smith?

The Federal Insurance Contributions Act (FICA) requires that each employer file a:

If Steve Company paid $820,000 in bonuses, and net income before bonus was $3,850,000, what was the bonus percentage offered to the employees during 2010?

A table that shows the amount of federal income tax to be withheld from an employee's pay is the:

A liability does not exist if there is any uncertainty about whom to pay, when to pay or how much to pay.