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Exam 10: Liabilities: Current, Installment Notes, and Contingencies

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Question 1

Multiple Choice

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The journal entry to record the monthly payroll on April 30 would include a

A) credit to Salaries Payable for $8,150
B) debit to Salaries Expense for $7,902
C) debit to Salaries Payable for $8,150
D) debit to Salaries Payable for $7,902

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Question 2

Multiple Choice

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Scott Company sells merchandise with a one-year warranty. Sales consisted of 2,500 units in Year 1 and 2,000 units in Year 2. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2 for the Year 1 sales. Similarly, 30% of repairs will be made in Year 2 and 70% in Year 3 for the Year 2 sales. In the Year 3 income statement, how much of the warranty expense shown will be due to Year 1 sales?

A) $6,000
B) $14,000
C) $20,000
D) $0

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Question 3

Multiple Choice

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Proper payroll accounting methods are important for a business for all the reasons below except

Which of the following are included in the employer's payroll taxes?

Most employers are levied a tax on payrolls for

Journalize the following transactions for Riley Corporation: Dec. 31 $\quad$ The accrued product warranty expense for the year is estimated to be $2.5 \%$ of sales. Sales for the year totaled $\$ 8,850,000$ . 31 $\quad$$\quad$$\quad$ The accrued vacation pay for the year is estimated to be $\$ 75,000$ . 31 $\quad$$\quad$$\quad$ Paid First Insurance Co. $\$ 55,000$ as fund trustee for the pension plan. The annual pension cost is $\$ 87,000$ .

On January 1, Gemstone Company obtained a $165,000, 10-year, 7% installment note from Guarantee Bank. The note requires annual payments of $23,492, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry to record the payment of the first annual amount due on the note would include a

Each year there is a ceiling for the amount that is subject to all of the following except

The discount on a note payable is charged to an account that has a normal credit balance.

Which is not a determinate in calculating federal income taxes withheld from an individual's pay?

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 3 carrying amount in the allocation of periodic payments table for this installment note will be equal to

Nelson Industries warrants its products for one year. The estimated product warranty is 4.3% of sales. Sales were $475,000 for September. In October, a customer received warranty repairs requiring $215 of parts and $65 of labor. ​ (a) Joumalize the adjusting entry required at September 30 , the end of the first month of the current year, to record the estimated product warranty expense. (b) Journalize the entry to record the warranty work provided in October. ​ ​

Kelly Howard has the following transactions. Prepare the journal entries. ​ ​

According to a summary of the payroll of Scotland Company, salaries for the period were $500,000. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (5.4%) and federal (0.8%) unemployment taxes. All earnings are subject to social security tax of 6.0% and Medicare tax of 1.5%. ​ (a) Joumalize the entry to record the accrual of payroll. If required, round your answers to the nearest cent. (b) Journalize the entry to record the accrual of payroll taxes. If required, round your answers to the nearest cent.

​An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, of the first year, for each of the next five years. After the final payment, the carrying amount on the note will be​

The journal entry used to record the payment of a discounted note is

The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n)

Federal income taxes are subject to a maximum amount per employee per year.

Receiving payment prior to delivering goods or services causes a current liability to be incurred.

For Company A and Company B: (a) Calculate the quick ratio for each company. Round ratios to two decimal places. (b) Comment on which one is more able to meet current liabilities. ​