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Exam 9: Current Liabilities

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Question 1

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If Jefferson Company paid a bonus equal to 8% of net income after bonuses and the total bonus distributed was $420,000, how much was net income for the year?

A) $5,250,000
B) $5,670,000
C) $6,250,000
D) $4,320,000
E) $4,875,000

F) B) and E)
G) All of the above

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B

Question 2

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Times interest earned ratio is computed by dividing _______________ by interest expense.

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Income bef...

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Question 3

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

On June 1, 2010, Martin Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable. a. What is the total amount of interest to be paid on this note? b. Prepare Martin Company's general journal entry to record the issuance of the note payable c. Prepare Martin Company's general journal entry to record the payment of the note on September 29, 2010.

Gross pay is also called take-home pay.

The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.

An employee earned $3,450 for the current period. Calculate the total and individual amounts to be withheld for social security (6.2%), Medicare (1.45%) and federal income tax (15%) assuming the entire employee's pay is subject to FICA taxes.

Identify the types of payroll records prepared for each pay period and each employee.

Home Depot had income before interest expense and income taxes of $5,909 million and interest expense of $37 million. Calculate Home Depot's times interest earned ratio.

A contingent liability is a potential obligation that depends on a future event arising from a future transaction or event.

Income tax liabilities are the same whether calculated by tax accounting methods or by financial accounting methods.

Vacation benefits are a form of estimated liabilities for an employer.

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

Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay.

Unearned revenue is another name for sales.

If Jefferson Company paid a bonus equal to 6.5% of net income after bonuses and the total bonus distributed was $560,000, how much was net income for the year?

A company's employees had the following earnings records at the close of the current payroll period: $\begin{array} { | l | r | r | } \hline \text { Employees } & \begin{array} { r } \text { Earnings through } \\\text { Prior Pay Period }\end{array} & \begin{array} { r } \text { Earnings this Pay } \\\text { Period }\end{array} \\\hline \text { D. Adams } & \$ 11,300 & \$ 3,900 \\\hline \text { J. Hess } & 6,100 & 2,500 \\\hline \text { R. Lui } & 9,500 & 3,100 \\\hline \text { T. Morales } & 4,800 & 1,400 \\\hline \text { L. Vang } & 10,000 & 3,000 \\\hline\end{array}$

Explain how to calculate times interest earned and explain how it is used to analyze a company.

A single liability can be divided between current and noncurrent liabilities.

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