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Exam 8: Current Liabilities

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Question 31

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Name as many items as you can that are withheld from employee payroll checks. Which employee deductions are required by law and which are voluntary? Name as many items as you can that are employer payroll costs in addition to the employee's salary. Which employer costs are required by law and which are voluntary?

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Items commonly withheld from employee pa...

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Question 32

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When a company collects sales tax from a customer, the event is recorded by:

A) A debit to Sales Tax Expense and a credit to Sales Tax Payable.
B) A debit to Cash and a credit to Sales Tax Payable.
C) A debit to Sales Tax Payable and a credit to Sales Tax Expense.
D) A debit to Sales Tax Payable and a credit to Cash.

E) B) and C)
F) B) and D)

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Question 33

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Which of the following statements regarding liquidity ratios is true?

Away Travel filed suit against West Coast Travel seeking damages for copyright violations. West Coast Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should West Coast Travel report this litigation?

Which of the following is not a current liability?

Brian Inc. borrowed $8,000 from First Bank and signed a promissory note. What entry should Brian Inc. record?

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the total payroll tax expense for the first week of January?

Define a contingent liability. Provide three common examples. Under what circumstances should a firm report a contingent liability?

Which of the following is not an employer payroll cost?

Mike Smith is a college football coach making a base salary of $960,000 a year ($80,000 per month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Assuming the FICA base amount is $106,800, compute how much will be withheld during the year for Coach Smith's Social Security and Medicare. Through what month will Social Security be withheld? What additional amount will the employer need to contribute?

Companies selling products subject to sales taxes are responsible for collecting the sales tax directly from customers and periodically remitting the sales taxes collected to the state and local governments.

Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?

On November 1, 2012, New Morning Bakery signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2013. New Morning Bakery records the appropriate adjusting entry for the note on December 31, 2012. What amount of cash will be needed to pay back the note payable plus any accrued interest on May 1, 2013?

Which of the following is not withheld from an employee's salary?

The employer is required to match the amount of FICA taxes withheld for each employee, effectively doubling the amount paid into Social Security.

The employer records amounts deducted from employee payroll as liabilities until it pays them to the appropriate organizations.

A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit without having to follow formal loan procedures and paperwork.

Large, highly-rated firms sometimes sell commercial paper

Young Company is involved in a lawsuit. The liability which could arise as a result of this lawsuit should be recorded on the books if the probability of Young owing money as a result of the lawsuit is:

All states impose a state income tax.