Question 1

Use the following to answer questions 
The following information is taken from the balance sheet of Menendez Company on January 1,2016:
 
-On January 2,2016,the company recorded the following transaction:
Recording this transaction will:

Accepted Answer

The answer of Use the following to answer questions 
The...

Question 2

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

Accepted Answer

The purpose of the Federal W-4 form is to allow an employee to choose the number of withholding allowances for calculating federal withholding tax. It helps to ensure that the correct amount of federal income tax is withheld from an employee's paycheck based on their personal situation, such as marital status, number of dependents, and income level.

Question 3

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.The company's current ratio is closest to:

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities: $8,650 / $6,000 = 1.44 to 1.

Question 4

What factor distinguishes an employee from an independent contractor?

Accepted Answer

The factor that distinguishes an employee from an independent contractor is whether or not the company supervises and controls the work. Employees have a set schedule, receive guidance and training, use company tools and materials, and work under the direction of the employer. Independent contractors, on the other hand, work on their own terms, have greater autonomy, supply their own materials, and are responsible for determining their own work methods. Factors such as pay, location, and choice of classification are not definitive in determining employee status.

Question 5

Benitez Co.had sales of $800,000 in 2016.The company expects to incur warranty expenses amounting to 3% of sales.There were $13,000 of warranty obligations paid in cash during 2016.Based on this information:

Accepted Answer

The warranty expense is 3% of $800,000, which is $24,000, decreasing net earnings. Cash decreases by $13,000 due to warranty payments. The warranties payable account increases by $24,000 (expense) minus $13,000 (payments), resulting in an $11,000 increase.

Question 6

Selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%:

Accepted Answer

The transaction increases cash flow from operating activities by $208 ($200 - $130), increases total assets by $78 ($200 - $130), and increases equity by $70 ($200 - $130 - $4 (sales tax)).

Question 7

Monthly remittance of sales tax:

Accepted Answer

Remitting sales tax on a monthly basis helps to reduce liabilities as it ensures that the tax is paid promptly and not accumulated over time, thereby reducing the possibility of interest and penalty charges. B and C are not correct, as monthly remittance of sales tax is not a claims exchange transaction and does not affect stockholders' equity.

Question 8

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In December 2016,Lucas Corporation sold merchandise for $10,000 cash.Lucas estimated that $700 of warranty claims might be filed in regard to these sales.On February 12,2017,warranty work amounting to $550 was performed for one of the customers ($430 labor paid in cash and $120 from the materials inventory).
53.Which of the following answers correctly shows the effect of the recognition of the warranty obligation at the end of 2016 on the financial statements of Lucas?
A.
B.
C.
D.
      Answer: D
Learning Objective: 09-04
Topic Area: Warranty obligations
AACSB: Analytical Thinking
AACSB: Knowledge Application
AICPA: FN Measurement
AICPA: BB Critical Thinking
Blooms: Analyze
Blooms: Apply
Level of Difficulty: 2 Medium
Feedback: The entry to estimate future warranty costs related to 2016 sales increases expenses (warranty expense),which decreases net income and equity,and increases liabilities (warranties payable).
-Which of the following answers indicates the effect of the February 12,2017 entry on the financial statements of Lucas Corporation?

Accepted Answer

The warranty work performed on February 12, 2017, results in a decrease in assets (materials inventory) by $120 and a decrease in equity due to the recognition of warranty expense of $550 ($430 labor + $120 materials), resulting in a decrease in net income.

Question 9

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

Accepted Answer

Bonds payable are long-term liabilities and would not appear in the current liabilities section of a classified balance sheet. The other options, interest payable, wages payable, and accounts payable, are all short-term liabilities and would typically appear in the current liabilities section.

Question 10

Burger Barn has been named as a plaintiff in a $5 million lawsuit filed by a customer over the addictive nature of the company's french fries.Burger Barn's attorneys have advised them that the likelihood of a future obligation from the suit is remote.As a result of the lawsuit,Burger Barn should:

Accepted Answer

Since the likelihood of a future obligation is considered remote, Burger Barn is not required to disclose or recognize the lawsuit in its financial statements.

Question 11

Under what condition should a pending lawsuit be recognized as a liability on a company's balance sheet?

Accepted Answer

A pending lawsuit should only be recognized as a liability on a company's balance sheet if the outcome is probable and the amount can be reasonably estimated. This is because a probable outcome means that it is likely that the company will have to pay damages, and the amount can be estimated with some degree of accuracy. If the outcome is only reasonably possible, then it may not be appropriate to recognize a liability as the chances of the lawsuit being successful are not high enough.

Question 12

Use the following to answer questions
In December 2016,Lucas Corporation sold merchandise for $10,000 cash.Lucas estimated that $700 of warranty claims might be filed in regard to these sales.On February 12,2017,warranty work amounting to $550 was performed for one of the customers ($430 labor paid in cash and $120 from the materials inventory).
53.Which of the following answers correctly shows the effect of the recognition of the warranty obligation at the end of 2016 on the financial statements of Lucas?
A.
B.
C.
D.
      Answer: D
Learning Objective: 09-04
Topic Area: Warranty obligations
AACSB: Analytical Thinking
AACSB: Knowledge Application
AICPA: FN Measurement
AICPA: BB Critical Thinking
Blooms: Analyze
Blooms: Apply
Level of Difficulty: 2 Medium
Feedback: The entry to estimate future warranty costs related to 2016 sales increases expenses (warranty expense),which decreases net income and equity,and increases liabilities (warranties payable).
-Which of the following reflects the effect of the year-end adjusting entry to record estimated warranty expense?

Accepted Answer

The answer of Use the following to answer questions
In December...

Question 13

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 14

Which of the following items is not classified as a current asset?

Accepted Answer

Office equipment is classified as a long-term asset, not a current asset. Current assets are those that are expected to be converted into cash within one year or the operating cycle, whichever is longer. Merchandise inventory, office supplies, and prepaid rent are all examples of current assets.

Question 15

Greer Company pays Jamal Perry a salary of $3,000 per week.How much FICA tax must Greer pay on Jamal's behalf,including both the employee and employer portions?

Accepted Answer

FICA tax includes Social Security tax at 6.2% and Medicare tax at 1.45% for both employee and employer. Total FICA tax rate is 15.3% (7.65% employee + 7.65% employer). For a $3,000 salary, the total FICA tax is $3,000 * 15.3% = $459, but the closest option is $450.

Question 16

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

Accepted Answer

On a classified balance sheet, assets are generally separated into current and noncurrent categories, allowing the financial statement user to easily distinguish between assets that are expected to be converted into cash within the next year (or operating cycle, if longer) and those that are not. This information can be useful in assessing the liquidity of the company and its ability to meet its short-term obligations. The other answer choices relate to other financial statements, such as the statement of cash flows and the income statement, and are not directly related to the balance sheet.

Question 17

Use the following to answer questions 
The following information is taken from the balance sheet of Menendez Company on January 1,2016:
 
-Use the information on January 1,2016 to determine the effect of the following entry on the current ratio of Menendez Company:
This transaction will

Accepted Answer

The answer of Use the following to answer questions 
The...

Question 18

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

Accepted Answer

Current ratio= current assets/ current liabilities
=(420,000+180,000+60,000)/ (320,000+120,000)
= $660,000/$440,000
= 1.5:1
Therefore, the current ratio of Atlanta Company is 1.5 to 1. The best choice is B, 1.6 to 1, as it is the closest to 1.5 to 1.

Question 19

When do the effects of product warranties appear on the statement of cash flows?

Accepted Answer

The effects of product warranties appear on the statement of cash flows when there is a settlement of a warranty claim made by a customer. This is because a warranty claim settlement involves an outflow of cash from the company to the customer to cover the costs of repairing or replacing the faulty product. This outflow of cash is reflected in the operating activities section of the statement of cash flows under the category of "cash paid for warranties." The recognition of the warranty obligation and the sale of merchandise do not directly impact the statement of cash flows.

Question 20

Which of the following represents the correct journal entry to record a taxable cash sale of $400 if the sales tax rate is 5%?

Accepted Answer

The total amount collected from the customer is $420 (400+20), out of which $20 is sales tax payable to the government. The correct journal entry would be a debit to cash for $420, a credit to sales revenue for $400, and a credit to sales tax payable for $20.

Quiz 9: Accounting for Current Liabilities and Payroll

Use the following to answer questions The following information is taken from the balance sheet of Menendez Company on January 1,2016: -On January 2,2016,the company recorded the following transaction: Recording this transaction will: