Question 1

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)

Accepted Answer

The correct answer is A.The employee's gross pay is $5,500. The FICA tax for Social Security is $5,500 x 6.2% = $341. The FICA tax for Medicare is $5,500 x 1.45% = $80.25. The FUTA tax is $5,500 x 0.6% = $33. The SUTA tax is $5,500 x 5.4% = $297. The total taxes withheld are $341 + $80.25 + $33 + $297 = $751.25. The employee's net pay is $5,500 - $751.25 - $182 - $150 - $75 = $4,672.25.

Question 2

All of the following statements regarding long-term liabilities are true except?

Accepted Answer

Liabilities that do not have a fixed due date and are payable on demand are reported as current liabilities rather than long-term liabilities. Long-term liabilities have a fixed due date that exceeds one year or the operating cycle, whichever is longer.

Question 3

An employee earned $4,600 in February working for an employer. Cumulative earnings of the previous pay periods are $4,800. The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. What is the amount the employer should record as payroll taxes expense for the month of February?

Accepted Answer

- Social Security tax (6.2% of $4,600): $285.20
- Medicare tax (1.45% of $4,600): $66.70
- FUTA tax (0.6% of $7,000): $42.00
- SUTA tax (5.4% of $7,000): $378.00
- Total payroll taxes expense: $285.20 + $66.70 + $42.00 + $378.00 = $772.90
- Since the employee had already earned $4,800 cumulatively prior to February, only $7,000 - $4,800 = $2,200 is subject to the two unemployment taxes.
- FUTA tax on $2,200: $2,200 x 0.6% = $13.20
- SUTA tax on $2,200: $2,200 x 5.4% = $118.80
- Adjusted payroll taxes expense: $772.90 - $13.20 - $118.80 = $641.90
- Therefore, the amount the employer should record as payroll taxes expense for the month of February is $483.90 (difference between $641.90 and $158 in Social Security and Medicare taxes already withheld from employee's paycheck).

Question 4

Athena Company provides employee health insurance that costs $5,000 per month. In addition, the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:

Accepted Answer

The entry to record the accrued benefits for the month should include the expenses of both employee health insurance and contributions to the retirement program.

The entry would be as follows:

Debit Employee Benefits Expense $11,000
 Credit Medical Insurance Payable $5,000
 Credit Employee Retirement Program Payable $6,000

Option A is incorrect because it only accounts for the medical insurance expense and ignores the retirement program contribution. Option C is incorrect because it is a credit entry, which is not needed for the accrued benefits entry. Option D is incorrect because it only accounts for the retirement program contribution and ignores the medical insurance expense. Option E is incorrect because it refers to payroll taxes, which are not relevant to this entry.

Question 5

An employee earned $4,600 in February working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned during each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The employee has $644 in federal income taxes withheld and has voluntary deductions for health insurance of $50 and contributes 10% of gross pay to a retirement plan each month. The employer pays the $200 remainder of the health insurance premium and an equal amount of contribution to the retirement fund. What is the amount of net pay for the employee for the month of February?

Accepted Answer

The answer of An employee earned $4,600 in February working...

Question 6

On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account.
- What is the journal entry that Indigo Company would make, when it records payment of the note on the maturity date? (Use 360 days a year.)

Accepted Answer

Indigo Company would debit Notes Payable for the principal amount of $4,500 and debit Interest Expense for the interest of $75 (calculated as $4,500 * 10% * 60/360), and credit Cash for the total payment of $4,575.

Question 7

Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales?

Accepted Answer

The correct entry is to debit Cash for the total amount received ($8,640), credit Sales for the sales amount ($8,000), and credit Sales Taxes Payable for the tax amount ($640).

Question 8

The chief executive officer earns $20,000 per month. As of May 31, her gross pay was $100,000. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. 
-What is the amount of FICA-Social Security withheld from this employee for the month of June?

Accepted Answer

The answer of The chief executive officer earns $20,000 per...

Question 9

All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:

Accepted Answer

While the other statements are true, statement B is false. The approach to recording taxes under U.S. GAAP and IFRS is generally similar, although there may be some differences based on each country's tax laws and regulations.

Question 10

During the first week of January, an employee works 46 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour, and her wages are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $80 in federal income taxes withheld. 
-What is the amount of this employee's gross pay for the first week of January?

Accepted Answer

The answer of During the first week of January, an...

Question 11

On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account. 
-What is the journal entry needed to record the transaction by Indigo Company?

Accepted Answer

Indigo Company is converting an overdue account payable into a note payable, so they debit Accounts Payable and credit Notes Payable.

Question 12

During the first week of January, an employee works 46 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour, and her wages are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $80 in federal income taxes withheld. 
-What is the amount of this employee's net pay for the first week of January?

Accepted Answer

The employee earns $736 in regular pay (40 hours x $16) and $144 in overtime pay (6 hours x $24), totaling $880. Deductions include $54.56 for Social Security (6.2% of $880), $12.76 for Medicare (1.45% of $880), and $80 for federal income tax. The net pay is $880 - $54.56 - $12.76 - $80 = $732.68. However, the correct choice is $644.02, indicating a possible error in the calculation or choice options.

Question 13

If a company uses a special payroll bank account:

Accepted Answer

When a company uses a special payroll bank account, they would typically draw one check for the entire payroll on their regular bank account and then transfer the sum to the payroll bank account, from which they would issue the paychecks. This helps to ensure that the funds are segregated and that there is greater control over the payroll process. It does not impact the need to issue W-2's or maintain a payroll register, nor does it require the use of a federal depository bank.

Question 14

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. 
-What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?

Accepted Answer

The journal entry should include debiting Notes Payable for the principal amount of $7,500 and debiting Interest Expense for the interest of $150 (calculated as $7,500 x 8% x 90/360), and crediting Cash for the total payment of $7,650.

Question 15

All of the following statements regarding FICA taxes are true except:

Accepted Answer

All of the statements are true except for D. A self-employed person is not exempt from FICA taxes. However, rather than having the taxes withheld from their paycheck, they are responsible for paying the equivalent of both the employer and employee portions of FICA taxes themselves.

Question 16

Athena Company's salaried employees earn two weeks of vacation per year. It pays $858,000 in total employee salaries for 52 weeks but its employees work only 50. Record Athena Company's weekly journal entry to record the vacation expense:

Accepted Answer

The answer of Athena Company's salaried employees earn two weeks...

Question 17

The chief executive officer earns $20,000 per month. As of May 31, her gross pay was $100,000. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. 
-What is the amount of FICA - Medicare withheld from this employee for the month of June?

Accepted Answer

The FICA - Medicare tax rate is 1.45% of all earnings. For June, the CEO earns $20,000. Therefore, the Medicare tax withheld is 1.45% of $20,000, which equals $290.00.

Question 18

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

Accepted Answer

The journal entry to record cash sales subject to sales tax is to debit Cash for the total amount collected ($82,680) and credit Sales for the amount of the sale ($78,000) and Sales Taxes Payable for the amount of the tax collected ($4,680). Therefore, choice B is the correct answer. Choice A is incorrect because it incorrectly debits Accounts Receivable instead of Cash. Choice C is incorrect because it incorrectly debits Sales Taxes Payable before recording the cash received. Choice D is incorrect because it incorrectly credits Sales for the net amount (after sales tax) instead of the gross amount of sales, and incorrectly debits Sales Taxes Payable by the same amount. Choice E is incorrect because it ignores the immediate recording of the sales tax liability.

Question 19

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January?

Accepted Answer

Step 1: Calculate FICA Tax
- Social Security tax: 6.2% x $5,500 = $341
- Medicare tax: 1.45% x $5,500 = $79.75
Total FICA tax: $341 + $79.75 = $420.75

Step 2: Calculate FUTA and SUTA taxes
- FUTA tax: 0.6% x $7,000 = $42
- SUTA tax: 5.4% x $7,000 = $378
Total unemployment taxes: $42 + $378 = $420

Step 3: Calculate total payroll taxes
Total payroll taxes: $420.75 + $420 = $840.75

Step 4: Calculate net pay
Gross pay: $5,500
Federal income tax: $182
Health insurance: $150
Retirement plan: $75
Total voluntary deductions: $182 + $150 + $75 = $407
Net pay: $5,500 - $407 = $5,093

Step 5: Record payroll taxes expense
Payroll taxes expense: $840.75

Question 20

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note.
- What is the journal entry needed to record the transaction by Jarrett Company?

Accepted Answer

When Jarrett Company borrows $7,500 from Fairmont Financing, the company receives cash, which is an asset. Simultaneously, the company creates a liability by issuing the note payable. Therefore, to record the transaction, we need to debit Cash and credit Notes Payable for $7,500. Option A is the only one that correctly reflects this. Option B is incorrect because it implies that Jarrett Company lent money to Fairmont Financing, which is not the case. Option C is incorrect because it includes an additional $150, which is not part of the transaction. Option D and E are incorrect because they have the wrong accounts and amounts involved.

Quiz 11: Current Liabilities and Payroll Accounting

All of the following statements regarding long-term liabilities are true except?

Athena Company provides employee health insurance that costs $5,000 per month. In addition, the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:

On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account. - What is the journal entry that Indigo Company would make, when it records payment of the note on the maturity date? (Use 360 days a year.)

Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales?

All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:

On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account. -What is the journal entry needed to record the transaction by Indigo Company?

If a company uses a special payroll bank account:

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. -What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?

All of the following statements regarding FICA taxes are true except:

Athena Company's salaried employees earn two weeks of vacation per year. It pays $858,000 in total employee salaries for 52 weeks but its employees work only 50. Record Athena Company's weekly journal entry to record the vacation expense:

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. - What is the journal entry needed to record the transaction by Jarrett Company?