Question 1

Gross earnings for the pay period are $138,000.Required payroll deductions are: Social Security $9,246;Medicare $2,001;Federal Income tax $24,840 and State income tax $5,313.What is the net pay to employees?
A)$96,600
B)$138,000
C)$179,400
D)$107,847

Accepted Answer

Net pay = Gross pay to employees − Federal & State Income taxes − FICA (Social Security and Medicare)taxes
= $138,000 − $9,246 − $2,001 − $24,840 − $5,313 = $96,600

Question 2

Sierra Blanca Co.is required to match $82,620 for its portion of FICA and $8,460 for federal and state unemployment taxes.The entry to record Sierra Blanca's payroll taxes includes:
A)debit to Payroll Tax Expense for $91,080.
B)credit to Payroll Tax Expense for $91,080.
C)debit to FICA Payable for $82,620.
D)debit to Unemployment Tax Payable of $8,460.

Accepted Answer

The entry to record employer payroll taxes includes a debit to Payroll Tax Expense for $91,080,a credit to FICA Payable for $82,620 and Unemployment Tax Payable for $8,460.

Question 3

Employees' gross earnings differ from their net pay because of:
A)unemployment taxes.
B)payroll deductions.
C)accounts payable.
D)corporate income taxes.

Accepted Answer

Net earnings to the employee are equal to gross earnings less payroll deductions either required by law (e.g. ,FICA,Medicare)or voluntarily requested (e.g. ,medical insurance premiums,parking,charitable contributions,etc. ).

Question 4

Viewmont Manufacturing began the year owing its suppliers $4,800 for merchandise purchased last year.Viewmont then sold half of this merchandise for $8,000 on account.Two weeks later,Viewmont paid its suppliers $1,600 and bought another $6,400 of merchandise on account.Viewmont now has an Accounts Payable balance of:
A)$17,600.
B)$9,600.
C)$1,600.
D)$7,200.

Accepted Answer

Ending Accounts Payable balance = Beginning Accounts Payable balance + Purchases on account − Payments on account
= $4,800 + $6,400 − $1,600 = $9,600
The sales on account do not affect Accounts Payable.

Question 5

The entry to record the initial borrowing of cash by issuing a promissory note will include a debit to ________ and a credit to ________.
A)Cash;Notes Payable
B)Notes Payable;Cash
C)Interest Expense;Cash
D)Cash;Interest Expense

Accepted Answer

The entry increases Cash,an asset,and increases Notes Payable,a liability.

Question 6

The following 6%,$1,000 notes were issued on November 1.Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year on each of the notes described?
A)Interest on a 4-month note is calculated as: $1,000 × 6% × 2 / 12.
B)Interest on a 3-month note is calculated as: $1,000 × 6% × 2 / 3.
C)Interest on a 4-month note is calculated as: $1,000 × 6% × 2 / 4.
D)Interest on a 2-year note is calculated as: $1,000 × 6% × 2 / 24.

Accepted Answer

As of December 31,two months have passed since each of the notes was signed.As a result,each of the calculations should include a time factor of 2 / 12.That factor is correctly set forth for the 4-month note.

Question 7

On November 1,2018,Sky Mountain Co.borrowed $200,000 cash on a 1-year,6% note payable that requires Sky Mountain to pay both principal and interest on October 31,2019.Given no prior adjusting entries have been recorded,the adjusting journal entry on December 31,2018,Sky Mountain's year-end,would include a:
A)credit to Cash of $2,000.
B)debit to Interest Expense of $12,000.
C)credit to Interest Payable of $2,000.
D)credit to Note Payable of $2,000.

Accepted Answer

The amount of interest expense that has accrued for the months of November and December 2018 is computed as follows: $200,000 × 0.06 × 2 / 12 = $2,000.Since interest has accrued but has not yet been paid,Interest Expense must be debited and Interest Payable must be credited for $2,000.

Question 8

Accruing a liability always involves ________ expenses and ________ liabilities.
A)increasing;increasing
B)increasing;decreasing
C)decreasing;increasing
D)decreasing;decreasing

Accepted Answer

Since these types of entries relate to an expense that has been incurred but not paid,the related entries increase "Payable" accounts (liabilities)and increase the related expense accounts.

Question 9

The law requires ________ to pay FICA taxes.
A)both employee and employer
B)the employee
C)the employer
D)only retailers

Accepted Answer

Employees and their employers are required to pay FICA taxes.

Question 10

If a company forgets to record the journal entry to accrue interest expense,then its net income is too ________ and its liabilities are too ________.
A)high;high
B)low;high
C)low;low
D)high;low

Accepted Answer

The entry to accrue interest on a note increases Interest Payable,a liability,and increases Interest Expense,an expense.If that entry is not made,liabilities are understated (too low)and expenses are also understated (too low)and,as a result,net income is overstated (too high).

Question 11

The entry to record the borrowing of cash by issuing a note was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:
A)assets to be understated.
B)liabilities to be overstated.
C)stockholders' equity to be understated.
D)stockholders' equity to be overstated.

Accepted Answer

The entry should have included a debit to Cash,an asset,and a credit to Notes Payable,a liability.The correction would include a debit to Notes Receivable (to reverse the increase to this account)and a credit to Notes Payable (to correctly increase this account).If the original entry is not corrected,assets are understated and liabilities are understated.

Question 12

Payroll deductions:
A)are amounts added to employees' gross earnings to determine their net pay.
B)all voluntary increase the amount of cash an employee receives.
C)are amounts subtracted from employees' gross earnings to determine their net pay.
D)are all accounted for as expenses.

Accepted Answer

Payroll deductions are either required by law (including federal,state,county,and city income tax and FICA taxes)or voluntarily requested by employees (including voluntary deductions for charitable donations,parking,union dues,retirement savings,etc. ).

Question 13

Diana Olympic works 40 hours for Quartz,Inc.for $27 per hour.Required payroll deductions are: Social Security $66.96;Medicare $15.66;Federal income tax $104.40;and State income tax $18.00.The entry to record her net pay would cause which of the following to change as described?
A)Salaries and Wages Expense increases by $1,080.
B)Salaries and Wages Expense decreases by $1,080.
C)Salaries and Wages Payable increases by $1,080.
D)Salaries and Wages Payable decreases by $1,080.

Accepted Answer

The journal entry would include a debit to Salaries and Wages Expense for $1,080 (or 40 hours × $27 per hour),a credit to Withheld Income Taxes Payable for $122.40 (or $104.40 + $18.00),a credit to FICA Payable for $82.62 (or $66.96 + $15.66),and a credit to Salaries and Wages Payable for $874.98 (her net pay).The debit to Salaries and Wages Expense causes that account to increase.

Question 14

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n):
A)increase in stockholders' equity.
B)decrease in assets.
C)decrease in stockholders' equity.
D)increase in liabilities.

Accepted Answer

The entry increases Cash,an asset,and increases Notes Payable,a liability.

Question 15

The journal entry to record employer payroll taxes affects:
A)assets only.
B)liabilities only.
C)liabilities and stockholders' equity.
D)assets and liabilities.

Accepted Answer

The entry to record employer payroll taxes increases Payroll Tax Expense and increases two liability accounts,FICA Payable and Unemployment Tax Payable.The increase to Payroll Tax Expense decreases net income and,as a result,total stockholders' equity.

Question 16

On November 1,2018,Sky Mountain Co.borrowed $200,000 cash on a 1-year note payable with a 6% annual rate that requires Sky Mountain to pay all the interest as well as the principal on October 31,2019.Assuming the November 1 transaction was properly recorded,how would the December 31,2018,year-end adjusting entry affect the accounting equation?
A)Liabilities decrease and stockholders' equity increases.
B)Both assets and stockholders' equity increase.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities increase and stockholders' equity increases.

Accepted Answer

Since interest has accrued but has not yet been paid,Interest Payable,a liability,must also be increased.In addition,Interest Expense must be increased,which will decrease net income and stockholders' equity.

Question 17

Gross earnings for the pay period are $100,000.Required payroll deductions are: Social Security $6,700;Medicare $1,450;Federal Income tax $18,000 and State income tax $3,850.The journal entry to record wages paid includes a:
A)$100,000 credit to Salaries and Wages Payable.
B)$6,700 debit to FICA Payable.
C)$100,000 debit to Salaries and Wages Expense.
D)$70,000 debit to Salaries and Wages Expense.

Accepted Answer

The journal entry would include a debit to Salaries and Wages Expense for $100,000 (gross pay),a credit to Withheld Income Taxes Payable for $21,850 (or $18,000 + $3,850),a credit to FICA Payable for $8,150 (or $6,700 + $1,450),and a credit to Salaries and Wages Payable for $70,000 (net pay).

Question 18

The Payroll records of Oregon Mist contained the following information for the month of November:  The journal entry to record the monthly Payroll Tax Expense would include a:
A)debit to Payroll Tax Expense of $25,200.
B)credit to FICA Taxes Payable of $43,400.
C)debit to Payroll Tax Expense of $48,650.
D)debit to Payroll Tax Expense of $26,950.

Accepted Answer

The entry to record the payroll taxes includes a debit to Payroll Tax Expense of $26,950 (or Federal unemployment taxes of $3,500 + State unemployment taxes of $1,750 + FICA taxes − employer of $21,700),a credit to FICA Payable of $21,700,and a credit to Unemployment Tax Payable for $5,250 (or $3,500 + $1,750).

Question 19

On September 1,Sky Mountain Co.borrowed $200,000 on a 6%,9-month note payable to Coast National Bank.Given no previous adjusting entries have been recorded,Sky Mountain's adjusting entry four months later at December 31 would include a:
A)debit to Interest Expense of $3,000.
B)debit to Interest Expense of $4,000.
C)debit to Interest Expense of $12,000.
D)debit to Interest Expense of $9,000.

Accepted Answer

The amount of interest expense that has accrued as of December 31 is computed as follows: $200,000 × 0.06 × 4 / 12 = $4,000.Since interest has accrued but has not yet been paid,Interest Expense must be debited and Interest Payable must be credited for $4,000.

Question 20

Issuing a note payable for cash immediately results in a(n):
A)increase in assets and an increase in liabilities.
B)decrease in assets and an increase in liabilities.
C)decrease in assets and a decrease liabilities.
D)increase in liabilities and a decrease in stockholders' equity.

Accepted Answer

The entry increases Cash,an asset,and increases Notes Payable,a liability.

Quiz 10: Liabilities

Gross earnings for the pay period are $138,000.Required payroll deductions are: Social Security $9,246;Medicare $2,001;Federal Income tax $24,840 and State income tax $5,313.What is the net pay to employees?

Sierra Blanca Co.is required to match $82,620 for its portion of FICA and $8,460 for federal and state unemployment taxes.The entry to record Sierra Blanca's payroll taxes includes:

Employees' gross earnings differ from their net pay because of:

The entry to record the initial borrowing of cash by issuing a promissory note will include a debit to and a credit to .

The following 6%,$1,000 notes were issued on November 1.Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year on each of the notes described?

Accruing a liability always involves expenses and liabilities.

The law requires ________ to pay FICA taxes.

If a company forgets to record the journal entry to accrue interest expense,then its net income is too and its liabilities are too .

The entry to record the borrowing of cash by issuing a note was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

Payroll deductions:

Diana Olympic works 40 hours for Quartz,Inc.for $27 per hour.Required payroll deductions are: Social Security $66.96;Medicare $15.66;Federal income tax $104.40;and State income tax $18.00.The entry to record her net pay would cause which of the following to change as described?

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n) :

The journal entry to record employer payroll taxes affects:

Gross earnings for the pay period are $100,000.Required payroll deductions are: Social Security $6,700;Medicare $1,450;Federal Income tax $18,000 and State income tax $3,850.The journal entry to record wages paid includes a:

The Payroll records of Oregon Mist contained the following information for the month of November: The journal entry to record the monthly Payroll Tax Expense would include a:

On September 1,Sky Mountain Co.borrowed $200,000 on a 6%,9-month note payable to Coast National Bank.Given no previous adjusting entries have been recorded,Sky Mountain's adjusting entry four months later at December 31 would include a:

Issuing a note payable for cash immediately results in a(n) :