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Exam 11: Current Liabilities and Payroll

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Question 31

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Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.

A) True
B) False

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Question 32

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FICA tax becomes a liability to the federal government at the time an employee's payroll is prepared.

A) True
B) False

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Question 33

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Perez Company has the following information for the pay period of January 15-31:​ $\begin{array}{lrlr}\text { Gross payroll } & \$ 20,000 & \text { Federal income tax withhel d } & \$ 2,500 \\\text { Social security rate } & 6.0 \% & \text { Federal unemployment tax rate } & 0.8 \% \\\text { Medicare rate } & 1.5 \% & \text { State unemployment tax rate } & 5.4 \%\end{array}$ Assuming no employees are subject to ceilings for their earnings, calculate salaries payable and payroll tax expense.​

Core Company had the following assets and liabilities as of December 31:​​ $\begin{array}{|l|r|}\hline {\text { Assets }} & \\\hline \text { Cash } & \$ 58,000 \\\hline \text { Accounts receivable } & 25,000 \\\hline \text { Inventory }& 20,000 \\\hline \text { Equipment } & 50,000 \\\hline\\\hline {\text { Liabilities }}\\\hline \text { Current portion of long-term debt } & \$ 20,000 \\\hline \text { Accounts payable } & 12,000 \\\hline \text { Long-term debt } &25,000\\\hline\end{array}$ Calculate the current ratio, working capital, and quick ratio.​

Form W-2 is called the Wage and Tax Statement.

A defined contribution plan promises employees a fixed annual pension benefit.

Federal income taxes are subject to a maximum amount per employee per year.

On June 8, Smith Technologies issued a $75,000, 6%, 140-day note payable to Johnson Company. What is the due date of the note?

The employee's earnings record would contain which of the following data that the payroll register would probably not contain?

The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is

The payroll register is a multicolumn form used to assemble the payroll-related data for all employees.

An aid in internal control over payrolls that indicates employee attendance is the

Use this information for Magnum Company to answer the following questions. ​ The following totals for the month of April were taken from the payroll register of Magnum Company: ​ ​ $\begin{array} { l r } \text { Salaries } & \$ 12,000 \\\text { FICA taxes withheld } & 900 \\\text { Income taxes withheld } & 2,500 \\\text { Medical insurance deductions } & 450 \\\text { Federal unemployment taxes } & 32 \\\text { State unemployment taxes } & 216\end{array}$ ​ -The entry to record the accrual of the employer's payroll taxes would include a

Which of the following taxes are employers required to withhold from employees?

Below are two independent sets of transactions for Welcott Company:​ (a) Welcott provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation pay is $78,000. Journalize the adjusting entry required on January 31, the end of the first month of the year, to record the accrued vacation pay.​ (b) Welcott maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Northern Trust, by the fifteenth of the month following the end of each quarter. Assuming that the pension cost is $119,600 for the quarter ended December 31, journalize entries to record (1) the accrued pension liability on December 31 and (2) the payment to the funding agent on January 15.

The current assets and current liabilities for Kolbie Company and Newton Company are as follows:​ *These represent prepaid expenses and other non-quick current assets. (a) Determine the quick ratio for both companies. Round to two decimal places. (b) Interpret the quick ratio difference between the two companies.​

Which of the following is not a determinant in calculating federal income taxes withheld from an individual's pay?

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. -Probable likelihood of a liability but cannot be estimated

According to a summary of the payroll of Sinclair Company, $505,000 was subject to the 6.0% social security tax and $545,000 was subject to the 1.5% Medicare tax. Also, $10,000 was subject to state and federal unemployment taxes. (a)Calculate the employer's payroll taxes using the following rates: State unemployment, 4.2%; Federal unemployment, 0.8%. (b)Journalize the entry to record the accrual of the employer's payroll taxes.

Assuming a 360-day year, the interest charged by the bank, at the rate of 6%, on a 90-day, discounted note payable of $100,000 is