Fundamental Accounting Principles Study Set 5
Quiz 11: Current Liabilities and Payroll Accounting
Estimated Liabilities Commonly Arise From
Estimated liabilities commonly arise from: A) Warranties. B) Vacation benefits. C) Income taxes. D) Employee benefits. E) All of these.
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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 to be recorded for the month of July? A) $25 B) $100 C) $250 D) $2,500 E) $25,000
Employee vacation benefits: A) Are estimated liabilities. B) Are contingent liabilities. C) Are recorded as an expense when the employee takes a vacation. D) Are recorded as an expense when the employee retires. E) Increase net income.
A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should: A) Consider the warranty expense a remote liability since the rate is only 2%. B) Recognize warranty expense at the time the warranty work is performed. C) Recognize warranty expense and liability in the year of the sale. D) Consider the warranty expense a contingent liability. E) Recognize warranty liability when the company purchases the trampolines.
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