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On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31, the company's year end, on the note?


A) Debit interest expense, $0; credit interest payable, $0.
B) Debit interest payable, $120; credit interest expense, $120.
C) Debit interest expense, $120; credit interest payable, $120.
D) Debit interest expense, $720; credit interest payable, $720.
E) Debit interest payable, $240; credit interest expense, $240.

F) B) and D)
G) All of the above

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Employers' responsibilities for payroll do not include:


A) Providing each employee with an annual report of his or her wages subject to FICA and federal income taxes along with the amount of these taxes withheld.
B) Filing Form 941, the Employer's Quarterly Federal Tax Return.
C) Filing Form 940, the Annual Federal Unemployment Tax Return.
D) Maintaining individual earnings records for each employee.
E) Recording an expense for the employee Federal Income Tax withholding.

F) A) and D)
G) A) and C)

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Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $118,500 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. His net pay for the month is:


A) $3,510.14
B) $3,857.30
C) $4,190.84
D) $4,538.00
E) $3,162.98

F) C) and E)
G) B) and E)

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Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:


A) Debit Estimated Bonus Payable $32,500; credit Cash $32,500.
B) Debit Employee Bonus Expense $32,500; credit Bonus Payable $32,500.
C) No entry since the bonuses are not paid until January.
D) Debit Employee Bonus Expense $32,500; credit Prepaid Employee Bonus $32,500.
E) Debit Unearned Bonuses $32,500; credit Bonus Payable $32,500.

F) B) and D)
G) B) and C)

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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:


A) Debit Warranty Expense $7,400; credit Sales $7,400.
B) Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C) Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400.
D) Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E) No entry is recorded until the items are returned for warranty repairs.

F) All of the above
G) D) and E)

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Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

A) True
B) False

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

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Known current liabilities are obligation...

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Companies may use a special bank account solely for the purpose of paying employees, by depositing an amount equal to the total employees' net pay into the account each pay period and drawing the employees' payroll checks on the account. This account is a(n) :


A) Federal depository bank account.
B) Employee's Individual Earnings account.
C) Employees' bank account.
D) Payroll register account.
E) Payroll bank account.

F) None of the above
G) A) and C)

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Which of the following is not true regarding the unemployment insurance program?


A) It requires withholding from the employee wages.
B) It is administered by each state.
C) It provides unemployment benefits to qualified workers.
D) It adjusts rates paid by employers based on their merit rating.
E) It is a joint federal and state program.

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

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All of the following statements regarding FICA taxes are true except:


A) FICA taxes are deducted from the employee.
B) Employers must pay withheld FICA taxes to the IRS.
C) The amount of FICA deducted from the employee is credited to a liability account.
D) A self-employed person is exempt from FICA taxes.
E) An employer must pay FICA taxes equal to the amount withheld from the employee.

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

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A company's has fixed interest expense of $52,000, income taxes expense of $121,000, and net income of $281,000. The company's times interest earned ratio equals:


A) 8.73.
B) 5.40.
C) 7.73.
D) 2.33.
E) 0.11.

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

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The full disclosure principle requires inclusion of information about contingent liabilities that are reasonably possible in the notes to the financial statements.

A) True
B) False

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Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax for social security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,325.17. What is the total amount of taxes withheld from the Portia's earnings?


A) $3,097.17
B) $2,443.21
C) $1,957.06
D) $1,722.00
E) $1,495.36

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

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All of the following statements regarding liabilities are true except:


A) A liability is a probable future payment of assets or services.
B) Unearned future wages to be paid to employees should be recorded as liabilities.
C) For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services.
D) Information about liabilities is more useful when the balance sheet identifies them as either current or long term.
E) Liabilities can involve uncertainty in whom to pay.

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

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A ___________________ is a potential obligation that depends on a future event arising from a past transaction or event.

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contingent...

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

A) True
B) False

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Classify each of the following items as either: A.Current liability B.Long-term liability C.Not a liability Classify each of the following items as either: A.Current liability B.Long-term liability C.Not a liability

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1. A; 2. A; 3. A; 4....

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A company's income before interest expense and income taxes in 2016 and 2017 is $225,000 and $250,000, respectively. Its interest expense was $45,000 for both years. Calculate the company's times interest earned ratio, and comment on its level of risk.

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2016: 5.0
2017: 5.6
Risk analysis: The i...

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Calculate the total amount of FICA withholding for an employee whose pay is $2,400 for the first pay period of the year. The tax rate for FICA-Social Security is 6.2% of the first $118,500 of employee earnings per calendar year and the tax rate for FICA-Medicare is 1.45% of all earnings.

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The correct times interest earned computation is:


A) (Net income + Interest expense + Income taxes) /Interest expense.
B) (Net income + Interest expense - Income taxes) /Interest expense.
C) (Net income - Interest expense - Income taxes) /Interest expense.
D) (Net income - Interest expense + Income taxes) /Interest expense.
E) Interest expense/(Net income + Interest expense + Income taxes expense) .

F) All of the above
G) B) and E)

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