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Exam 11: Current Liabilities and Payroll

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Question 61

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An unfunded pension liability is reported on the balance sheet as

A) a current liability
B) owner's equity
C) a long-term liability
D) a current liability or long-term liability, depending on when the pension liability is to be paid

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Question 62

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For proper matching of revenues and expenses, the estimated cost of fringe benefits must be recognized as an expense of the period during which the employee earns the benefits.

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Question 63

Multiple Choice

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Match each of the following items with the term or phrase (a-g) that best describes it. Terms or phrases may be used more than once. -Current assets/Current liabilities

On January 5, Thomas Company, which follows a calendar year, issued $1,000,000 of notes payable, of which $250,000 is due on January 1 each of the next four years. The proper balance sheet presentation on December 31 is

The total net pay for a period is determined from the payroll register.

The journal entry to record the payment of an interest-bearing note is

According to a summary of the payroll of Scotland Company, $450,000 was subject to the 6.0% social security tax and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%) and federal (0) 8%) unemployment taxes. The journal entry to record the accrued payroll taxes would include a​

Roseland Design borrowed $700,000 on a 90-day note from CorpOne Funding Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for interest calculations.) (a) Journalize Roseland’s entries to record: a. The issuance of the note. b. The payment of the note at maturity. (b) Journalize CorpOne’s entries to record: a. The receipt of the note. b. The receipt of the payment of the note at maturity.

Dixon Sales has seven sales employees that receive weekly paychecks. Each earns $10.25 per hour and each has worked 40 hours in the pay period. Each employee pays 12% of gross in federal income tax, 3% in state income tax, 6.0% of gross in social security tax, 1.5% of gross in Medicare tax, and 0.5% in state disability insurance. Journalize the recognition of the pay period ending January 19 that will be paid to the employees January 26.

Journalize the following, assuming a 360-day year is used for interest calculations:? Apr. 30 Issued a $150,000, 30-day, 6% note dated April 30 to Misner Co. on account. May 30 Paid Misner Co. the amount owed on the note dated April 30.

Hall Company sells merchandise with a one-year warranty. In the current year, sales consist of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of

Match each payroll item that follows to the one item (a-f) that best describes its characteristics. -Federal income tax

Taxes deducted from an employee's earnings to finance social security and Medicare benefits are called FICA taxes.

Depending on when an unfunded pension liability is to be paid, it will be classified on the balance sheet as either a long-term or a current liability.

The summary of the payroll for the monthly pay period ending July 15 indicated the following:? $\begin{array}{lr}\text { Sales salaries } & \$ 125,000 \\\text { Federal income tax withheld } & 32,300 \\\text { Office salaries } & 35,000 \\\text { Medical insurance withheld } & 7,370 \\\text { Social security tax withheld } & 10,200 \\\text { Medicare tax withheld } & 2,550\end{array}$ Journalize the entries to record (a) the payroll and (b) the employer's payroll tax expense for the month. The state unemployment tax rate is 3.1%, and the federal unemployment tax rate is 0.8%. Only $25,000 of salaries are subject to unemployment taxes.

Notes may be issued

A borrower has two alternatives for a loan: (1) issue a $480,000, 60-day, 8% note or (2) issue a $480,000, 60-day note that the creditor discounts at 8%. (Assume a 360-day year is used for interest calculations.) (a)Calculate the amount of the interest expense for each option. (b)Determine the proceeds received by the borrower in each situation.

Martin Jackson receives an hourly wage rate of $30, with time-and-a-half pay for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to Jackson?

Use this information for Harris Company to answer the following questions. ​ Assuming no employees are subject to ceilings for their earnings, Harris Company has the following information for the pay period of January 15-31. ​ $\begin{array} { l r l c } \text { Gross payroll } & \$ 10,000 & \text { Federal income tax withheld } & \$ 1,800 \\\text { Social security rate } & 6.0 \% & \text { Federal unemployment tax rate } & 0.8 \% \\\text { Medicare rate } & 1.5 \% & \text { State unemployment tax rate } & 5.4 \%\end{array}$ ​ -Salaries Payable would be recorded for

Match each payroll item that follows to the one item (a-f) that best describes its characteristics. -FICA-Social security