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Exam 11: Current Liabilities and Payroll

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Question 71

Multiple Choice

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Which of the following liabilities is created when a company receives cash for services to be provided in the future?

A) Unearned Revenue
B) Accrued Liability
C) Accounts Payable
D) Estimated Warranty Payable

E) None of the above
F) B) and C)

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Question 72

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Employer FICA tax is paid by the employer and is added to the employee's earnings.

A) True
B) False

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Question 73

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The information related to Outloud Music, Inc. is given below: Calculate the times-interest-earned ratio for each year and also state the percentage change in the ratio.

If a contingency is remote, the company does not need to record a liability and does not need to disclose it in the notes to the financial statements.

Which of the following is included in the entry to record the employer's payroll taxes?

Eric's gross pay for the week is $2,050. His deduction for federal income tax is based on a rate of 23%. He has no voluntary deductions. His yearly pay is under the limit for OASDI. What is the amount of FICA tax that will be withheld from Eric's pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

The following transactions of Windsor Enterprises occurred in 2016 and 2017: Journalize the transactions in Windsor's general journal. Explanations are not required. Round to the nearest dollar.

A high interest-coverage ratio indicates a company's difficulty in paying interest expense.

State unemployment compensation tax (SUTA) is paid by the employer and is not deducted from an employee's gross earnings.

The matching principle requires businesses to report Warranty Expense ________.

Cash received in advance of providing goods or performing services is recorded as ________.

A contingency was evaluated at year-end and considered to have a reasonable possibility of becoming an actual liability. If this was not reported on the balance sheet or in the notes to the financial statements, it could be considered a violation of generally accepted accounting principles.

Ragas, Inc. sold goods with a selling price of $62,000 in the 2017 and estimated 4% warranty expense for the year. Customers complained of defects, and goods with a cost of $3,500 had to be replaced. Which of the following is the correct journal entry for honoring the warranties with goods?

Which of the following is a major control risk related to payroll?

Dan Jones and Pat Smith are two employees of Lone Star, Inc. In January 2017, Dan's gross pay was $10,500, and Pat's gross pay was $10,900. All earnings are subject to FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. Which of the following would be included in the entry to record the payroll tax expense to be paid out by Lone Star, Inc. for January?

Which of the following statements about the times-interest-earned ratio is true?

Jupiter Services sells service plans for commercial computer maintenance. The price for each service plan is $1,650 per year, paid in advance. On October 1, 2017, a service plan was sold to a new customer for cash. Prepare the journal entry to record this transaction.

Iggy Sales, Inc. offers warranties on all its electronic goods. Warranty expense is estimated at 3.5% of sales revenue. In 2017, Iggy had sales of $333,000. In the same year, Iggy replaced defective goods with merchandise inventory costing $8,750. Prepare the journal entry to record the replacement of defective goods.

The times-interest-earned ratio is calculated as ________.

If a long-term debt is paid in installments, the business will report the current portion of the note payable as a current liability.