Question 1

During the first week of January,an employee works 46 hours.For this company,workers earn 150% of their regular rate for hours in excess of 40 per week.Her pay rate is $16 per hour,and her wages are subject to no deductions other than FICA Social Security,FICA Medicare,and federal income taxes.The tax rate for Social Security is 6.2% of the first $127,200 earned 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.The employee has $80 in federal income taxes withheld.What is the amount of this employee's net pay for the first week of January?
A)$784.00
B)$139.98
C)$724.02
D)$644.02
E)$923.98

Accepted Answer

The answer of During the first week of January,an employee...

Question 2

A company has a selling price of $1,800 each for its printers.Each printer has a 2 year warranty that covers replacement of defective parts.It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $150 each.During November,the company sold 30,000 printers,and 400 printers were serviced under the warranty at a total cost of $55,000.The balance in the Estimated Warranty Liability account at November 1 was $29,000.What is the company's warranty expense for the month of November?
A)$26,000
B)$45,000
C)$55,000
D)$60,000
E)$90,000

Accepted Answer

The answer of A company has a selling price of...

Question 3

On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry needed to record the transaction by Indigo Company?
A)Debit Notes Payable $4,500; credit Accounts Payable $4,500.
B)Debit Accounts Payable $4,500; credit Notes Payable $4,500.
C)Debit Accounts Receivable $4,500; credit Notes Payable $4,500.
D)Debit Cash $4,500; credit Notes Payable $4,500.
E)Debit Sales $4,500; credit Notes Payable $4,500.

Accepted Answer

Indigo Company is the one issuing the note to extend the due date on an overdue account, so they would debit the Accounts Payable account for the amount owed ($4,500) and credit the Notes Payable account for the same amount to record the issuance of the note.

Question 4

During the first week of January,an employee works 46 hours.For this company,workers earn 150% of their regular rate for hours in excess of 40 per week.Her pay rate is $16 per hour,and her wages are subject to no deductions other than FICA Social Security,FICA Medicare,and federal income taxes.The tax rate for Social Security is 6.2% of the first $127,200 earned 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.The employee has $80 in federal income taxes withheld.What is the amount of this employee's gross pay for the first week of January?
A)$736
B)$784
C)$1,104
D)$1,156
E)$1,004

Accepted Answer

The employee's gross pay is calculated as follows: 40 hours at her regular rate of $16 per hour equals $640. For the 6 hours of overtime, she earns 150% of her regular rate, which is $24 per hour (1.5 x $16). Thus, for 6 hours, she earns $144 (6 x $24). Her total gross pay for the week is $640 + $144 = $784.

Question 5

The chief executive officer earns $20,000 per month.As of June 30,her gross pay was $120,000.The tax rate for Social Security is 6.2% of the first $127,200 earned 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 4.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.What is the amount of FICA- Social Security withheld from this employee for the month of July?
A)$7,347.00
B)$1,147.00
C)$1,240.00
D)$446.40
E)$290.00

Accepted Answer

First we need to calculate the CEO's monthly gross pay: $120,000 ÷ 6 = $20,000.
Next, we need to calculate the amount of Social Security tax withheld, which is 6.2% of $20,000 = $1,240.
Therefore, the answer is D, $446.40, which is 1/12 of the annual FICA - Social Security tax withheld.

Question 6

A company estimates that warranty expense will be 4% of sales.The company's sales for the current period are $185,000.The current period's entry to record the warranty expense is:
A)Debit Warranty Expense $7,400; credit Sales $7,400.
B)Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C)Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400
D)Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E)No entry is recorded until the items are returned for warranty repairs.

Accepted Answer

The entry to record warranty expense is to debit Warranty Expense and credit Estimated Warranty Liability. This reflects the estimated cost of warranties that the company expects to pay in the future for products sold in the current period. Option A is incorrect because sales should not be credited. Option C is incorrect because the accounts should not be reversed. Option D is incorrect because cash is not involved in recording the estimated warranty liability. Option E is incorrect because the estimated warranty expense needs to be recorded at the time of sale.

Question 7

A table that shows the amount of federal income tax to be withheld from an employee's pay is the:
A)Form 941.
B)Tax table.
C)Wage bracket withholding table.
D)W-2.
E)W-4.

Accepted Answer

The Wage Bracket Withholding Table is used to determine the amount of federal income tax to withhold from an employee's pay, based on their earnings and tax status.

Question 8

Cantrell Company is required by law to collect and remit sales taxes to the state.If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax,what is the journal entry to record the cash sales?
A)Debit Cash $8,000; credit Sales $7,360; credit Sales Taxes Payable $640.
B)Debit Sales Taxes Payable $640; debit Cash $7,360; credit Sales $8,000.
C)Debit Cash $8,000; credit Sales $8,000; and record the taxes when paid.
D)Debit Cash $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.
E)Debit Accounts Receivable $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.

Accepted Answer

The correct journal entry to record the cash sales including sales tax is to debit Cash for the total amount received ($8,000 + $640 = $8,640), credit Sales for the sales amount before tax ($8,000), and credit Sales Taxes Payable for the amount of sales tax collected ($640). This reflects the increase in cash, records the revenue earned, and acknowledges the liability for the sales tax owed to the state.

Question 9

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):
A)Federal depository bank account.
B)Employee's Individual Earnings account.
C)Employees' bank account.
D)Payroll register account.
E)Payroll bank account.

Accepted Answer

This type of account specifically used for payroll purposes is commonly known as a payroll bank account. Option A is incorrect because a federal depository bank account refers to a bank account held by a federal government agency, such as the US Treasury, and is not relevant to a company's payroll process. Option B is incorrect as it does not refer to any specific type of bank account. Option C is incorrect because it implies that each employee has their own separate bank account for payroll, which is not practical for most businesses. Option D is incorrect because a payroll register account is simply a record-keeping tool used to track payroll transactions and balances.

Question 10

On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?
A)Debit Notes Payable $7,500; credit Interest Expense $150; credit Cash $7,350.
B)Debit Notes Payable $7,500; credit Cash $7,500.
C)Debit Notes Payable $7,650; credit Cash $7,650.
D)Debit Notes Payable $7,500; debit Interest Expense $150; credit Cash $7,650.
E)Debit Cash $7,650; credit Interest Revenue $150; credit Notes Receivable $7,500.

Accepted Answer

The correct journal entry to record the payment of the note includes debiting Notes Payable for the principal amount of $7,500, debiting Interest Expense for the interest accrued ($7,500 x 8% x 90/365 = $150), and crediting Cash for the total amount paid out ($7,500 principal + $150 interest = $7,650).

Question 11

On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the transaction by Jarrett Company?
A)Debit Cash $7,500; credit Accounts Payable $7,500.
B)Debit Accounts Payable $7,500; credit Notes Payable $7,500.
C)Debit Cash $7,650; credit Notes Payable $7,650.
D)Debit Cash $7,500; credit Notes Payable $7,500.
E)Debit Notes Receivable $7,500; credit Cash $7,500.

Accepted Answer

Jarrett Company is borrowing money, so they will increase their assets by debiting Cash for $7,500. The money is being borrowed via a note payable, so they will also increase liabilities by crediting Notes Payable for $7,500. The interest rate and term of the note are not needed for the journal entry. Therefore, the correct entry is to debit Cash for $7,500 and credit Notes Payable for $7,500.

Question 12

A payroll register does not include:
A)Pay period dates.
B)Hours worked.
C)Gross pay and net pay.
D)Deductions.
E)Prior year's earnings

Accepted Answer

A payroll register typically includes information about pay period dates, hours worked, gross pay and net pay, and deductions. However, it would not include prior year's earnings as this information is from a previous fiscal year and not relevant to the current payroll register.

Question 13

All of the following statements regarding long-term liabilities are true except?
A)Liabilities not expected to be paid within the longer of one year or the company's operating cycle are reported as long-term liabilities.
B)Long-term liabilities include long-term notes payable,warranty liabilities,lease liabilities,and bonds payable.
C)Liabilities that do not have a fixed due date,but are payable on demand,are reported as long-term liabilities.
D)Long-term liabilities can be reported on the balance sheet in a single total or in multiple categories.
E)A single long-term liability can be divided between current and noncurrent sections on the balance sheet.

Accepted Answer

Liabilities that do not have a fixed due date but are payable on demand, such as accounts payable or accrued expenses, are reported as current liabilities, not long-term liabilities.

Question 14

An employee earns $5,500 per month working for an employer.The FICA tax rate for Social Security is 6.2% of the first $127,200 earned 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.The employee has $182 in federal income taxes withheld.The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month.What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)
A)$4,827.00
B)$4,672.25
C)$4,628.25
D)$4,386.25
E)$4,430.25

Accepted Answer

Step 1: Calculate the FICA tax (Social Security + Medicare)
- Social Security tax: 6.2% of $5,500 = $341
- Medicare tax: 1.45% of $5,500 = $79.75
- Total FICA tax = $341 + $79.75 = $420.75

Step 2: Calculate federal income tax
- $182

Step 3: Calculate total voluntary deductions
- Health insurance: $150
- Retirement plan: $75
- Total voluntary deductions = $150 + $75 = $225

Step 4: Calculate unemployment taxes
- FUTA tax: 0.6% of $7,000 = $42
- SUTA tax: 5.4% of $7,000 = $378
- Total unemployment taxes = $42 + $378 = $420

Step 5: Calculate net pay
- Gross pay: $5,500
- Total taxes: $420.75 + $182 + $420 = $1,022.75
- Total deductions: $225
- Net pay = $5,500 - $1,022.75 - $225 = $4,252.25

Rounding the answer to two decimal places, the net pay for the employee for the month of January is $4,672.25, making choice (B) the correct answer.

Question 15

The wage bracket withholding table is used to:
A)Compute social security withholding.
B)Compute Medicare withholding.
C)Compute federal income tax withholding.
D)Prepare the W-4.
E)Compute unemployment taxes.

Accepted Answer

The wage bracket withholding table is used to compute federal income tax withholding.

Question 16

On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry that Indigo Company would make,when it records payment of the note on the maturity date? (Use 360 days a year.)
A)Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575.
B)Debit Notes Payable $4,500; credit Interest Expense $75,credit Cash $4,425.
C)Debit Cash $4,575; credit Interest Revenue $75; credit Notes Payable $4,500.
D)Debit Notes Payable $4,500; debit Interest Expense $112; credit Cash $4,612.
E)Debit Cash $4,575; credit Interest Revenue $75; credit Notes Receivable $4,500.

Accepted Answer

The correct journal entry for Indigo Company when it records the payment of the note on the maturity date includes debiting Notes Payable for the principal amount of $4,500 and debiting Interest Expense for the interest accrued, which is $75 (calculated as $4,500 * 10% * (60/360)), and crediting Cash for the total amount paid, which is $4,575 ($4,500 + $75).

Question 17

Furniture World is required by law to collect and remit sales taxes to the state.If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax,what is the journal entry to record the cash sales?
A)Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.
B)Debit Sales Taxes Payable $4,680; debit Cash $73,220; credit Sales $78,000.
C)Debit Cash $78,000; credit Sales $78,000; and record the taxes when paid.
D)Debit Cash $78,000; credit Sales $73,320; credit Sales Taxes Payable $4,680.
E)Debit Accounts Receivable $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.

Accepted Answer

The journal entry to record cash sales subject to sales tax would be to debit Cash for the total amount collected ($82,680) and credit Sales for the amount of the sale ($78,000) and credit Sales Taxes Payable for the amount of the tax collected ($4,680). This reflects the fact that the cash collected includes both the amount of the sale and the amount of tax collected, and that the tax collected is a liability that Furniture World owes to the state until it is remitted.

Question 18

Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year.The journal entry on December 31 to record the bonuses is:
A)Debit Estimated Bonus Payable $32,500; credit Cash $32,500.
B)Debit Employee Bonus Expense $32,500; credit Bonus Payable $32,500.
C)No entry since the bonuses are not paid until January.
D)Debit Employee Bonus Expense $32,500; credit Prepaid Employee Bonus $32,500.
E)Debit Unearned Bonuses $32,500; credit Bonus Payable $32,500.

Accepted Answer

The journal entry should debit Employee Bonus Expense (an expense account) for the estimated amount of $32,500 and credit Bonus Payable (a liability account) for the same amount. This recognizes the expense in the current year and creates a liability to pay the bonuses in the following year. Option A is not correct because there is no actual payment in the current year. Option C is not correct because we need to accrue the expense and liability in the current year. Option D is not correct because there is no prepayment of the bonuses. Option E is not correct because Unearned Bonuses is not a valid account; it should be Bonus Payable.

Question 19

The chief executive officer earns $20,000 per month.As of June 30,her gross pay was $120,000.The tax rate for Social Security is 6.2% of the first $127,200 earned 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 4.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.What is the amount of FICA - Medicare withheld from this employee for the month of July?
A)$7,347.00
B)$1,147.00
C)$1,240.00
D)$268.25
E)$290.00

Accepted Answer

The FICA - Medicare tax is 1.45% of all earnings. For July, the earnings are $20,000. Therefore, the Medicare tax withheld is 1.45% of $20,000, which equals $290.00.

Question 20

If a company uses a special payroll bank account:
A)The company does not need to issue paychecks.
B)The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account.
C)The company must use a federal depository bank for the payroll bank account.
D)There is no need for a payroll register.
E)There is no need to issue W-2's.

Accepted Answer

The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account. This is the purpose of having a special payroll bank account - to separate payroll funds from general operating funds. The other options are incorrect. The company still needs to issue paychecks to employees, can use any bank for the payroll account, needs a payroll register to track transactions, and must issue W-2's at year-end.

Quiz 9: Reporting and Analyzing Current Liabilities

On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry needed to record the transaction by Indigo Company?

A company estimates that warranty expense will be 4% of sales.The company's sales for the current period are $185,000.The current period's entry to record the warranty expense is:

A table that shows the amount of federal income tax to be withheld from an employee's pay is the:

Cantrell Company is required by law to collect and remit sales taxes to the state.If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax,what is the journal entry to record the cash sales?

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) :

On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?

On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the transaction by Jarrett Company?

A payroll register does not include:

All of the following statements regarding long-term liabilities are true except?

The wage bracket withholding table is used to:

On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry that Indigo Company would make,when it records payment of the note on the maturity date? (Use 360 days a year.)

Furniture World is required by law to collect and remit sales taxes to the state.If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax,what is the journal entry to record the cash sales?

Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year.The journal entry on December 31 to record the bonuses is:

If a company uses a special payroll bank account: