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Exam 9: Reporting and Analyzing Current Liabilities

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Question 71

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Liabilities:

A) Must be certain
B) Must sometimes be estimated
C) Must be for a specific amount
D) Must always have a definite date for payment
E) Must involve an outflow of cash

F) A) and B)
G) A) and C)

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Question 72

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______________ are amounts owed to suppliers for products or services purchased on credit.

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Question 73

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The Federal Insurance Contributions Act (FICA) requires that each employer file a:

A company's income before interest expense and income taxes was $395,000 in 2010 and $427,000 in 2011.Its fixed interest expense was $125,000 for both years.Calculate the company's times interest earned ratio and comment on its level of risk.

Employer payroll taxes are an added employee _______________ beyond the wages and salaries earned by the employees.

Pastimes Co.offers its employees a bonus equal to 2% of the company's net income.The estimated net income for the year is expected to be $850,000.Prepare the general journal entry to record the employee bonus plan expense.

Explain how to calculate times interest earned and explain how it is used to analyze a company.

Vacation benefits are a type of _______________ liability.

Gross pay less all deductions is called ____________________.

Mission Company has three employees: $\begin{array}{lcc}&\text { Gross Pay through July}&\text { Gross Pay for August }\\\text { Smith } & \$ 3,200 & \$ 1,000 \\\text { Cain } & 25,800 & 3,500 \\ \text { Clark } & 94,600 & 13,100\end{array}$ $\text { The company is subject to the following taxes: }$ $\begin{array} { l c l } \text { Tax } & \text { Rate } & \text { Applied To } \\ \text { FICA-Social Security } & 6 . 2 0 \% & \text { First } \$ 106,800 \\ \text { FICA-Medicare } & 1.45 & \text { All grosspay } \\ \text { FUTA } & . 8 0& \text { First } \$ 7,000 \\ \text { SUTA } & 5.40 & \text { First } \$ 7,000 \end{array}$ What is the amount that Mission Company will withhold from Smith's gross pay?

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 for the month of July?

The FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%.An employee's share of both FICA taxes was $3,901.50.Given that this employee did not exceed the FICA earnings limitation,compute gross pay.

A _____________________ shows the pay period dates,hours worked,gross pay,deductions and net pay of each employee for every pay period.

An employee earned $4,300 working for an employer.The current rate for FICA social security is 6.2% and the FICA Medicare rate is 1.45%.The employer's total FICA payroll tax for this employee is:

Times interest earned can be calculated by multiplying income by the interest rate on a company's debt.

Match each of the following terms with the appropriate definitions.

Identify the types of payroll records prepared for each pay period and each employee.

Explain the responsibilities and necessary accounting procedures that employers must follow for employee payroll deductions.

The Orlando Magic received $6 million cash in advance season ticket sales.Prior to the beginning of the basketball season,these sales are recorded as a credit to unearned season ticket revenue.

If a company uses a special payroll bank account: