Deck 11: Current Liabilities and Payroll

Question 1

Modern Age Company made total cash sales in February of $666,000,which are subject to 7.5% sales tax.Prepare the summary entry to record the transaction.Omit explanation.

Answer 1

Question 2

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

A)It creates a present obligation for future payment of cash or services.
B)It cannot be settled with services.
C)It is an avoidable obligation.
D)It occurs because of a future transaction or event.

Answer 2

A

Question 3

Any portion of a long-term liability that is due with the next year is reported as a current liability.

Answer 3

True

Question 4

Mars Company had cash sales of $10,000.The state sales tax rate is 10.8%.What amount is debited to the Cash account?

A)$10,000
B)$11,080
C)$1080
D)$1000

Question 5

Because amounts owed for products or services on account are typically due in 60 days,they are current liabilities.

Question 6

Amounts owed for products or services purchased on account are called ________.

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

Question 7

The IFRS definitions of current and long-term liabilities are much different than the U.S.GAAP definitions.

Question 8

Current liabilities must be paid either in cash or with goods and services within one year or within the entity's operating cycle,if the cycle is longer than a year.

Question 9

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 10

Sales revenue for a sporting goods store amounted to $526,000 for the current period.All sales are on account and are subject to a sales tax of 10%.Which of the following would be included in the journal entry to record the sales transaction?

A)a debit to Sales Revenue for $526,000
B)a credit to Accounts Receivable for $526,000
C)a debit to Sales Tax Payable for $52,600
D)a debit to Accounts Receivable for $578,600

Question 11

Unearned revenue arises because the business receives goods or services before payment has been made.

Question 12

Sales tax is an expense of the business.

Question 13

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

Question 14

Sales Tax Payable is usually calculated as a percentage of the amount of the sale.

Question 15

Which of the following would be included in the journal entry to record the payment of sales tax 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 16

Barron Company sold goods for $883,500 on account.The company operates in a state that imposes a 9% sales tax.What is the amount of the sales tax payable to the state?

A)$79,515
B)$39,758
C)$19,879
D)$159,030

Question 17

Which of the following statements regarding Accounts Payable is incorrect?

A)The Accounts Payable account is decreased with a credit.
B)Accounts payable occur because the business receives the goods or services before payment has been made.
C)Because accounts payable are typically due in 30 days,they are current liabilities.
D)Accounts payable represent debts owed to creditors.

Question 18

Unearned revenues are current liabilities until they are earned.

Question 19

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

Question 20

Venus Corp.sold goods,with a selling price of $17,221,for cash.The state sales tax rate is 8%.What amount is credited to the Sales Revenue account? (Round calculations to the nearest dollar. )

A)$17,221
B)$18,599
C)$1378
D)$15,843

Question 21

To compute the interest for notes payable,multiply principal times the annual rate of interest.

Question 22

Cash received in advance of providing goods or performing services is recorded as ________.

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

Question 23

Short-term notes payable represent a written promise by the business to pay a debt,without the addition of interest,within one year or less.

Question 24

Jupiter Services sells service plans for commercial computer maintenance.The price for each service plan is $1,650 per year,paid in advance.On October 1,2018,a service plan was sold to a new customer for cash.Prepare the journal entry to record this transaction.Omit explanation.

Question 25

The journal entry for accrued interest on a note payable 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 26

A $49,000,three-month,12% note payable was issued on December 1,2018.What is the amount of accrued interest on December 31,2018? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

A)$490
B)$708
C)$354
D)$823

Question 27

When a business 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 28

Fleetwood Company signed a three-year note payable for $59,000 at 7% annual interest.What is the interest expense for 2019 if the note was signed on August 1,2019? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

A)$2065
B)$1721
C)$12,390
D)$4130

Question 29

Management Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2019,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2019 to September 30,2020.Prepare the December 31,2019 adjusting entry.Round to two decimal places.Omit explanation.

Question 30

When borrowing cash from a bank,the business is required to sign a promissory note stating that the business will pay the principal plus interest at a specified maturity date.

Question 31

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 32

A $54,000,four-month,12% note payable was issued on October 1,2018.Which of the following would be included in the journal entry required on the note's maturity date by the borrower? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

A)a credit to Note payable for $56,160
B)a credit to Cash for $54,000
C)a debit to Interest expense for $540
D)a debit to Interest payable for $540

Question 33

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 34

Norwood Company signs a $11,000,8.5%,six-month note dated November 1,2018.The interest expense recorded for this note in 2018 will be ________.(Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

A)$935
B)$156
C)$468
D)$312

Question 35

On April 1,2019,Orbit Services received $8000 in advance of performing the services from a customer for three months of service - April,May and June.What would be the journal entry to adjust the accounts at the end of May? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

A)Debit Service Revenue $2667,and credit Unearned Revenue $2667.
B)Debit Unearned Revenue $5333,and credit Service Revenue $5333.
C)Debit Unearned Revenue $8000,and credit Service Revenue $8000.
D)Debit Service Revenue $5333,and credit Accounts Receivable $5333.

Question 36

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 37

A $45,000,two-month,9% note payable was issued on December 1,2018.What is the amount of interest expense recorded in the year 2019? (Round the final calculation to the nearest dollar. )

A)$4050
B)$338
C)$675
D)$45,675

Question 38

On August 31,2018,Allright Services received $3,500 in advance of performing the service.Which journal entry is needed 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 39

Solutions Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2018,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2018 to September 30,2019.Adjusting entries are made on December 31 of each year.Prepare the journal entry for September 30,2019.Round to two decimal places.Omit explanation.

Question 40

Unearned revenue,for services to be performed in six months,appears on the balance sheet as ________.

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

Question 41

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

Question 42

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 43

Maywood Company recently signed a $350,000,six-month note on August 22,2019.The interest rate is 7%.How much interest will be due at maturity?

A)$10,208
B)$24,500
C)$12,250
D)$8167

Question 44

On December 31,2018,Barry Company borrowed $500,000 by signing a five-year,8% note payable.The note is payable in five yearly installments of $100,000 plus interest,due at the end of every year beginning on December 31,2019.What amount represents the current portion of Long-term Notes Payable at December 31,2018?

Question 45

Mario worked 48 hours during the work week.He earns wages of $18 per hour for straight time (40 hours).The company pays time-and-half for overtime.Mario's gross pay is $864.

Question 46

Peter earns $14.50 per hour for straight time (40 hours),and the company pays him time-and-a-half for overtime.He worked 46 hours at his job during the first week of March 2018.What was Peter's gross pay for the week?

A)$667.00
B)$671.50
C)$710.50
D)$1000.50

Question 47

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

Question 48

On October 1,2019,Norway Company borrowed $225,000 by signing a nine-month,8% note payable.Interest was accrued on December 31,2019.Prepare the journal entry on July,1,2020,the date the note was paid.Omit explanation.

Question 49

The current portion of notes payable is the amount of the principal that is payable more than one year from the balance sheet date.

Question 50

On December 31,2018,Globe Company borrowed $500,000 by signing a five-year,8% note payable.The note is payable in five yearly installments of $100,000 plus interest,due at the end of every year beginning on December 31,2019.Which portion is classified as the long-term portion of Notes Payable at December 31,2018?

Question 51

On July 1,2018,Sanchez Company 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%.Prepare the journal entry for this transaction,using a perpetual inventory system.Omit explanation.

Question 52

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 53

A journal entry is prepared to reclassify the current portion of a note payable.

Question 54

Extra compensation items that are not paid directly to an employee are called ________.

A)bonuses
B)benefits
C)wages
D)commissions

Question 55

The current portion of long-term notes payable is ________.

A)the amount of principal that will be paid within five years
B)typically included with the long-term liabilities on the balance sheet
C)recorded as an adjusting entry
D)reclassified as current for reporting purposes on the balance sheet

Question 56

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

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

Question 57

On September 1,2018,Tri-Cities Company borrowed $125,000 by signing a nine-month,7.2% note payable.Prepare the journal entry to accrue interest expense on December 31,2018.Omit explanation.

Question 58

Retirement compensation is a benefit because the employer sets aside money for the employee's future retirement.

Question 59

________ is a pay amount stated at an hourly rate.

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

Question 60

On June 30,2019,Development Company purchased merchandise inventory for $500,000 by signing a six-month,8% note payable.Prepare the journal entry for the payment of the note on December 30,2019.Omit explanation.

Question 61

Regarding net pay,which of the following statements is incorrect?

A)The net pay amount is not important for accounting purposes.
B)The amount of compensation that the employee actually takes home is net pay.
C)The employer either writes a paycheck to each employee for his or her net pay or directly deposits the employee's net pay into the employee's bank account.
D)Net pay equals gross pay minus all deductions.

Question 62

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

A)federal income tax
B)SUTA
C)FUTA
D)charitable contributions

Question 63

Regarding gross and net pay,which of the following statements is correct?

A)Gross pay minus all deductions such as income tax withheld equals net pay.
B)Net pay represents the total salaries and wages expense to the employer.
C)For most businesses,gross pay equals net pay.
D)Employers are required to deposit net pay into the employee's bank account.

Question 64

All earnings are subject to Medicare tax.

Question 65

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 66

There are numerous ways to label an employee's pay.Complete the table to show how each type of employee pay is generally labeled.

Question 67

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

Question 68

Tony's gross pay for the month is $2700.Tony's deduction for federal income tax is based on a rate of 21%.Tom has no voluntary deductions.Tony's year-to-date pay is under the limit for OASDI.What is the amount of FICA tax withheld from Tony's pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.Do not round any intermediate calculations,and round your final answer to the nearest cent. )

A)$773.55
B)$206.55
C)$567.00
D)$387.45

Question 69

Brad's gross pay for the month is $15,400.His deduction for federal income tax is based on a rate of 18%.He has no voluntary deductions.His year-to-date pay is under the limit for OASDI.What is Brad's net pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

A)$11,450
B)$15,400
C)$14,222
D)$12,628

Question 70

The employer is required to directly deposit the employee's take-home pay into the employee's bank account.

Question 71

Amy's gross pay for the week is $870.00.Her deduction for federal income tax is based on a rate of 25%.She has voluntary deductions of $245.00.Her year-to-date pay is under the limit for OASDI.What is her net pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.(Round all calculations to the nearest cent. )

A)$407.50
B)$652.50
C)$585.94
D)$340.94

Question 72

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 73

Hank earns $24.00 per hour with time-and-a-half for hours in excess of 40 per week.He worked 50 hours at his job during the first week of March 2018.Hank pays income taxes at 15% and 7.65% for OASDI and Medicare.All of his income is taxable under FICA.Determine Hank's net pay for the week.(Do not round any intermediate calculations,and round your final answer to the nearest cent. )

A)$1122.00
B)$1021.02
C)$835.80
D)$799.80

Question 74

Andrew,an employee of Super Retailer,Inc. ,has gross salary for March of $5,500.The entire amount is under the OASDI limit of $118,500 and thus subject to FICA.The total amount of employee FICA tax is $841.50.(Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%. )

Question 75

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

Question 76

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 77

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

Question 78

The old age,survivors,and disability insurance component of FICA tax is imposed on the entire amount of an individual employee's earnings.

Question 79

Income taxes are withheld from the employee's paycheck.

Question 80

Social Security (FICA)tax is withheld from the employees' pay and matched by the employer.