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Exam 9: Current Liabilities

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Question 41

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A company's payroll information for the month of May follows: $\begin{array} { | l | r | } \hline \text { Administrative salaries } & \$ 2,000 \\\hline \text { Sales salaries } & 3,500 \\\hline \text { Shop wages } & 4,000 \\\hline \text { FICA taxes withheld } & 700 \\\hline \text { Federal income taxes withheld } & 1,300 \\\hline \text { Medical insurance premiums withheld } & 415 \\\hline \text { Union dues withheld } & 205 \\\hline\end{array}$ On May 31 the company issued Check No. 335 payable to the Payroll Bank Account for the May payroll. It issued payroll checks to the employees after depositing the check. (1) Prepare the journal entry to record (accrue) the employer's payroll for May. (2) Prepare the journal entry to pay for the May payroll. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee-the wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record the employer's payroll taxes.

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Question 42

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Mission Company has three employees: $\begin{array} { c c c } & \text { Gross Pay through July } & \text { Gross Pay for August } \\\text { Smith } & \$ 3,200 & \$ 1,000 \\\text { Cain } & 25,800 & 3,500 \\\text { Clark } & 94,600 & 13,100\end{array}$ $\begin{array} { l c l } \text { Tax } & \text { Rate } & \text { Applied To } \\\text { FICA-Social Security } & 6.20 \% & \text { First } \$ 106,800 \\\text { FICA-Medicare } & 1.45 & \text { All gross pay } \\\text { FUTA } & .80 & \text { First } \$ 7,000 \\\text { SUTA } & 5.40 & \text { First } \$ 7,000\end{array}$ What is the amount that Mission Company will withhold from Clark's gross pay?

A) $946.35
B) $1,002.15
C) $1,814.35
D) $6,234.75
E) $812.20

F) A) and E)
G) A) and D)

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Question 43

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If the times interest ratio:

A bank that is authorized to accept amounts payable to the federal government is a:

If a company had income before interest and taxes in the amount of $2,345,540 and a times interest earned ratio of 5.2, what would be the total amount of the company's interest expense?

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

Youngsong Martin, the founder of Wildflower Linen, realized that effectively managing payroll was crucial to the success of her business. If an employee of the company earns $50,500 per year, Wildflower Linen's total FICA payroll tax for this employee is:

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

What are known current liabilities? Provide at least two examples of known current liabilities.

Tree Frog Company is organized as a LLC and does not pay income taxes. The company has fixed interest expense of $5,750, Sales of $253,000 and variable expenses of $189,750. What is the company's times interest earned ratio?

Apple Company has three employees: $\begin{array} { c c c } & \text { Gross Pay through July } & \text { Gross Pay for August } \\\text { Happy } & \$ 4,120 & \$ 750 \\\text { Doc } & 31,100 & 5,600 \\\text { White } & 95,600 & 14,700\end{array}$ $\begin{array}{lcl}\text { Tax } & \text { Rate } & \text { Applied To } \\\text { FICA-Social Security } & 6.20 \% & \text { First } \$ 106,800 \\\text { FICA-Medicare } & 1.45 & \text { All gross pay } \\\text { FUTA } & .80 & \text { First } \$ 7,000 \\\text { SUTA } & 5.40 & \text { First } \$ 7.000\end{array}$ What is the amount that Apple Company will record as total payroll taxes for August?

A corporation has a $42,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $50,000. The company should record an entry to debit Income Tax Expense for $8,000 and credit Income Taxes Payable for $8,000.

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

Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as:

Known liabilities are obligations set by agreements, contracts or laws and are measurable and definitely determinable.

Uncertainties from the development of new competing products are contingent liabilities.

The deferred income tax liability:

When there is little uncertainty surrounding current liabilities, both GAAP and IFRS require companies to record them in a similar manner.

Accounting for contingent liabilities covers three categories. (1) The future event is probable and the amount cannot be reasonably estimated. (2) The future event is remote or unlikely to recur. (3) The likelihood of the liability to occur is impossible.

Social security payments are made up of Social Security taxes and Medicare taxes.