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Exam 8: Current Liabilities

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Question 21

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Action Travel has 10 employees each working 40 hours per week and earning $20 an hour.Federal income taxes are withheld at 15% and state income taxes at 6%.FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee.What is the actual direct deposit of payroll for the first week of January?

A) $5,404.
B) $5,708.
C) $4,792.
D) $8,000.

E) B) and D)
F) C) and D)

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Question 22

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Mike Gundy is a college football coach making a salary of $2,400,000 a year ($200,000 per month) .Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the FICA maximum base amount is $106,800,through what month will Social Security be withheld?

A) Social Security will be withheld only in January.
B) Social Security will be withheld through the entire year.
C) Social Security will be withheld through the month of March.
D) Social Security will be withheld through the month of June.

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

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Question 23

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T.Boone Pickens football stadium at Oklahoma State University has a seating capacity of about 60,000.Assume the stadium sells out all six home games before the season begins and the athletic department collects $30.6 million in ticket sales. 1.What was the average price per season ticket and average price per individual game ticket sold? 2.Record the advance collection of $30.6 million in ticket sales. 3.Record the revenue earned after the first home game was completed.

A company is said to be liquid if it has sufficient cash to pay currently maturing debts.

Sales taxes collected by a company on behalf of the state and local government are recorded by:

Universal Travel,Inc.borrowed $500,000 on November 1,2012,and signed a twelve-month note bearing interest at 6%.Principal and interest are payable in full at maturity on October 31,2013.In connection with this note,Universal Travel,Inc.should report interest payable at December 31,2012,in the amount of:

Brian Inc.borrowed $8,000 from First Bank and signed a promissory note.What entry should Brian Inc.record?

Liabilities are defined as:

Accounts payable are amounts the company owes to suppliers of merchandise or services that it has bought on credit.

The journal entry to record a contingent liability requires a debit to a loss (or expense)account and a credit to a liability.

The employer is required to match the amount of FICA taxes withheld for each employee,effectively doubling the amount paid into Social Security.

Mike Gundy is a college football coach making a salary of $2,400,000 a year ($200,000 per month) .Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the FICA maximum base amount is $106,800,how much will be withheld during the year for the coach's Social Security and Medicare.

At times,businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided.These customer advances represent:

A lower current ratio or acid-test ratio generally indicates a greater ability to pay current liabilities on a timely basis.

Which of the following are included in an employer's payroll tax expense?

Brian Inc.borrowed $8,000 from First Bank and signed a promissory note.What entry should First Bank record?

Delta,Northwest,and United Airlines have all,at one time,filed for bankruptcy.

Young Company is involved in a lawsuit.The liability which could arise as a result of this lawsuit should be recorded on the books if the probability of Young owing money as a result of the lawsuit is:

Strikers,Inc.sells soccer goals to customers over the Internet.History has shown that 2% of Strikers' goals are faulty and will need repair under the warranty program.For the year,Strikers has sold 4,000 goals and 45 have been repaired.If the estimated cost to repair a goal is $200,what would be the Warranty Liability at the end of the year?

Away Travel filed suit against West Coast Travel seeking damages for copyright violations.West Coast Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000,with all amounts in the range considered equally likely.How should West Coast Travel report this litigation?