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Exam 9: Accounting for Current Liabilities

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Question 91

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Vacation benefits is an example of a known liability.

A) True
B) False

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Question 92

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Describe contingent liabilities and how to account for and/or report them.

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Contingent liabilities are uncertain obl...

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Question 93

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All of the following statements related to estimated liabilities are true except:

What are known current liabilities? Cite at least two examples of known current liabilities.

The total compensation an employee earns including wages,salaries,commissions,bonuses,and any compensation earned before deductions such as taxes is called ________.

If a company has advance subscription sales totaling $45,000 for the upcoming year,when four quarterly journals will mailed to customers,the receipt of cash would be journalized as:

On November 1,Casey's Snowboards signed a $12,000,90-day,5% note payable to cover a past due account payable. a.What amount of interest expense on this note should Casey's Snowboards report on year-end December 31? b.Prepare Casey's journal entry to record the issuance of the note payable. c.Prepare Casey's adjusting journal entry at the end of the year d.Prepare Casey's journal entry to record the payment of the note on January 30 of the following year.

Times interest earned is computed by dividing income before interest expense and income taxes by ________.

Gross pay is:

________ are amounts owed to suppliers for products or services purchased on credit.

Contingent liabilities are recorded in the accounts if the future event is ________ and the amount owed can be ________.

What are estimated liabilities? Cite at least two examples and explain why they are classified as estimated liabilities.

A company's income before interest expense and income taxes in Year 1 and Year 2 is $225,000 and $250,000,respectively.Its interest expense was $45,000 for both years.Calculate the company's times interest earned ratio,and comment on its level of risk.

All of the following statements regarding liabilities are true except:

Times interest earned is calculated by:

A short-term note payable is a written promise to pay a specified amount on a stated future date within five years or the operating cycle,whichever is more reasonable.

Companies may use a special bank account solely for the purpose of paying employees,by depositing an amount equal to the total employees' net pay into the account each pay period and drawing the employees' payroll checks on the account.This account is a(n) :

An employee earned $4,600 in February working for an employer.Cumulative earnings of the previous pay periods are $4,800.The FICA tax rate for Social Security is 6.2% of the first $128,400 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.What is the amount the employer should record as payroll taxes expense for the month of February?

If the times interest earned ratio:

Santa Barbara Express has 4 sales employees,each of whom earns $5,000 per month and is paid on the last working day of the month.Each employee's wages are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45% on all wages.Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $110 for each employee. a.Prepare the general journal entry to accrue the monthly sales salaries expense at January 31. b.The employer payroll taxes for Santa Barbara Express include FICA taxes,federal unemployment taxes of 0.6% of the first $7,000 paid each employee,and state unemployment taxes of 5.4% of the first $7,000 paid to each employee.Prepare the journal entry to record the employer's payroll taxes at January 31 for Santa Barbara Express.(Assume that none of the employees has reached the unemployment limit of $7,000.)