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Exam 10: Current Liabilities and Payroll

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Question 91

Multiple Choice

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The employee's earnings record would contain which data that the payroll register would probably not contain?

A) deductions
B) payment
C) earnings
D) cumulative earnings

E) A) and D)
F) A) and B)

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Question 92

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Federal unemployment compensation tax becomes an employer's liability at the time the employee is paid.

A) True
B) False

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Question 93

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The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is

The total net pay for a period is determined from the payroll register.

During May, Blast sold 650 portable CD players for $50 each and provided a one-year warranty with each unit. Each CD player cost Blast $25 to produce. If 10% of the goods sold typically need to be replaced over the warranty period, for what amount should Blast debit Product Warranty Expense in May?

Which of the following is the most desirable quick ratio?

Mobile Sales has five sales employees which receive weekly paychecks. Each earns $11.50 per hour and each has worked 40 hours in the pay period. Each employee pays 12% of gross in federal income tax, 3% in state income tax, 6% of gross in social security tax, 1.5% of gross in Medicare tax, and 0.5% in state disability insurance. Journalize the pay period ending January 19 which will be paid to the employees January 26.

Hall Company sells merchandise with a one-year warranty. In the current year, sales consisted of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of

Form W-4 is a form authorizing employers to withhold a portion of employee earnings for payment of an employee's federal income taxes.

Anderson Co. issued a $50,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay

The summary of the payroll for the monthly pay period ending July 15 indicated the following: $\begin{array} { l l } \text { Sales salaries } & \$ 125,000 \\\text { Federal income tax withheld } & 32,300 \\\text { Office salaries } & 35,000 \\\text { Medical insurance withheld } & 7,370 \\\text { Social security tax withheld } & 10,200 \\\text { Medicare tax withheld } & 2,550\end{array}$ Journalize the entries to record a) the payroll and b) the employer's payroll tax expense for the month. The state unemployment tax rate is 3.1%, and the federal unemployment tax rate is 0.8%. Only $25,000 of salaries are subject to unemployment taxes.

A borrower has two alternatives for a loan: a) issue a $480,000, 60-day, 8% note or 2) issue a $480,000, 60-day note that the creditor discounts at 8%. Assume a 360-day year is used for interest calculations.)a) Calculate the amount of the interest expense for each option. b) Determine the proceeds received by the borrower in each situation.

Federal unemployment taxes are paid by the employer and the employee.

The Crafter Company has the following assets and liabilities: $\begin{array} { | l | c | } \hline \text { ASSETS } & \\\hline \text { Cash } & \$ 28,000 \\\hline \text { Accounts receivable } & 15,000 \\\hline \text { Inventory } & 20,000 \\\hline \text { Equipment } & 50,000 \\\hline & \\\hline \text { LIABILITIES } & \\\hline \text { Current portion of long-term debt } & 10,000 \\\hline \text { Accounts payable } & 2,000 \\\hline \text { Long-term debt } & 25,000 \\\hline\end{array}$ Determine the quick ratio rounded to one decimal point) .

On August 1, Batson Company issued a 60-day note with a face amount of $140,000 to Jergens Company for merchandise inventory. Assume a 360-day year is used for interest calculations.) a. Determine the proceeds of the note assuming the note carries an interest rate of 6%. b. Determine the proceeds of the note assuming the note is discounted at 6%.

The following totals for the month of April were taken from the payroll register of Magnum Company: $\begin{array}{ll}\text { Salaries } & \$ 10,000 \\\text { FICA taxes withheld } & 750 \\\text { Income taxes withheld } & 2,000 \\\text { Medical insurance deductions } & 450 \\\text { Unemployment taxes } & 420\end{array}$ The entry to record accrual of employer's payroll taxes would include a

Current liabilities are due

Thomas Martin receives an hourly wage rate of $40, with time and a half for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the gross pay for Martin?

Quick assets include

Estimating and recording product warranty expense in the period of the sale best follows the