Question 1

During June,Vixen Company sells $850,000 in merchandise that has a one year warranty.Experience shows that warranty expenses average about 3% of the selling price.Customers returned $14,000 of merchandise for warranty replacement during the month.The entry to record the estimated warranty liability at the end of the month is:

Accepted Answer

The answer of During June,Vixen Company sells $850,000 in merchandise...

Question 2

All of the following statements related to recording warranty expense are true except:

Accepted Answer

Warranty expense should be recorded in the period when the product is sold, not when the warranty service is performed.

Question 3

A company has interest expense of $52,000,income taxes expense of $121,000,and net income of $281,000.The company's times interest earned ratio equals:

Accepted Answer

Times interest earned ratio = Net income / Interest expense= 281,000 / 52,000= 5.40

Question 4

During June,Vixen Company sells $850,000 in merchandise that has a one year warranty.Experience shows that warranty expenses average about 3% of the selling price.Customers returned $14,000 of merchandise for warranty replacement during the month.The entry to settle the customer warranties is:

Accepted Answer

The correct entry to settle customer warranties involves debiting the Estimated Warranty Liability account and crediting Merchandise Inventory for the cost of the merchandise returned under warranty, which is $14,000 in this case. This reflects the use of the warranty liability previously estimated and the reduction in inventory due to the replacement of returned merchandise.

Question 5

On December 1,Watson Enterprises signed a $24,000,60-day,4% note payable as replacement of an account payable with Erikson Company.What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)

Accepted Answer

The interest expense accrued at December 31 can be calculated using the formula: Interest = Principal x Rate x Time. Here, Principal = $24,000, Rate = 4% (or 0.04), and Time = 30/360 (since interest is being calculated for 30 days out of a 360-day year). Thus, Interest = $24,000 x 0.04 x (30/360) = $80.

Question 6

On December 1,Watson Enterprises signed a $24,000,60-day,4% note payable as replacement of an account payable with Erikson Company.What is the journal entry that should be recorded by Watson Enterprises upon signing the note?

Accepted Answer

When Watson Enterprises signs a note payable to replace an account payable, it is essentially converting a short-term liability (accounts payable) into a different form of short-term liability (notes payable). The correct journal entry to record this transaction involves debiting Accounts Payable to remove the liability from the books and crediting Notes Payable to record the new form of liability. There is no interest expense recorded at the time of signing the note; interest expense would be recognized over the life of the note or at maturity.

Question 7

If a company has advance subscription sales totaling $45,000 for the upcoming year,when four quarterly journals will mailed to customers,the receipt of cash would be journalized as:

Accepted Answer

The company has received cash for subscription sales, but these sales have not been earned yet since the quarterly journals have not been mailed to customers. Therefore, the journal entry should debit Cash and credit Unearned Revenue, which will be recognized as revenue as each journal is mailed throughout the year.

Question 8

A company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers.When the company mails the first quarterly journal to customers,it should record:

Accepted Answer

When the company mails the first quarterly journal, it recognizes revenue for that quarter. Since there are four quarters, $45,000 divided by 4 equals $11,250. The correct entry is to debit (decrease) Unearned Revenue and credit (increase) Sales for $11,250, reflecting the recognition of revenue for the first journal provided.

Question 9

Define liabilities and explain the difference between current and long-term liabilities.

Accepted Answer

The answer of Define liabilities and explain the difference between...

Question 10

What are known current liabilities? Cite at least two examples of known current liabilities.

Accepted Answer

The answer of What are known current liabilities? Cite at...

Question 11

Describe contingent liabilities and how to account for and/or report them.

Accepted Answer

The answer of Describe contingent liabilities and how to account...

Question 12

Identify each of the following payroll taxes as an (A)Employer Payroll Tax,(B)Employee Payroll Tax,or (C)Both.
1.FICA-Social Security taxes
2.FICA-Medicare taxes
3.FUTA (federal unemployment taxes)
4.SUTA (state unemployment taxes)
5.Employee federal income taxes
6.Employee state and local income taxes

Accepted Answer

The answer of Identify each of the following payroll taxes...

Question 13

During August,Boxer Company sells $356,000 in merchandise that has a one year warranty.Experience shows that warranty expenses average about 5% of the selling price.The warranty liability account has a credit balance of $12,800 before adjustment.Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs.The entry to record the estimated warranty expense for the month is:

Accepted Answer

The answer of During August,Boxer Company sells $356,000 in merchandise...

Question 14

Carson Company sells sporting tickets in advance of the event for $500,000.The journal entry to record the sale is:

Accepted Answer

The sale of tickets in advance is an example of unearned revenue, which means that the revenue has not yet been earned by the company. Therefore, the journal entry would be to debit Cash (since cash is received) and credit Unearned Ticket Revenue (since the revenue is not yet earned). Option A is incorrect because Prepaid sales is not a proper account name. Option B is incorrect because the sale is not on account, and therefore no accounts payable are involved. Option D is incorrect because no mention of cost of sales or inventory is given in the problem. Option E is incorrect because a journal entry is necessary to record the transaction.

Question 15

Describe employer responsibilities for reporting payroll taxes.(To the extent possible,reference the form to be filed for each tax.)

Accepted Answer

The answer of Describe employer responsibilities for reporting payroll taxes.(To...

Question 16

Classify each of the following items as either:
A.Current liability
B.Long-term liability
C.Not a liability
1.60-day note payable
2.A loan due in 3 months
3.Salaries payable
4.Debt guarantees
5.FICA taxes payable
6.Income taxes payable
7.A note payable due in 45 days
8.A loan due in 10 years
9.Warranty work completed this year
10.Accounts payable

Accepted Answer

The answer of Classify each of the following items as...

Question 17

During August,Boxer Company sells $356,000 in merchandise that has a one year warranty.Experience shows that warranty expenses average about 5% of the selling price.The warranty liability account has a credit balance of $12,800 before adjustment.Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs.The entry to record the customer warranty repairs is:

Accepted Answer

The correct entry to record the customer warranty repairs involves debiting the Estimated Warranty Liability account and crediting the Parts Inventory account for the cost of the parts used in the repairs, which is $9,400. This reflects the use of the previously recognized liability to cover actual warranty expenses.

Question 18

On September 1,Knack Company signed a $50,000,90-day,5% note payable with Central Savings Bank.What is the journal entry that should be recorded by Knack upon maturity of the note? (Use 360 days a year.)

Accepted Answer

The correct journal entry upon maturity of the note includes debiting Notes Payable for the principal amount of $50,000 and debiting Interest Expense for the interest accrued, which is calculated as $50,000 * 5% * (90/360) = $625. The total amount paid in cash, which is the sum of the principal and interest, is credited, totaling $50,625.

Question 19

Calculate the total amount of FICA withholding for an employee whose pay is $2,400 for the first pay period of the year.The tax rate for FICA-Social Security is 6.2% and the tax rate for FICA-Medicare is 1.45%.

Accepted Answer

The answer of Calculate the total amount of FICA withholding...

Question 20

Explain the responsibilities of and the accounting by employers for deductions from employee payroll.

Accepted Answer

The answer of Explain the responsibilities of and the accounting...

Quiz 9: Accounting for Current Liabilities