Question 1

A note payable can be used to extend the payment due on an account payable.

Accepted Answer

A note payable is a written agreement between a borrower and a lender that details the terms and conditions of the loan, including the repayment schedule. It can be used to extend or delay the payment due on an account payable, which is a debt owed to a supplier or vendor for goods or services purchased on credit. By converting an account payable into a note payable, a business can negotiate more favorable repayment terms and potentially improve its cash flow.

Question 2

Deposits of amounts payable to the federal government may be paid through federal depository banks.

Accepted Answer

Deposits of amounts payable to the federal government may be paid through federal depository banks.

Question 3

Employers must keep individual earnings reports for each employee.

Accepted Answer

Employers are required to keep individual earnings reports for each employee for tax and wage purposes.

Question 4

Even if the end of an accounting period occurs between the signing of a note payable and its maturity date, the matching principle requires that interest expense not be accrued on a note payable until the note is paid.

Accepted Answer

The matching principle requires that expenses be recorded in the period they are incurred, so interest expense should be accrued over the life of the note, not just when it is paid.

Question 5

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

Accepted Answer

The state unemployment tax rates are adjusted according to an employer's merit rating. Employers with lower unemployment claims and lower turnover rates may have lower tax rates, while employers with higher claims and turnover rates may have higher tax rates.

Question 6

Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay.

Accepted Answer

Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay.

Question 7

The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2.

Accepted Answer

The IRS requires employers to give employees their W-2 forms on or before January 31.

Question 8

A known obligation of an uncertain amount that can at least be reasonably estimated is reported as an estimated liability.

Accepted Answer

A known obligation of an uncertain amount that can at least be reasonably estimated is reported as an estimated liability under accounting principles. This estimate is based on past experience, industry trends, and any other available relevant information that can help determine the probable amount of the liability.

Question 9

A liability is incurred when income is earned because income tax expense is created by earning income.

Accepted Answer

When income is earned, income tax expense is created and recorded as a liability until it is paid to the government. Therefore, a liability is incurred when income is earned.

Question 10

Required payroll deductions include income taxes, Social Security taxes, pension and health contributions, union dues, and charitable giving.

Accepted Answer

Charitable giving is not a required payroll deduction; it is voluntary. Required deductions typically include income taxes and Social Security taxes.

Question 11

The amount of FICA tax that employers must pay is twice the amount of the FICA taxes withheld from their employees.

Accepted Answer

Employers match the FICA taxes withheld from their employees, meaning they pay an equal amount, not twice the amount.

Question 12

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds
$500.

Accepted Answer

According to the IRS, FUTA payments are made quarterly to a federal depository bank only if the total amount due is more than $500. If the total amount due is less than $500, the payment can be carried over to the next quarter or paid annually.

Question 13

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

Accepted Answer

A high merit rating for state unemployment taxes means that an employer has low employee turnover and stable employment.

Question 14

A corporation has a $40,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $47,000. The company should record an entry to debit Income Tax Expense for $7,000 and credit Income Taxes Payable for $7,000.

Accepted Answer

The entry suggested in the statement will bring the Income Tax Payable account balance to its actual liability of $47,000 by reducing the credit balance of $40,000 by debiting Income Tax Expense for $7,000 and crediting Income Taxes Payable for $7,000.

Question 15

Promissory notes cannot be transferred from party to party because they are nonnegotiable.

Accepted Answer

Promissory notes can be transferred from party to party, but since they are nonnegotiable, there are some restrictions and requirements that need to be followed, such as obtaining the endorsement of the payee.

Question 16

The amount of federal income tax withheld from employee pay depends on the employee's annual earnings rate and the number of withholding allowances claimed by the employee.

Accepted Answer

This statement is true. The more a person earns, the more federal income tax will be withheld from their pay. Additionally, the number of withholding allowances claimed on a W-4 form can also affect the amount of taxes withheld.

Question 17

FUTA requires employers to pay a federal unemployment tax on all salary or wages paid to each employee.

Accepted Answer

The answer of FUTA requires employers to pay a federal...

Question 18

A company's income before interest expense and taxes is $250,000 and its interest expense is
$100,000. Its times interest earned ratio is 2.5.

Accepted Answer

The times interest earned ratio is calculated by dividing the income before interest expense and taxes by the interest expense.

Times Interest Earned Ratio = Income Before Interest Expense and Taxes / Interest Expense

In this case:

Times Interest Earned Ratio = $250,000 / $100,000 = 2.5

Since the given times interest earned ratio matches the calculated ratio, the answer is A) True.

Question 19

Accrued vacation benefits are a form of estimated liability for an employer.

Accepted Answer

Accrued vacation benefits represent a legal obligation that the employer owes to employees for the time off they have earned but have not yet taken, making it an estimated liability for the employer.

Question 20

A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is shorter.

Accepted Answer

The answer of A short-term note payable is a written...

Quiz 11: Current Liabilities and Payroll Accounting

A note payable can be used to extend the payment due on an account payable.

Deposits of amounts payable to the federal government may be paid through federal depository banks.

Employers must keep individual earnings reports for each employee.

Even if the end of an accounting period occurs between the signing of a note payable and its maturity date, the matching principle requires that interest expense not be accrued on a note payable until the note is paid.

The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.

Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee's gross pay.

The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2.

A known obligation of an uncertain amount that can at least be reasonably estimated is reported as an estimated liability.

A liability is incurred when income is earned because income tax expense is created by earning income.

Required payroll deductions include income taxes, Social Security taxes, pension and health contributions, union dues, and charitable giving.

The amount of FICA tax that employers must pay is twice the amount of the FICA taxes withheld from their employees.

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

A high merit rating for state unemployment taxes means that an employer has high employee turnover or seasonal hiring.

A corporation has a $40,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $47,000. The company should record an entry to debit Income Tax Expense for $7,000 and credit Income Taxes Payable for $7,000.

Promissory notes cannot be transferred from party to party because they are nonnegotiable.

The amount of federal income tax withheld from employee pay depends on the employee's annual earnings rate and the number of withholding allowances claimed by the employee.

FUTA requires employers to pay a federal unemployment tax on all salary or wages paid to each employee.

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is 2.5.

Accrued vacation benefits are a form of estimated liability for an employer.

A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is shorter.