Deck 11: Current Liabilities and Payroll

Question 1

Amounts owed for products or services purchased on account are accounts receivable.

Answer 1

False

Question 2

Firewood Company signed a three-year note payable for $45,000 at 7% annual interest. What is the interest expense for 2013 if the note was signed on August 1, 2013?

A) $1,575
B) $1,313
C) $9,450
D) $3,150

Answer 2

B

Question 3

Jade signs a $6,500, 8.5%, six-month note dated November 1, 2013. The interest expense recorded for this note in 2013 will be:

A) $133.
B) $92.
C) $276.
D) $184.

Answer 3

B

Question 4

Where does unearned revenue to be earned in six months appear on the balance sheet?

A) under long-term investments
B) under current liabilities
C) under current assets
D) under long-term assets

Question 5

Which of the following would be included in the journal entry to record the payment of sales taxes payable?

A) a debit to Sales Tax Payable
B) a credit to Sales Tax Expense
C) a debit to Sales Tax Expense
D) a credit to Sales Tax Payable

Question 6

If a long-term liability is paid in installments, the maker will report the current portion of the note payable as a current liability.

Question 7

Revenue collected but not yet earned is recorded as:

A) Unearned Revenue.
B) Accrued Revenue.
C) Service Revenue.
D) Uncollected Revenue.

Question 8

Unearned revenues relating to a one-year service contract are current liabilities until they are earned.

Question 9

A $40,000, four-month, 6.5% note payable was issued on October 1, 2015. Which of the following would be included in the journal entry required on the note's maturity date by the borrower?

A) a credit to Note payable for $40,867
B) a credit to Cash for $40,000
C) a debit to Interest expense for $217
D) a debit to Interest payable for $217

Question 10

Sales revenue for a sporting goods store amounted to $525,000 for the current period. All sales are on account and are subject to a sales tax of 9%. Which of the following would be included in the journal entry to record the sales?

A) a debit to Sales Revenue for $525,000
B) a credit to Accounts Receivable for $525,000
C) a debit to Sales Tax Payable for $47,250
D) a debit to Accounts Receivable for $572,250

Question 11

Amounts owed for products or services purchased on account are called:

A) accounts payable.
B) unearned revenue.
C) accrued expense.
D) warranty payable.

Question 12

A $30,000, three-month, 7% note payable was issued on December 1, 2015. What is the amount of accrued interest on December 31, 2015?

A) $175
B) $267
C) $133
D) $275

Question 13

Which of the following correctly describes the accounting treatment for interest payable?

A) It is shown on the balance sheet as a current liability.
B) It is shown on the income statement as an operating expense.
C) It is shown on the balance sheet as a current asset.
D) It is shown on the balance sheet as a long-term liability.

Question 14

Which of the following accounts is credited by the seller when tax is collected on retail sales?

A) Accounts Payable
B) Payroll Tax
C) Sales Tax Payable
D) Unearned Revenue

Question 15

Which of the following is a characteristic of a current liability?

A) It is due within one year or one operating cycle, whichever is longer.
B) It is due within five years or five accounting periods, whichever is longer.
C) It is due within five years or five accounting periods, whichever is shorter.
D) It is due within one year or one operating cycle, whichever is shorter.

Question 16

A $35,000, two-month, 7% note payable was issued on December 1, 2015. What is the amount of interest expense recorded in the year 2016?

A) $402
B) $204
C) $408
D) $202

Question 17

Notes payable are considered long-term debts, usually involving interest, if they are to be paid within one year or less.

Question 18

Which of the following occurs when a company records accrued interest expense on a note payable?

A) Interest Expense is credited.
B) Note Payable is credited.
C) Cash is debited.
D) Interest Payable is credited.

Question 19

Amounts owed for products or services, due within one year, are current liabilities.

Question 20

Which of the following liabilities is created when a company receives cash for services to be provided in the future?

A) unearned revenue
B) accrued liability
C) accounts payable
D) estimated warranty payable

Question 21

Jane Services sells a service plan for commercial computer maintenance. The price is $1,350 per year, paid in advance. On October 1, 2015, Jane sells a service plan to a new customer for cash, and the plan covers the period October 1, 2015 to September 30, 2016. Provide the journal entry to record the adjustment needed on December 31, 2015.

Question 22

The journal entry for accrued interest on a note payable by the borrower includes:

A) a debit to Interest Expense and credit to Cash.
B) a debit to Interest Expense and credit to Interest Payable.
C) a debit to Interest Payable and credit to Cash.
D) a credit to Interest Expense and debit to Notes Payable.

Question 23

Ben Inc. recently signed a $350,000, six-month note on August 22, 2013. The interest rate is 6.5%. How much total interest will be due on the note at maturity?

A) $9,479
B) $22,750
C) $11,375
D) $7,583

Question 24

On December 31, 2014, Ferrero Inc. borrowed $500,000 by signing a note payable. The note is for 5 years and bears interest at the rate of 8%. The note is payable in 5 yearly installments of $125,219 due at the end of every year beginning on December 31, 2015. Which portion is classified as the long-term portion of Notes Payable at December 31, 2014?

Question 25

On December 31, 2014, Ferrero Inc. borrowed $500,000 by signing a note payable. The note is for 5 years and bears interest at the rate of 8%. The note is payable in 5 yearly installments of $125,219 due at the end of every year beginning on December 31, 2015. What amount represents the current portion of Long-term Notes Payable at December 31, 2014?

Question 26

On September 1, 2013, Ferrero Inc. borrowed $125,000 by signing a note payable. The note is for 9 months and bears interest at a rate of 7.2%. Provide the journal entry to accrue interest expense at the end of 2013.

Question 27

Which of the following accounts will be credited by the borrower when a promissory note is issued?

A) Note Payable
B) Note Receivable
C) Interest Payable
D) Cash

Question 28

Barter Company sold goods for $875,500 on account. The company operates in a state that imposes a 6% sales tax. Which of the following would be the amount of the sales tax payable to the state?

A) $52,530
B) $50,540
C) $45,300
D) $55,090

Question 29

On August 31, 2013, Peter Services received $3,500 in advance from a customer. Which of the following would be the journal entry to record the receipt of cash?

A) debit Unearned Revenue $3,500 and credit Cash $3,500
B) debit Cash $3,500 and credit Service Revenue $3,500
C) debit Unearned Revenue $3,500 and credit Service Revenue $3,500
D) debit Cash $3,500 and credit Unearned Revenue $3,500

Question 30

Victoria Sales made total cash sales in February of $666,000, and they are subject to 7.5% sales tax. Please provide the summary entry to record sales revenues and sales tax payable.

Question 31

Celia's had sales of $8,421. The state sales tax rate is 8%. Sales are for cash. What amount will be credited to the Sales Revenue account?

A) $8,421
B) $9,095
C) $674
D) $7,747

Question 32

On April 10, 2013, Peter Services received $4,800 in advance from a customer for one month's service, to be provided April 10, 2013 to May 10, 2013. What would be the journal entry to adjust the accounts at the end of April?

A) debit Service Revenue $1,600 and credit Unearned Revenue $1,600
B) debit Unearned Revenue $3,200 and credit Service Revenue $3,200
C) debit Unearned Revenue $4,800 and credit Service Revenue $4,800
D) debit Service Revenue $3,200 and credit Accounts Receivable $3,200

Question 33

On October 1, 2014, Ferrero Inc. borrowed $225,000 by signing a note payable. The note is for 9 months and bears interest at a rate of 8%. The company properly accrued interest at the end of 2014. Provide the journal entry at the end of June, 2015 when the note is settled.

Question 34

Gross pay is the total amount of salary, wages, commissions, and bonuses earned by an employee during a pay period, after taxes or any other deductions.

Question 35

On July 1, 2013, Ferrero Inc. purchased merchandise inventory for $350,000 by signing a note payable. The note is for 6 months and bears interest at a rate of 8%. Provide the journal entry for this transaction, using a perpetual inventory system.

Question 36

Gem Corp. had sales of $3,500. The state sales tax rate is 8.2%. Sales are for cash. What amount will be debited to the Cash account?

A) $3,500
B) $3,787
C) $287
D) $350

Question 37

Jane Services sells a service plan for commercial computer maintenance. The price is $1,650 per year, paid in advance. On October 1, 2013, Jane sells a service plan to a new customer for cash. Provide the journal entry to record this transaction on October 1.

Question 38

At the maturity of a note payable, a borrower will pay:

A) the principal plus interest.
B) the principal amount only.
C) the interest amount only.
D) the principal minus interest.

Question 39

On July 1, 2013, Ferrero Inc. purchased merchandise inventory for $500,000 by signing a note payable. The note is for 6 months and bears interest at a rate of 8%. Provide the journal entry at the end of December for payment of the note.

Question 40

Applied Foods had cash sales of $598,000 during the month of August. Sales taxes of 6.5% were collected on the sales. Prepare a compound journal entry to record the sales revenue and sales tax for the month.

Question 41

FUTA, Federal unemployment compensation tax, is not withheld from an employees' gross earnings.

Question 42

Art Panache is the sole employee of Panache Sales. His employer pays a portion of his health insurance premium, and also contributes to a retirement plan in his name. The company's share of the health insurance premium is $600, and the company's contribution to the retirement plan is $780. The journal entry in the payroll cycle to record the employee benefits to be paid by the company should include a debit to Employee Health Insurance Payable for $1,380.

Question 43

Employer FICA tax is a tax paid by the employer and is added to the employee's pay.

Question 44

Benefits are extra compensation-items that are not paid directly to an employee.

Question 45

FICA tax is paid by the employee only and is deducted from gross pay.

Question 46

FUTA, Federal unemployment compensation tax, is paid by the employer only and is not deducted from an employee's gross pay.

Question 47

SUTA, State unemployment compensation tax, is paid by the employer only and is not deducted from an employee's gross pay.

Question 48

Net pay is the total amount of compensation that the employee takes home, after the deductions are made.

Question 49

The Social Security system is funded by contributions from both the employer and employee.

Question 50

Establishing controls for efficiency of the payroll process is one of the two key controls for payroll.

Question 51

FICA tax is a tax which is paid by the employee only.

Question 52

Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. He is also subject to federal income tax at a rate of 20%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The journal entry in the payroll cycle to record the employer's payroll tax expense includes a credit to FICA-OASDI Taxes Payable for $310. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

Question 53

SUTA, State unemployment compensation tax, is not withheld from an employees' gross earnings.

Question 54

The employee federal and state income tax and Social Security tax are optional deductions under payroll withholding deductions.

Question 55

Employer FICA is a tax expense that is paid out by the employer and recorded as a payroll tax expense.

Question 56

FICA tax is a tax which is paid both by the employer and the employee in equal amounts.

Question 57

Income taxes are withheld from each employee's paycheck.

Question 58

The old age, survivors, and disability insurance portion of FICA taxes is imposed on all of an individual employee's earnings.

Question 59

The Bergan Corp. has gross pay for March of $50,000. The journal entry in the payroll cycle to record salary expense would include a debit to Salaries and Wages Payable for $50,000.

Question 60

Gross pay is the total amount of compensation earned by an employee, after the deductions are made.

Question 61

Which of the following deductions is paid by both the employer and employee?

A) Federal income taxes
B) Federal unemployment taxes
C) FICA taxes
D) SUTA taxes

Question 62

Federal income taxes are:

A) deducted to arrive at an employee's gross pay.
B) added to arrive at an employee's net pay.
C) deducted to arrive at an employee's net pay.
D) not borne by the employee.

Question 63

Berkley's gross pay for the month is $5,400. His deduction for federal income tax is based on a rate of 18%. He has no voluntary deductions. His yearly pay is under the limit for OASDI. What is the amount of Berkley's net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

A) $4,122.90
B) $5,400.00
C) $5,094.90
D) $4,428.00

Question 64

Which of the following are extra compensation items that are not paid directly to an employee?

A) Bonuses
B) Benefits
C) Wages
D) Commissions

Question 65

Parrish Sales withholds $720 from Art Parrish's paycheck for federal income tax. This amount is part of the company's payroll tax expense.

Question 66

Rocco worked 43 hours at his job during the first week of March, 2015. He is paid $14.5 per hour and receives overtime at the rate of time-and-one-half for hours worked over forty. What is Rocco's gross pay for the week?

A) $623.50
B) $628.00
C) $645.25
D) $935.25

Question 67

________ is pay stated as a percentage of a sale amount.

A) Salary
B) Wage
C) Commission
D) Bonus

Question 68

Which of the following is paid by the employer only?

A) OASDI tax
B) Medicare tax
C) Employee income tax
D) Federal unemployment tax

Question 69

Isabelle's gross pay for the week is $850. Her deduction for federal income tax is based on a rate of 19%. She has voluntary deductions of $135. Her yearly pay is under the limit for OASDI. What is the amount of her net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

A) $553.50
B) $688.50
C) $640.47
D) $505.47

Question 70

Which of the following are required to be deducted from employees' paychecks?

A) Federal income tax
B) SUTA
C) FUTA
D) Charitable contributions

Question 71

Which of the following is pay over and above base salary, usually paid for exceptional performance?

A) FICA
B) Benefits
C) Wages
D) Bonuses

Question 72

________ is a pay amount stated at an hourly rate.

A) Salary
B) Wage
C) Commission
D) Bonus

Question 73

Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. The total amount of employee FICA tax is $565. (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Question 74

Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. He is also subject to federal income tax at a rate of 20%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The journal entry in the payroll cycle to record employer's payroll tax expense includes a credit to FICA-Medicare Taxes Payable for $145. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

Question 75

Rocco worked 43 hours at his job during the first week of March, 2015. He is paid $14.5 per hour and receives overtime at the rate of time-and-one-half for hours worked over 40. Rocco pays income taxes at 15% and 5.65% for OASDI and Medicare. All of his income is taxable for FICA. What is Rocco's net pay?

A) $548.46
B) $512.00
C) $446.75
D) $483.21

Question 76

Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?

A) FICA-OASDI taxes
B) Sales Tax
C) Federal income tax
D) FICA-Medicare taxes

Question 77

Isabelle's gross pay for the week is $850. Her deduction for federal income tax is based on a rate of 19%. She has voluntary deductions of $135. Her yearly pay is under the limit for OASDI. What is the amount of FICA-Medicare Tax deducted from her pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

A) $198.03
B) $12.33
C) $96.47
D) $209.53

Question 78

Tom's gross pay for the month is $2,400. Tom's deduction for federal income tax is based on a rate of 20%. Tom has no voluntary deductions. Tom's yearly pay is under the limit for OASDI. What is the amount of FICA withheld from Tom's pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

A) $615.60
B) $135.60
C) $480.00
D) $296.40

Question 79

It is mandatory for both the employer and employee to pay:

A) FICA.
B) SUTA.
C) Employee income tax.
D) Federal unemployment tax.

Question 80

The journal entry in the payroll cycle to record employer's payroll tax expense will include a debit to Employee Income Taxes Payable.