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Exam 9: Accounting for Current Liabilities

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Question 1

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Unearned revenues are amounts received in advance from customers for future products or services.

A) True
B) False

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True

Question 2

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Accrued vacation benefits are a form of estimated liability for an employer.

A) True
B) False

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Question 3

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Identify and explain the types of employer payroll taxes.

Triston Vale is paid on a monthly basis.For the month of January of the current year,he earned a total of $5,210.FICA tax for Social Security is 6.2% on the first $128,400 of earnings each calendar year and the FICA tax for Medicare is 1.45% of all earnings.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 $885.70.What is the amount of the employer's payroll taxes expenses for this employee?

Obligations due within one year or the company's operating cycle,whichever is longer,are ________.

A company sells sofas with a 6-month warranty.In January,the company sold 100,000 sofas at $1,750 each; and 500 sofas needed repairs during that same month.The total repairs amounted to $85,000 costs from the upholstery materials inventory.It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit.Prepare the journal entries to record (a)estimated warranty expense for January and (b)warranty repair costs for January.

A liability cannot be divided between current and noncurrent liabilities.

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

Estimated liabilities commonly arise from all of the following except:

To compute the amount of tax withheld from an employee's pay,employers can use a ________ table.

Each employee records the number of withholding allowances claimed on the withholding allowance certificate that is filed with the employer,which is the Form W-4.

The times interest earned ratio reflects:

FUTA taxes are:

Kelso had income before interest expense and income taxes of $570 million and interest expense of $37 million.Calculate Kelso' times interest earned.

What is a short-term note payable? Explain the accounting issues related to notes payable.

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 $128,400 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 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:

FUTA requires employers to pay a federal unemployment tax on the first $1 million in salary or wages paid to each employee.

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

A liability is incurred when income is earned because income tax expense is created by earning income.