Question 1

What factor distinguishes an employee from an independent contractor?

Accepted Answer

When a business supervises, directs, and controls an individual's work, the individual is an employee of the business. When a business pays an individual for specific services, but the individual supervises and controls the work, then that individual is an independent contractor.

Question 2

Match between columns
                        Premises: If a business does not plan to use any of its current assets to repay a debt,then that debt is listed as long term even if it is due within a year.
Liquidity is the ability of a business to repay liabilities in the long run.
Operating cycles for most businesses are less than one year.
The current ratio is computed by dividing current assets by net income.
The current ratio is a useful measure of a company's liquidity.

Accepted Answer

The Answer of False and True is...

Question 3

Match between columns
                        Premises: An employer will submit $8,250 in FICA taxes for an employee who earns $55,000 annually.(Assume a Social Security rate of 6 percent on the first $110,000 of income and a Medicare rate of 1.5 percent on all earnings.)
A voluntary deduction,such as a charitable contribution,creates a liability when it is withheld from employee pay.
If an employer records gross pay of $2,400 and withholds $700 of that amount,then the employer will recognize $1,700 in salary expense.
The amount of federal tax withheld from an employee's salary depends on the employee's gross pay and the number of withholding allowances the employee claims.
Withheld taxes are recorded in the payroll tax expense account.

Accepted Answer

The Answer of True and False is...

Question 4

[The following information applies to the questions displayed below.]
The following information is taken from the balance sheet of Menendez Company on January 1, Year 1:
 
-On January 2,Year 1,the company earned revenue on account of $8,000.
How will this transaction affect the current ratio?

Accepted Answer

Current ratio = Current assets ÷ Current liabilities
Current ratio = ($12,000 + $8,000) ÷ $4,000 = 5 to 1

Question 5

Match between columns
                        Premises: The amount of warranty expense is an estimate that is based on the amount of merchandise sold.

Accepted Answer

The Answer of True and False is...

Question 6

The December 31,Year 1,balance sheet of Rowan Company shows current assets of $32,000 and current liabilities of $20,000.On January 1,Year 2,the company had the following two transactions:
1)Issued common stock for $10,000 cash
"2)Received a $6,000 cash payment for its accounts receivable
After the two transactions are recorded,what is the company's current ratio?"

Accepted Answer

Current ratio = Current assets ÷ Current liabilities
Current ratio = ($32,000 + $10,000 + $6,000 ? $6,000) ÷ $20,000 = 2.1 to 1

Question 7

What is the purpose of the Federal W-4 form?

Accepted Answer

Employee's Withholding Allowance Certificate, Form W-4, is the form used to document the number of allowances claimed by an employee. Employees are generally allowed to claim one allowance for themselves and one for each legal dependent.

Question 8

During Year 1,its first year of operations,Benitez Co.reported sales of $800,000.At the end of Year 1,the company estimated its warranty obligation at 3% of sales.During Year 1,the company paid $13,000 cash to settle warranty claims.Which of the following statements is true?

Accepted Answer

Year 1 Warranty expense = $800,000 × 3% = $24,000
Accruing the warranty obligation increases liabilities (warranties payable) and increases expenses (warranty expense) by $24,000. Settlement of the warranty claims decreases assets (cash) and decreases liabilities (warranties payable) by $13,000. Thus, at the end of Year 1, the warranties payable account has a balance of $11,000 ($24,000 ? $13,000).
Cash decreases by $13,000 when the warranty obligations are settled.

Question 9

Which of the following is not an item deducted from salary expense to arrive at net pay?

Accepted Answer

Federal unemployment tax is paid entirely by the employer; as such, it is not withheld from an employee's pay.

Question 10

When do the effects of warranty obligations affect the statement of cash flows?

Accepted Answer

Cash is usually used to settle a warranty claim made by a customer and affects the statement of cash flows at that time. Although cash may be collected when the sale is made, that cash is not related to the warranty obligation. The accrual of the warranty obligation increases the liability Warranties Payable and increases Warranty Expense; as such, that transaction does not affect the statement of cash flows.

Question 11

What is the current ratio used to evaluate?

Accepted Answer

The primary ratio used to evaluate liquidity is the current ratio. Liquidity describes the ability to generate sufficient short-term cash flows to pay obligations as they come due.

Question 12

[The following information applies to the questions displayed below.]
The following information is taken from the balance sheet of Menendez Company on January 1, Year 1:
 
-On January 1,Year 1 Menendez Company paid $2,000 cash to reduce its accounts payable.
How will this transaction affect the current ratio?

Accepted Answer

Current ratio = Current assets ÷ Current liabilities
Before transaction: Current ratio = $12,000 ÷ $4,000 = 3 to 1
After transaction: Current ratio = ($12,000 ? $2,000) ÷ ($4,000 ? $2,000) = 5 to 1

Question 13

How is the current ratio calculated?

Accepted Answer

Current ratio = Current assets ÷ Current liabilities

Question 14

Which of the following items would be least likely to appear in the current liabilities section of a classified balance sheet?

Accepted Answer

Current (short-term) liabilities would be those due within one year or an operating cycle, whichever is longer. An operating cycle is defined as the average time it takes a business to convert cash to inventory, inventory to accounts receivable, and accounts receivable back to cash. Accounts payable, interest payable, and salaries payable are typically current liabilities.

Question 15

The following information is taken from the balance sheet of Atlanta Company:

What is Atlanta Company's current ratio?

Accepted Answer

Current ratio = Current assets ÷ Current liabilities
Current ratio = $960 ÷ $600 = 1.6 to 1

Question 16

On a classified balance sheet,the financial statement user will be able to distinguish between:

Accepted Answer

Classified balance sheets distinguish between current and noncurrent items with regards to both assets and liabilities.

Question 17

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.What is the company's current ratio?

Accepted Answer

Current ratio = Current assets ÷ Current liabilities
Current ratio = $8,650 ÷ $6,000 = 1.44 to 1

Question 18

Which of the following terms describes the ability to generate short-term cash flows?

Accepted Answer

The answer of Which of the following terms describes the...

Question 19

Which of the following items would most likely not be classified as a current asset?

Accepted Answer

The answer of Which of the following items would most...

Question 20

Greer Company pays Jamal Perry a salary of $3,000 per week.How much FICA tax must Greer pay with regards to this employee (including both the employee and employer portions)? (Assume a Social Security rate of 6 percent on the first $110,000 of income and a Medicare rate of 1.5 percent on all earnings.)

Accepted Answer

The answer of Greer Company pays Jamal Perry a salary...

Quiz 9: Accounting for Current Liabilities and Payroll

What factor distinguishes an employee from an independent contractor?

Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false.

[The following information applies to the questions displayed below.] The following information is taken from the balance sheet of Menendez Company on January 1, Year 1: -On January 2,Year 1,the company earned revenue on account of $8,000. How will this transaction affect the current ratio?

Indicate whether each of the following statements is true or false.

What is the purpose of the Federal W-4 form?

During Year 1,its first year of operations,Benitez Co.reported sales of $800,000.At the end of Year 1,the company estimated its warranty obligation at 3% of sales.During Year 1,the company paid $13,000 cash to settle warranty claims.Which of the following statements is true?

Which of the following is not an item deducted from salary expense to arrive at net pay?

When do the effects of warranty obligations affect the statement of cash flows?

What is the current ratio used to evaluate?

How is the current ratio calculated?

Which of the following items would be least likely to appear in the current liabilities section of a classified balance sheet?

The following information is taken from the balance sheet of Atlanta Company: What is Atlanta Company's current ratio?

On a classified balance sheet,the financial statement user will be able to distinguish between:

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.What is the company's current ratio?

Which of the following terms describes the ability to generate short-term cash flows?

Which of the following items would most likely not be classified as a current asset?