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Exam 10: Liabilities: Current,installment Notes,and Contingencies

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Question 1

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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.

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Question 2

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

A) time card
B) voucher system
C) special payroll bank account
D) fringe benefits

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

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Question 3

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Match the following terms or phrases in (a-g) with the explanations in 1-8.Terms or phrases may be used more than once. -Probable likelihood of a liability but cannot be estimated

The proceeds of a discounted note are equal to the face value of the note.

Ecco Company sold $150,000 of kitchen appliances with six-month warranties during September.The cost to repair defects under the warranty is estimated at 6% of the sales price.On October 15,a customer required a $200 part replacement,plus $85 labor under the warranty. ​ Provide the journal entry for (a)the estimated expense on September 30 and (b)the October 15 warranty work.

Use the following key (a-d) to identify the proper treatment of each contingent liability. -Event is probable but amount is not estimable

Aqua Construction installs swimming pools.It calculates that warranty obligations are 5% of sales.For the year just ending,Aqua's sales were $1,500,000.Previous quarterly entries debiting Product Warranty Expense totaled $48,700.Determine the estimated warranty expense for the year and make the journal entry necessary to bring the account to the needed balance.

Current liabilities are

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.

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 accrued payroll taxes would include a ​

Mobile Sales has five sales employees which receive weekly paychecks.Each earns $11.50 per hour and each has worked 40 hours in the pay period.Each employee pays 12% of gross in federal income tax,3% of gross in state income tax,6% of gross in social security tax,1.5% of gross in Medicare tax,and 0.5% of gross in state disability insurance.Journalize the pay period ending January 19 which will be paid to the employees January 26.

The journal entry to record the cost of warranty repairs that were incurred during the current period,but related to sales made in prior years,includes a debit to Warranty Expense.

The Young Company has the following assets and liabilities: ​ ​ Determine the quick ratio (rounded to one decimal point) .

Generally,all deductions made from an employee's gross pay are required by law.

Excel Products Inc.pays its employees semimonthly.The summary of the payroll for December 31,indicated the following: ​ Payroll is subject to social security tax of 6% and Medicare tax of 1.5%,with no maximum earnings; $10,000 is subject to state unemployment tax of 4.3% and federal unemployment tax of 0.8%.Prepare the journal entries for payroll tax expense if the employees are paid on December 31 of the current year.

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

Blast sells portable CD players and each unit carries a one-year replacement warranty.The cost of repair defects under the warranty is estimated at 10% of the sales price.During May,Blast sells 650 portable CD players for $50 each.For what amount in May would Blast debit Product Warranty Expense?

Anderson Co.issued a $50,000,60-day,discounted note to National Bank.The discount rate is 6%.At maturity,assuming a 360-day year,the borrower will pay

An unfunded pension liability is reported on the balance sheet as

The following totals for the month of February were taken from the payroll register of Arcon Company: ​ (a)How much is the total payroll expense for Arcon Company for this payroll? (b)Assume that the monthly salaries expense remains the same for the entire year and no employees are hired or fired during that time.Based on what you learned in this chapter about payroll taxes,do you expect the total payroll expense to stay the same every month? Explain.