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Exam 9: Accounting for Current Liabilities

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Question 31

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The payroll records of a company provided the following data for the currently weekly pay period ended March 7: Assume that the Social Security portion of the FICA taxes is 6.2% on the first $106,800 and the Medicare portion is 1.45% of all wages paid to each employee for this pay period. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Calculate the net pay for each employee.

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Question 32

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

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B) False

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Question 33

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Which of the following is a true statement regarding the treatment of accounts payable, sales tax payable, and unearned revenues?

A high value for the times interest earned ratio means that a company is of high risk to the borrower.

Promissory notes are nonnegotiable, which means they cannot be transferred from party to party.

Employees earn vacation pay at the rate of one day per month. During July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense for the month of July?

A company's payroll information for the month of May follows: $\begin{array}{|l|r|}\hline \text { Administrative salaries } & \$ 2,000 \\\hline \text { Sales salaries } & 3,500 \\\hline \text { Shop wages } & 4,000 \\\hline \text { FICA taxes withheld } & 700 \\\hline \text { Federal incometaxes withheld } & 1,300 \\\hline \text { Medical insurance premiums withheld } & 415 \\\hline \text { Union dues withheld } & 205 \\\hline\end{array}$ On May 31 the company issued Check No. 335 payable to the Payroll Bank Account for the May payroll. It issued payroll checks to the employees after depositing the check. (1) Prepare the journal entry to record (accrue) the employer's payroll for May. (2) Prepare the journal entry to pay for the May payroll. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. The wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record the employer's payroll taxes.

The rate for FICA Social Security is 6.2% and the rate for FICA Medicare is 1.45%. Calculate the total amount of FICA withholding for an employee whose pay is $2,400 and is entirely subject to these FICA taxes.

Employers are required to pay state and federal payroll taxes.

Karen Cooper, the founder of SmartIT Staffing, realized that effectively managing payroll was crucial to the success of her business. If an employee of the company earns $50,500 per year, SmartIT Staffing's total FICA payroll tax for this employee is:

Unearned revenues are amounts received _________from______ for future products or services.

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

A corporation has a $42,000 credit balance in the Income Tax Payable account. Period-end information shows that the actual liability is $50,000. The company should record an entry to debit Income Tax Expense for $8,000 and credit Income Taxes Payable for $8,000.

Vacation benefits are a type of _______________ liability.

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

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.

Employer payroll taxes are an added employee _______________ beyond the wages and salaries earned by the employees.

An employee earnings report:

An employee earned $47,000 during the year working for an employer. The FICA tax for social security is 6.2%, and the FICA tax for Medicare is 1.45%. The employee's share of FICA taxes is:

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.