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Exam 9: Reporting and Analyzing Current Liabilities

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Question 41

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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) A) and B)
G) All of the above

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Question 42

Multiple Choice

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The amount of federal income taxes withheld from an employee's paycheck is determined by:

A) Current earnings for the pay period and number of withholding allowances the employee claims.
B) The employer's merit rating.
C) The amount of social security taxes withheld.
D) Multiplying the gross pay by 6.2%.
E) Tax tables provided by the state in which the employee works.

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

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Question 43

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A corporation has a $40,000 credit balance in the Income Tax Payable account.Period end information shows that the actual liability is $47,000.The company should record an entry to debit Income Tax Expense for $7,000 and credit Income Taxes Payable for $7,000.

An employee earned $4,600 in February working for an employer.Cumulative earnings of the previous pay periods are $4,800.The FICA tax rate for Social Security is 6.2% of the first $127,200 of earnings 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.What is the amount the employer should record as payroll taxes expense for the month of February?

A note payable can be used to extend the payment due on an account payable.

All of the following statements regarding uncertainty in liabilities are true except:

A company sold $12,000 worth of bicycles with an extended warranty.The company's experience is that warranty expense averages 2% of sales.The current period's entry to record the warranty expense is:

On November 1,Alan Company signed a 120-day,8% note payable,with a face value of $9,000.Alan made the appropriate year-end accrual.What is the journal entry as of March 1 to record the payment of the note assuming no reversing entry was made? (Use 360 days a year.)

If the times interest earned ratio:

Describe contingent liabilities and how to account for and/or report them.

Debt guarantees are usually disclosed as a contingent liability.

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

On December 1,Victoria Company signed a 90-day,6% note payable,with a face value of $15,000.Assuming the company does not prepare reversing entries,what is the journal entry to record the repayment of the note on March 1?

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000.Its times interest earned ratio is 2.5.

A company has 90 employees and a weekly payroll of $117,000.The FICA-social security tax withheld totals $7,254 and the FICA-Medicare tax withheld totals $1,696.50.The total withholding for federal income tax is $16,500.Prepare the journal entry to accrue this week's salaries expense and withholdings.

Richardson Fields receives $31,680 cash in advance ticket sales for 11 home soccer games.Record the advance ticket sales on March 31.Record the revenue earned for the first game played on August 17.

In the accounting records of a defendant,lawsuits:

The chief executive officer earns $20,000 per month.As of June 30,her gross pay was $120,000.The tax rate for Social Security is 6.2% of the first $127,200 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 4.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.What is the amount of FICA- Social Security withheld from this employee for the month of July?

An employee earns $5,500 per month working for an employer.The FICA tax rate for Social Security is 6.2% of the first $127,200 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 $182 in federal income taxes withheld.The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month.What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)

The payroll records of a company provided the following data for the weekly pay period ended December 7: The FICA social security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this week's wages paid to each employee.The federal and state unemployment tax rates are 0.8% and 5.4%,respectively,on the first $7,000 paid to each employee.Prepare the journal entries to (a)accrue the payroll and (b)record payroll taxes expense.