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Exam 10: Current Liabilities and Payroll

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Question 81

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The Crafter Company has the following assets and liabilities: $\begin{array}{|l|r|}\hline \text { ASSETS }\\\hline \text { Cash } & \$ 28,000 \\\hline \text { Accounts receivable } & 15,000 \\\hline \text { Inventory } & 20,000 \\\hline \text { Equipment } & 50,000\\\hline \\\hline \text { LIABILITIES }\\\hline \text { Current portion of long-term debt } & 10,000 \\\hline \text { Accounts payable } & 2,000 \\\hline \text { Long-term debt } & 25,000\\\hline \end{array}$ Determine the quick ratio rounded to one decimal point.

A) 5.3
B) 3.6
C) 3.3
D) 2.3

E) A) and D)
F) C) and D)

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Question 82

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Martin Services Company provides its employees vacation benefits and a defined contribution pension plan.Employees earned vacation pay of $39,500 for the period.The pension plan requires a contribution to the plan administrator equal to 9% of employee salaries.Salaries were $750,000 during the period.Provide the journal entries for a the vacation pay and b the pension benefit.

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Question 83

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Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings?

Most employers are required to withhold federal unemployment taxes from employee earnings.

Scott Company sells merchandise with a one-year warranty.Sales consisted of 2,500 units in Year 1 and 2,000 units in Year 2.It is estimated that warranty repairs will average $10 per unit sold,and 30% of the repairs will be made in Year 1 and 70% in Year 2 for the Year 1 sales.Similarly,30% of repairs will be made in Year 2 and 70% in Year 3 for the Year 2 sales.In the Year 3 income statement,how much of the warranty expense shown will be due to Year 1 sales?

The payroll register of Seaside Architecture Company indicates $870 of social security and $217 of Medicare tax withheld on total salaries of $14,500 for the period.Assume earnings subject to state and federal unemployment compensation taxes are $5,250 at the federal rate of 0.8% and state rate of 5.4%.Prepare the journal entry to record the payroll tax expense for the period.

On August 1,Batson Company issued a 60-day note with a face amount of $140,000 to Jergens Company for merchandise inventory.Assume a 360-day year is used for interest calculations. a.Determine the proceeds of the note assuming the note carries an interest rate of 6%. b.Determine the proceeds of the note assuming the note is discounted at 6%.

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

The 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.

A business issued a 120-day,6% note for $10,000 to a creditor on account.The company uses a 360-day year for interest calculations.Journalize the entries to record a the issuance of the note and b the payment of the note at maturity,including interest. $\begin{array}{|c|c|c|r|}\hline & \text { Description } & \text { Debit } & \text { Credit } \\\hline \text { a } \\\hline & \\\hline & & & \\\hline & & & \\\hline \text { b }& \\\hline & \\\hline & \\\hline\end{array}$

An employee receives an hourly rate of $15,with time and a half for all hours worked in excess of 40 during the week.Payroll data for the current week are as follows: hours worked,48; federal income tax withheld,$120; social security tax rate,6%; and Medicare tax rate,1.5%; state unemployment compensation tax,3.4% on the first $7,000; federal unemployment compensation tax,0.8% on the first $7,000.What is the net amount to be paid to the employee?

Wright Company sells merchandise with a one-year warranty.This year,sales consisted of 2,000 units.It is estimated that warranty repairs will average $15 per unit sold,and 30% of the repairs will be made this year and 70% next year.In this year's income statement,Wright should show warranty expense of

One of the more popular defined contribution plans is the 401k plan.

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 journal entry a company uses to record pension rights that have not been funded for its salaried employees at the end of the year is

The journal entry a company uses to record partially funded pension rights for its salaried employees at the end of the year is

$\begin{array}{lr}\text { Salaries } & \$ 12,000 \\\text { FICA taxes withheld } & 900 \\\text { Income taxes withheld } & 2,500 \\\text { Medical insurance deductions } & 450 \\\text { Federal unemployment taxes } & 32\\\text { State unemployment taxes }&216\\\end{array}$ -The journal entry to record the monthly payroll on April 30 would include a

The journal entry to record the conversion of a $6,300 accounts payable to a notes payable would be

An employee receives an hourly rate of $45,with time and a half for all hours worked in excess of 40 during the week.Payroll data for the current week are as follows: hours worked,48; federal income tax withheld, $950; Social security tax rate,6.0%; and Medicare tax rate,1.5%; state unemployment compensation tax,3.4% on the first $7,000; federal unemployment compensation tax,0.8% on the first $7,000. Calculate the employer's payroll tax expense if: a this is the first payroll of the year and the employee has no cumulative earnings for the year to date. b the employee's cumulative earnings for the year prior to this week equal $6,200. c the employee's cumulative earnings for the year prior to this week equal $118,700.

Federal unemployment compensation taxes that are collected by the federal government are not paid directly to the unemployed but are allocated among the states for use in state programs.