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Exam 10: Liabilities: Current, Installment Notes, and Contingencies

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Question 81

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​The interest portion of an installment note payment is computed by multiplying the interest rate by the carrying amount of the note at the end of the period.

A) True
B) False

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Question 82

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The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. All earnings are subject to social security tax of 6.0% and Medicare tax of 1.5%. Earnings subject to state and federal unemployment compensation taxes are $3,000 at the federal rate of 0.8% and state rate of 5.4%. Journalize the entry to record the accrual of employer payroll taxes.

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Question 83

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The borrower issues a note payable to a creditor.

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

Excel Products Inc. pays its employees semimonthly. The summary of the payroll for December 31, indicated the following: $\begin{array}{lr}\text { Salary expense } & \$ 120,000 \\\text { Federal income tax withheld } & 20,000\end{array}$ ​ Payroll is subject to social security tax of 6% and Medicare tax of 1.5%, with no maximum earnings; $10,000 is subject to state unemployment tax of 5.4% and federal unemployment tax of 0.8%. Prepare the journal entries for payroll tax expense if the employees are paid on December 31 of the current year.

The journal entry to record the conversion of a $6,300 accounts payable to a note payable would be

Which of the following taxes are employers required to withhold from employees?

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31 of the current year. The December 31, Year 1 carrying amount in the allocation of periodic payments table for this installment note will be equal to:

A current liability is a debt that is reasonably expected to be paid

The amount borrowed is equal to the face amount of the note on an interest-bearing note payable.

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%.

Payroll taxes are based on the employee's net pay.

Journalize the following entries on the books of Winston Co. for August 1, September 1, and November 30. (Assume a 360-day year is used for interest calculations.)

Generally, all deductions made from an employee's gross pay are required by law.

An employee receives an hourly wage rate of $15, with time and a half for all hours worked in excess of 40 during the first week of the calendar year. Payroll data for the first week of the calendar year are as follows: hours worked, 48; federal income tax withheld, $120; social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment tax, 5.4% on the first $7,000; federal unemployment tax, 0.8% on the first $7,000. What is the net amount to be paid to the employee?

Quick assets include

Perez Company has the following information for the pay period of January 15-31. $\begin{array} { l r l r } \text { Gross payroll } & \$ 20,000 & \text { Federal income tax withheld } & \$ 2,500 \\\text { Social security rate } & 6 \% & \text { Federal unemployment tax rate } & 0.8 \% \\\text { Medicare rate } & 1.5 \% & \text { State unemployment tax rate } & 5.4 \%\end{array}$ ​ Assuming no employees are subject to ceilings for their earnings, calculate salaries payable and employer payroll tax expense.

The accounting for defined benefit plans is usually very easy and straightforward.

Assuming a 360-day year, when a $50,000, 90-day, 9% interest-bearing note payable matures, total payment will be

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% of gross in state income tax, 6% of gross in social security tax, 1.5% of gross in Medicare tax, and 0.5% of gross in state disability insurance. Journalize the pay period ending January 19 which will be paid to the employees January 26.