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Exam 9: Accounting for Current Liabilities

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Question 21

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Floral Depot's income before interest expense and income taxes was $5,900 million, and interest expense was $38 million. Calculate Floral Depot's times interest earned.

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Question 22

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Define liabilities and explain the difference between current and long-term liabilities.

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Liabilities are probable future payments...

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Question 23

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A corporation has a $40,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $47,000. The company should record an entry to debit Income Tax Expense for $7,000 and credit Income Taxes Payable for $7,000.

What are estimated liabilities? Cite at least two examples and explain why they are classified as estimated liabilities.

Explain the responsibilities of and the accounting by employers for deductions from employee payroll.

Interest expense is not:

A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 5% of sales. During the month of July, the company performed warranty work and used $11,000 of parts to perform the warranty work. Sales for July were $450,000. 1. Record the warranty expense for the month of July. 2. Record the costs of the warranty work completed in June. 3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the account balance at June 30?

Payroll is an example of a contingent liability for the employer.

The employer should record deductions from employee pay as:

Contingent liabilities are recorded in the accounts if the future event is _______________ and the amount owed can be _______________. Answers must appear in this order

On June 1, Jasper Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable. a. What is the total amount of interest to be paid on this note? b. Prepare Jasper Company's general journal entry to record the issuance of the note payable. c. Prepare Jasper Company's general journal entry to record the payment of the note on September 29.

On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value of the note on March 1?

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?

Identify and explain the types of employer payroll taxes.

Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,288. FICA tax for Social Security is 6.2% and the FICA tax for Medicare is 1.45%. The 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 amount of Federal Income Tax withheld from his earnings was $1,375.17. What is the amount of the employer's payroll taxes expenses for this employee?

A company has three employees. Total salaries for the month of January were $8,000. The federal income tax rate for all employees is 15%. The FICA-social security tax rate is 6.2% and the FICA-Medicare tax rate is 1.45%. Calculate the amount of employee taxes withheld and prepare the company's journal entry to record the January payroll assuming these were the only deductions.

Sales taxes payable is debited and cash is credited when companies send sales taxes collected from customers to the government.

All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:

Employers' responsibilities for payroll do not include:

The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $2,900 in the current period and had cumulative pay for prior periods of $5,800. What is the amount of unemployment taxes the employer must pay on this employee's wages for the current period?