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Exam 11: Current Liabilities and Payroll Accounting

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Question 51

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Harvel Company is required by law to collect and remit sales taxes to the state. If Havel has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales?

A) Debit Cash $8,000; credit Sales $7,360; credit Sales Taxes Payable $640.
B) Debit Sales Taxes Payable $640; debit Cash $7,360; credit Sales $8,000.
C) Debit Cash $8,000; credit Sales $8,000; and record the taxes when paid.
D) Debit Cash $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.
E) Debit Accounts Receivable $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.

F) B) and D)
G) A) and B)

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Question 52

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____________________________ are banks authorized to accept deposits of amounts payable to the federal government, including amounts due for payroll taxes.

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Question 53

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Obligations due to be paid within one year or the company's operating cycle, whichever is longer, are:

Arena Company provides health insurance to its employees that costs $15,000 per month. In addition, the company contributes 5% of the employees' $150,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:

Classify each of the following items as either:

All expected future payments are liabilities.

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

A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.

Contingent liabilities are recorded in the accounts if the future event is _______________ and the amount owed can be _____________.

An employee earned $3,450 for the current period. Calculate the total and individual amounts to be withheld for social security (6.2%), Medicare (1.45%) and federal income tax (15%) assuming the entire employee's pay is subject to FICA taxes.

An estimated liability is a known obligation of an uncertain amount that can at least be reasonably estimated.

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

Promissory notes are nonnegotiable meaning that they cannot be transferred from party to party.

A _____________________ is a seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period.

The times interest earned ratio is calculated by dividing income before interest expense and income taxes by interest expense.

Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities.

The unemployment insurance program:

Contingent liabilities must be recorded if:

A company had income before interest expense and income taxes of $176,000, and its interest expense is $55,000. Calculate the company's times interest earned ratio.

A potential lawsuit claim is recorded when the claim can be reasonably estimated and it is possible.