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Exam 10: Accounting for Liabilities

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Question 41

Multiple Choice

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On January 1, 2019 Tracey Sisters Company borrowed $90,000 cash by signing an 8 year, 7% mortgage note that requires equal total payments on December 31 of each year. The balance in the Mortgage Note Payable account after the first payment is made is:

A) $83,700
B) $78,750
C) $79,017
D) $81,228

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Question 42

Multiple Choice

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Idaho Company signed a $540,000, 90-day, 9% note payable, on December 1, 2019. If the accounting period ends on December 31, 2019, the entry made on the note's maturity (March 1, 2020) will include:

A) A debit to Interest Payable for $8,100
B) A debit to Interest Expense for $12,150
C) A debit to Interest Expense for $4,050
D) A debit to Interest Expense for $8,100

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Question 43

Multiple Choice

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When the market rate of interest was 10%, Gloria Corporation issued $2,400,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was: (If PV tables are used, select the closest answer from the options provided.)

Moonbeam Company has the following monthly payroll for June 2019: Total salaries $108,000 Salaries subject to FICA taxes (6.2% + 1.45%) 108,000 Salaries subject to FUTA (0.8%) and state unemployment taxes (2.7%) 28,000 Income taxes withheld 9,700 The total employer's payroll tax expense for this period is:

On January 1, 2019, Camire Company issues $540,000, 15 year, 8% bonds (paying semiannual interest) for $645,842, when the annual market rate of interest is 6%. If the company uses the effective interest method of amortization, the journal entry to record the semi-annual interest on June 30 will include a:

Westwood Company borrowed $202,500 cash on January 1, 2019, by signing an 8% mortgage note that is to be repaid in 10 equal annual end-of-year payments. The first payment is due on December 31, 2019. The journal entry to record the first payment will include:

Hola Company has 5 sales employees, each of whom earns $8,000 per month and is paid on the last working day of the month. The gross monthly payroll is subject to federal unemployment taxes of 0.8% and state unemployment taxes of 4.0%. All earnings are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45%. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $220 for each employee. Monthly payroll tax expense will be:

Murnau, Inc. has $1,400 working capital and $3,300 of current assets. What is the firm's current liabilities?

The following data are taken from Duncan Wayneright Corporation's monthly payroll for August 2019: Assume that the company is subject to a 2.7% state unemployment tax and a 0.8% federal unemployment tax. Record the general journal entry to: a. Accrue the payroll. b. Accrue the employer's payroll taxes.

Sunshine Company has the following monthly payroll for June 2019: Total salaries $324,000 Salaries subject to FICA taxes (6.2% + 1.45%) 324,000 Salaries subject to FUTA (0.8%) and state unemployment taxes (2.7%) 84,000 Income taxes withheld 29,250 The total employer's payroll tax expense for this period is:

Assume that Brian earns $72 per hour and he worked 40 hours this week. The Social Security rate is 6.2% and the Medicare rate is 1.45%, and his entire earnings are subject to both FICA taxes. Also, $360 in income taxes and $120 of union dues are withheld. Brian's net take-home pay should be:

Emma Company provides a 12-month warranty on all their products. During 2019, they had total sales of $1,400,000, and estimated warranty costs to be 3% of sales. On January 1, 2019, the Estimated Warranty Liability account had a debit balance of $6,000, and it had a credit balance of $10,000 on December 31, 2019. What was the actual cost of repairs covered under warranties during 2019?

Snow White Company borrowed $72,000 from Bank of Fairytales on December 1, 2019, and signed a 90 day, 8% Notes Payable. If Snow White's accounting period ends on December 31, 2019, which of the following will not be true for Snow White Company?

Investment Company issues $1,500,000 of 8% bonds that pay interest semiannually and mature in 10 years. Compute the bonds' issue price assuming that the bonds' market interest rate is: a. 6% per year compounded semiannually b. 10% per year compounded semiannually

Quechua Company borrowed $90,000 cash on January 1, 2019, by signing an 8% mortgage note that is to be repaid in 10 equal annual end-of-year payments. The first payment is due on December 31, 2019. The journal entry to record the first payment will include:

Federal unemployment taxes are:

The December 31, 2019, balance sheet of Bash Company includes the following information: Cash $ 360,000 Short-term Investments 180,000 Accounts Receivable 1,020,000 Inventory 1,080,000 Prepaid Expenses 240,000 Current Liabilities 1,312,500 Total Liabilities 360,000 What is Bash's quick ratio at December 31, 2019?

Perfect Pedal Products Company sells bicycles for $720, with a 30-day warranty against defects. Past experience indicates that 6% of the bicycles will have a defect and that the necessary repairs will cost $96 per bicycle. Sales for May were $648,000; 20 units sold in May were found defective and repaired that month. What is the May 31 journal entry for the estimated liability for product warranties?

Hickenlooper Company retired a $900,000, 7% bond issue at 98. If the unamortized discount is $7,200, the entry will include a:

Laundry Needs, Inc. sells washing machines with a 2 year warranty. Laundry Needs estimates that total warranty costs are 3% of sales. In the year 2019, Washing Machines recorded total sales of washing machines of $4,200,000. The balance in the Estimated Liability for Warranties account was $229,200 on December 31, 2018, and $153,600 on December 31, 2019. What must have been the actual cost of repairs (covered under warranty) for the year 2019?