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1. Receiving payment prior to
delivering goods or services causes a current liability to be incurred.
a. True
b. False
2. All long-term liabilities
eventually become current liabilities.
a. True
b. False
3. For a current liability to
exist, the liability must be due usually within a year and must be paid out of
current assets.
a. True
b. False
4. The borrower issues a note
payable to a creditor.
a. True
b. False
5.
Notes
payable may be issued to creditors to satisfy previously created accounts
payable.
a. True
b. False
6. Interest expense is reported in
the operating expense section of the income statement.
a. True
b. False
7. An interest-beating note is a
loan in which the lender deducts interest from the amount loaned before the
money is advanced to the borrower.
a. True
b. False
8.
The
amount borrowed is equal to the face amount of the note on an interest bearing
note payable.
a. True
b. False
9. The amount of money a borrower
receives from the lender is called the discount rate.
a. True
b. False
10. The proceeds of a discounted
note are equal to the face value of the note.
a. True
b. False
11. The discount on a note payable
is charged to an account that has a normal credit balance.
a. True
b. False
12.
The
proceeds from discounting a $20,000, 60-day, note payable at 6% is $20,200.
a. True
b. False
13. Amounts withheld from each employee
for social security and Medicare vary by state.
a. True
b. False
14. An employee's take-home pay is
equal to gross pay less all voluntary deductions.
a. True
b. False
15.
Form
W-4 is a form authorizing employers to withhold a portion of employee earnings
for payment of an employee’s federal income taxes.
a. True
b. False
16. Taxes deducted from an
employee's earnings to finance social security and Medicare benefits are called
FICA taxes.
a. True
b. False
17. Generally, all deductions made
from an employee's gross pay are required by law.
a. True
b. False
18.
Payroll
taxes are based on the employee's net pay.
a. True
b. False
19. Most employers are required to
withhold federal unemployment taxes from employee earnings.
a. True
b. False
20. FICA tax is a payroll tax that
is paid only by employers.
a. True
b. False
21.
Medicare
taxes are paid by both the employee and the employer.
a. True
b. False
22. Federal unemployment taxes are
paid by the employer and the employee.
a. True
b. False
23. 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.
a. True
b. False
24.
Federal
income taxes are subject to a maximum amount per employee per year.
a. True
b. False
25. Federal unemployment
compensation tax becomes an employer's liability at the time the employee is
paid.
a. True
b. False
26. Form W-2 is called the Wage and
Tax Statement.
a. True
b. False
27.
FICA
tax becomes a liability to the federal government at the time an employee's
payroll is prepared.
a. True
b. False
28. Payroll taxes only include
social security taxes and federal unemployment and state unemployment taxes.
a. True
b. False
29. Federal income taxes withheld
increase the employer's payroll tax expense.
a. True
b. False
30. The use of a separate payroll
bank account is not an advantageous control, because it creates more complexity
in reconciliation functions for a
company and invites theft.
a. True
b. False
31. Employers are required to
compute and report payroll taxes on a calendar-year basis, even if a different
fiscal year is used for financial reporting
and income tax purposes.
a. True
b. False
32. Payroll taxes levied against
employers become an employer liability at the time the employee wages are
incurred.
a. True
b. False
33.
Most
employers use payroll checks drawn on a special bank account for paying the payroll.
a. True
b. False
34. The payroll register is a
multicolumn form used to assemble the payroll-related data for all employees.
a. True
b. False
35. The total net pay for a period
is determined from the payroll register.
a. True
b. False
36.
Internal
controls for cash payments apply to payrolls.
a. True
b. False
37. For proper matching of revenues
and expenses, the estimated cost of fringe benefits must be recognized as an expense of the period during which the
employee earns the benefits.
a. True
b. False
38. Depending upon when an unfunded pension
liability is to be paid, it will be classified on the balance sheet as either a long-term or a current liability.
a. True
b. False
39. During the first year of
operations, employees earned vacation pay of $35,000. The vacations will be taken during the second year. The vacation pay expense should be recorded
in the second year as the vacations are taken by the employees.
a. True
b. False
40. One of the more popular defined
contribution plans is the 401k plan.
a. True
b. False
41. A defined contribution plan
promises employees a fixed annual pension benefit.
a. True
b. False
42.
In
a defined benefits plan, the employer bears the investment risks in funding a
future retirement income benefit.
a. True
b. False
43. The accounting for defined
benefit plans is usually very easy and straightforward.
a. True
b. False
44. During the first year of
operations, a company granted warranties on its products at an estimated cost
of $8,500. The product warranty
expense should be recorded in the years of the expenditures to repair the
products covered by the warranty
payments.
a. True
b. False
45.
Obligations
that may arise from past transactions only if certain events occur in the
future are contingent liabilities.
a. True
b. False
46. In order to be a recorded
contingent liability, the liability must be possible and easily estimated.
a. True
b. False
47. 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.
a. True
b. False
48.
Current
liabilities are due
a. but not receivable for more than
one year
b. but not payable for more than
one year
c. and receivable within one year
d. and payable within one year
49. Notes may be issued
a. when assets are purchased
b. to creditors to temporarily
satisfy an account payable created earlier
c. when borrowing money
d. for all of these
50. 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?
a. October 28
b. October 27
c. October 26
d. October 25
51. On June 8, Williams Company
issued an $80,000, 5%, 120-day note payable to Brown Industries. Assuming a 360- day year, what is the maturity value of the note?
a. $82,600
b. $84,000
c. $81,333
d. $88,200
52. On July 8, Jones Inc. issued an
$80,000, 6%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using the 360-day year, what is the amount of
interest expense recognized by Jones in the current
fiscal year?
a. $700
b. $4,200
c. $307
d. $1,400
53. On June 1, Davis Inc. issued an
$84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30.
Using the 360-day year, what is the amount of interest revenue
recognized by Garcia in the following
year?
a. $700
b. $1,600
c. $1,061
d. $4,200
54. On May 18, Rodriguez Co. issued
an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company.
Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true?
a. Rodriguez is the creditor and
credits Accounts Receivable
b. Wilson is the creditor and
debits Accounts Receivable
c. Wilson is the borrower and
credits Accounts Payable
d. Rodriguez is the borrower and
debits Accounts Payable
55. Martinez Co. borrowed $50,000 on
March 1 of the current year by signing a 60day, 9%, interest-bearing note. Assuming a 360-day year, when the note is
paid on April 30, the entry to record the payment should include a
a. debit to Interest Payable for
$750
b. debit to Interest Expense for
$750
c. credit to Cash for $50,000
d. credit to Cash for $54,500
56. When a borrower receives the
face amount of a discounted note less the discount, the amount is known as
a. the note proceeds
b. the note discount
c. the note deferred interest
d. the note principal
57. Assuming a 360-day year, the
interest charged by the bank, at the rate of 6%, on a 90day, discounted note payable
of $100,000 is
a. $6,000
b. $1,500
c. $500
d. $3,000
58. Assuming a 360-day year, when a
$50,000, 90-day, 9% interest-bearing note payable matures, total payment will
be
a. $51,125
b. $54,500
c. $1,125
d. $4,500
59. Assuming a 360-day year,
proceeds of $48,750 were received from discounting a $50,000, 90-day note at a bank.
The discount rate used by the bank in computing the proceeds was
a. 6.25%
b. 10.00%
c. 10.26%
d. 9.75%
60. 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
a. $53,000
b. $50,500
c. $50,000
d. $49,500
61. Chang Co. issued a $50,000,
120-day, discounted note to Guarantee Bank.
The discount rate is 6%. Assuming
a 360-day year, the cash proceeds to
Chang Co. are
a. $49,750
b. $47,000
c. $49,000
d. $51,000
62. The journal entry to record the
issuance of a note for the purpose of converting an existing account payable
would be
a.
debit
Cash; credit Accounts Payable
b.
debit
Accounts Payable; credit Cash
c.
debit
Cash; credit Notes Payable
d.
debit
Accounts Payable; credit Notes Payable
63. The journal entry used to record
the issuance of an interest-bearing note for the purpose of borrowing funds for
the business is
a. debit Accounts Payable; credit
Notes Payable
b. debit Cash; credit Notes Payable
c. debit Notes Payable; credit Cash
d. debit Cash and Interest Expense;
credit Notes Payable
64. The journal entry used to record
the issuance of a discounted note for the purpose of borrowing funds for the business is
a. debit Cash and Interest Expense;
credit Notes Payable
b. debit Cash and Interest Payable;
credit Notes Payable
c. debit Accounts Payable; credit
Notes Payable
d. debit Notes Payable; credit Cash
65. The journal entry used to record
the payment of a discounted note is
a. debit Notes Payable and Interest
Expense; credit Cash
b. debit Notes Payable; credit Cash
c. debit Cash; credit Notes Payable
d. debit Accounts Payable; credit
Cash
66.
The
journal entry to record the payment of an interest-bearing note is
a. debit Cash; credit Notes Payable
b. debit Accounts Payable; credit
Cash
c. debit Notes Payable and Interest
Expense; credit Cash
d. debit Notes Payable and Interest
Receivable; credit Cash
67. A current liability is a debt
that is reasonably expected to be paid
a. between 6 months and 18 months
b. out of currently recognized
revenues
c. within one year
d. out of cash currently on hand
68. Taylor Bank lends Guarantee
Company $150,000 on January 1. Guarantee
Company signs a $150,000, 8%, 9- month
note. The entry made by Guarantee Company on January 1 to record the proceeds
and issuance of the note is
|
a.
Interest Expense
|
12,000
|
|
|
Cash
|
138,000
|
|
|
Notes Payable
|
|
150,000
|
b. Cash 150,000
Notes
Payable 150,000
|
c.
Cash
|
162,000
|
|
|
Interest Expense
|
|
12,000
|
|
Notes Payable
|
|
150,000
|
|
d.
Notes Payable
|
120,000
|
|
|
Interest Payable
|
7,200
|
|
|
Cash
|
|
120,000
|
|
Interest Expense
|
|
7,200
|
69.
The
journal entry to record the conversion of a $6,300 accounts payable to a notes
payable would be
a. Cash 6,300
Notes Payable 6,300
b. Notes Receivable 6,300
Notes Payable 6,300
c. Notes Payable 6,300
Cash 6,300
d. Accounts Payable 6,300
Notes Payable 6,300
70. Current liabilities are
a. due and receivable within one
year
b. due and to be paid out of
current assets within one year
c. due, but not payable for more
than one year
d. payable if a possible subsequent
event occurs
71.
Which
of the following would most likely be classified as a current liability?
a. two-year notes payable
b. bonds payable
c. mortgage payable
d. unearned rent
72. Assuming a 360-day year, when a
$20,000, 90-day, 5% interest-bearing note payable matures, total payment will
be
a. $21,000
b. $1,000
c. $20,250
d. $250
73. The current portion of long-term
debt should
a. be classified as a long-term
liability
b. not be separated from the
long-term portion of debt
c. be paid immediately
d. be reclassified as a current
liability
74. On January 5, Thomas Company, a
calendar-year company, issued $1,000,000 of notes payable, of which $250,000 is due on January 1 each of the next four
years. The proper balance sheet presentation on December 31 is
a. Current Liabilities, $1,000,000
b. Current Liabilities, $250,000;
Long-Term Debt, $750,000
c. Long-Term Debt, $1,000,000
d. Current Liabilities, $750,000;
Long-Term Debt, $250,000
75.
Proper
payroll accounting methods are important for a business for all the reasons
below except
a. good employee morale requires
timely and accurate payroll payments
b. payroll is subject to various
federal and state regulations
c. to help a business with cash
flow problems by delayed payments of payroll taxes to federal and state agencies
d. payroll and related payroll
taxes have a significant effect on the net income of most businesses
76. The amount of federal income
taxes withheld from an employee's gross pay is recorded as a(n)
a. payroll expense
b. contra account
c. asset
d. liability
77.
Which
is not
a determinate in calculating federal income taxes withheld from an
individual's pay?
a. filing status
b. types of earnings
c. gross pay
d. number of exemptions
78. Which of the following would be
used to compute the federal income taxes to be withheld from an employee's earnings?
a. FICA tax rate
b. wage and tax statement
c. FUTA tax rate
d. wage bracket and withholding
table
79. Which of the following taxes
would be deducted in determining an employee's net pay?
a. FUTA taxes
b. SUTA taxes
c. FICA taxes
d. all are correct
80.
Which
of the following taxes are employers required to withhold from employees?
a.
FICA
tax
b.
FICA
tax, state, and federal unemployment tax
c.
state
unemployment tax
d.
federal
unemployment tax
81. Thomas Martin receives an hourly
wage rate of $40, with time and a half for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as
follows: hours worked, 48; federal income tax
withheld, $350; social security tax rate, 6.0%; and Medicare tax rate,
1.5%. What is the gross pay for Martin?
a. $449
b. $1,730
c. $2,080
d. $1,581
82. Martin Jackson receives an
hourly wage rate of $30, with time and a half for all hours worked in excess of
40 hours during a week. Payroll data for the current week are as
follows: hours worked, 46; federal income tax
withheld, $350; social security tax rate, 6.0%; and Medicare tax rate,
1.5%. What is the net amount to be paid
to Jackson?
a. $1,470.00
b. $1,009.75
c. $1,097.95
d. $460.25
83. The total earnings of an
employee for a payroll period is referred to as
a.
take-home
pay
b.
pay
net of taxes
c.
net
pay
d.
gross
pay
84. Most employers are levied a tax
on payrolls for
a.
sales
tax
b.
medical
insurance premiums
c.
federal
unemployment compensation tax
d.
union
dues
85.
Which
of the following will have no effect
on an employee’s take-home pay?
a. social security tax
b. unemployment tax
c. marital status
d.
number
of exemptions claimed
86. Sadie White receives an hourly
rate of $30, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are
as follows: hours worked, 48; federal income tax withheld, $300; social security tax rate, 6.0%; and
Medicare tax rate, 1.5%. What is the net
amount to be paid to White?
a. $1,443.00
b. $1,143.00
c. $1,260.00
d. $1,000.00
87. Davis and Thompson have earnings
of $850 each. The social security tax rate is 6% and the Medicare tax rate is 1.5%. Assuming that the payroll will be
paid on December 29, what will be the employer's total FICA tax for this payroll period?
a. $102.00
b. $127.50
c. $96.00
d. $25.50
88.
The
following totals for the month of June were taken from the payroll register of
Arcon Company:
|
Salaries
expense
|
$14,000
|
|
Social security and Medicare taxes withheld
|
1,050
|
|
Income taxes withheld
|
2,600
|
|
Retirement savings
|
1,000
|
|
The
entry to record the payment of net pay would include a
a.
debit to salaries payable for $14,000
|
|
|
b.
debit to salaries payable for $9,350
|
|
|
c.
credit to salaries expense for $9,350
|
|
|
d.
credit to salaries payable for $9,350
|
|
89. Which of the following are
included in the employer's payroll taxes?
a.
SUTA
taxes
b.
FUTA
taxes
c. social security taxes
d.
all
are included in employer taxes
90.
Which
of the following is required to be withheld from employee's gross pay?
a. both federal and state
unemployment compensation taxes
b. only federal unemployment compensation
tax
c. only federal income tax
d. only state unemployment
compensation tax
91.
Each
year there is a ceiling for the amount that is subject to all of the following except
a. social security tax
b. federal income tax
c. federal unemployment tax
d. state unemployment tax
92.
Lee
Company has the following information for the pay period of December 15–31:
|
Gross
payroll
|
$16,000
|
Federal
income tax withheld
|
$4,000
|
|
Social security rate
|
6%
|
Federal unemployment tax rate
|
0.8%
|
|
Medicare rate
|
1.5%
|
State unemployment tax rate
|
5.4%
|
Assuming no employees are subject to ceilings for taxes on
their earnings, Salaries Payable would be recorded for
a. $16,000
b. $9,808
c. $10,800
d. $11,040
93. Payroll taxes levied against
employees become liabilities
a. the first of the following month
b. when the payroll is paid to
employees
c. when data are entered in a
payroll register
d. at the end of an accounting
period
94.
Payroll
entries are made with data from the
a. wage and tax statement
b. employee's earning record
c. employer's quarterly federal tax
return
d. payroll register
95. Which of the following forms is
typically given to employees at the end of the calendar year so that employees
can file their individual income tax
forms?
a. Employee’s Withholding Allowance
Certificate (W4)
b. Wage and Tax Statement (Form
W-2)
c. Employer's Quarterly Federal Tax
Return (Form 941)
d. 401k plans
96.
The
employee's earnings record would contain which data that the payroll register
would probably not contain?
a. deductions
b.
payment
c.
earnings
d. cumulative earnings
97. The detailed record indicating
the data for each employee for each payroll period and the cumulative total
earnings for each employee is called
the
a.
payroll
register
b.
payroll
check
c.
employee's
earnings record
d.
employer's
earnings record
98. 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?
a. $568.74
b. $601.50
c. $660.00
d. $574.90
The following totals for the month of April were taken from
the payroll register of Magnum Company.
|
Salaries
|
$12,000
|
|
FICA taxes withheld
|
900
|
|
Income taxes withheld
|
2,500
|
|
Medical insurance deductions
|
450
|
|
Federal unemployment taxes
|
32
|
|
State unemployment taxes
|
216
|
99.
The
journal entry to record the monthly payroll on April 30 would include a
a. credit to Salaries Payable for
$8,150
b. debit to Salaries Expense for
$7,902
c. debit to Salaries Payable for
$8,150
d. debit to Salaries Payable for
$7,902
100.
The
entry to record accrual of employer’s payroll taxes would include a
a. debit to Payroll Tax Expense for
$248
b. debit to FICA Taxes Payable for
$1,800
c. credit to Payroll Tax Expense
for $248
d. debit to Payroll Tax Expense for
$1,148
101.
The
following totals for the month of April were taken from the payroll register of
Magnum Company:
|
Salaries
|
$10,000
|
|
FICA taxes withheld
|
750
|
|
Income taxes withheld
|
2,000
|
|
Medical insurance deductions
|
450
|
|
Unemployment taxes
|
420
|
The entry to record accrual of
employer’s payroll taxes would include a
a.
debit
to Payroll Tax Expense for $1,170
b.
debit
to FICA Taxes Payable for $1,500
c.
credit
to Payroll Tax Expense for $420
d.
debit
to Payroll Tax Expense for $1,620
102. 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, 46; federal income tax withheld, $110; cumulative earnings for the year prior to
this week, $24,500; 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?
a. $569.87
b. $539.00
c. $625.00
d. $544.88
103.
The
following totals for the month of June were taken from the payroll register of
Young Company:
|
Salaries
expense
|
$15,000
|
|
Social security and Medicare taxes withheld
|
1,125
|
|
Income taxes withheld
|
3,000
|
|
Retirement savings
|
500
|
|
Salaries subject to federal and state
|
|
|
unemployment taxes of 6.2
percent
|
4,000
|
The entry to record the accrual of employer’s payroll taxes
would include a debit to
a. Payroll Tax Expense for $2,498
b. Social Security and Medicare Tax
Payable for $2,250
c. Payroll Tax Expense for $1,373
d.
Payroll
Tax Expense for $1,125
Assuming no employees are subject to ceilings for their
earnings, Harris Company has the following information for
the pay period of January 15–31.
|
Gross
payroll
|
$10,000
|
Federal
income tax withheld
|
$1,800
|
|
Social security rate
|
6%
|
Federal unemployment tax rate
|
0.8%
|
|
Medicare rate
|
1.5%
|
State unemployment tax rate
|
5.4%
|
104. Salaries Payable would be
recorded in the amount of
a. $8,200
b. $6,830
c. $8,630
d. $7,450
105. Assuming that all wages are
subject to federal and state unemployment taxes, the employer's payroll tax
expense would be
a. $1,370
b. $750
c. $620
d. $2,870
106. Assume that social security
taxes are payable at a 6% rate and Medicare taxes are payable at a 1.5% rate
with no maximum earnings, and that
federal and state unemployment compensation taxes total 4.6% on the first
$7,000 of earnings. If an employee earns $2,500 for the current
week and the employee's year-to-date earnings before this week were $6,800, what is the total payroll
taxes related to the current week?
a. $187.50
b. $196.70
c. $344.50
d. $9.20
107. 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
a. debit to SUTA Payable of $630
b. debit to SUTA Payable of $18,900
c. credit to SUTA Payable of $630
d. credit to SUTA Payable of
$18,900
108.
Which
of the following is an example of a variable component of a payroll system?
a. hours worked
b. Medicare tax rate
c. rate of pay
d. social security number
109. 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 salaries would include a
a. debit to Salary Payable of
$450,000
b. credit to Salary Payable of
$500,000
c. debit to Salary Expense of
$500,000
d. credit to Salary Expense of
$450,000
110. 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 salaries would include a
a. debit to Salaries Payable of
$313,000
b. credit to Salaries Payable of $364,500
c. debit to Salaries Expense of
$364,500
d. credit to Salaries Expense of
$313,000
111.
An
aid in internal control over payrolls that indicates employee attendance is
a. time card
b. voucher system
c. payroll register
d. employee's earnings record
112. A pension plan that requires the
employer to make annual pension contributions, with no promise to employees regarding future pension payments, is
termed
a. funded
b. unfunded
c. defined benefit
d. defined contribution
113. During its first year of
operations, a company granted employees vacation privileges and pension rights
estimated at a cost of $21,500 and
$15,000. The vacations are expected to
be taken in the next year and the pension rights are expected to be paid in the future 5–30 years. What is the total cost of vacation pay and
pension rights to be recognized in the
first year?
a. $15,000
b. $36,500
c. $6,500
d. $21,500
114. A pension plan that promises
employees a fixed annual pension benefit, based on years of service and compensation, is called a(n)
a. defined contribution plan
b. defined benefit plan
c. unfunded plan
d. compensation plan
115. Vacation pay payable is reported
on the balance sheet as a(n)
a. current liability or long-term
liability, depending upon when the vacations will be taken by employees
b. current liability
c. expense
d. long-term liability
116.
An
unfunded pension liability is reported on the balance sheet as
a. current liability
b. owner's equity
c. long-term liability
d. current liability or long-term
liability, depending upon when the pension liability is to be paid
117.
The
journal entry a company uses to record accrued vacation privileges for its
employees at the end of the year is
a. debit Vacation Pay Expense;
credit Vacation Pay Payable
b. debit Vacation Pay Payable;
credit Vacation Pay Expense
c. debit Salary Expense; credit
Cash
d. debit Salary Expense; credit
Salaries Payable
118. The journal entry a company uses
to record fully funded pension rights for its salaried employees at the end of
the year is
a. debit Salary Expense; credit
Cash
b. debit Pension Expense; credit
Unfunded Pension Liability
c. debit Pension Expense; credit
Unfunded Pension Liability and Cash
d. debit Pension Expense; credit
Cash
119. The journal entry a company uses
to record partially funded pension rights for its salaried employees at the end
of the year is
a. debit Salary Expense; credit
Cash
b. debit Pension Expense; credit
Unfunded Pension Liability
c. debit Pension Expense; credit
Unfunded Pension Liability and Cash
d. debit Pension Expense; credit
Cash
120. 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
a. debit Salary Expense; credit
Cash
b. debit Pension Expense; credit
Unfunded Pension Liability
c. debit Pension Expense; credit
Unfunded Pension Liability and Cash
d. debit Pension Expense; credit
Cash
121. Zennia Company 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 cost is
$135,000. The journal entry to record the adjusting entry required on December
31, the end of the current year, to record the current month’s accrued vacation pay is
a. $135,000
b. $67,500
c. $0
d. $11,250
122. Hall Company sells merchandise
with a one-year warranty. In the current
year, sales consisted of 4,500 units. It is estimated that warranty repairs will
average $10 per unit sold, and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall
should show warranty expense of
a. $45,000
b. $13,500
c. $31,500
d. $0
123. During September, Excom sold 100
radios for $50 each and provided a two-year warranty with each unit. Each radio
cost Excom $30 to produce. If 5% of the
goods sold typically need to be replaced over the warranty period and one is actually replaced during
September, for what amount in September would Excom debit Product Warranty Expense?
a. $50
b. $150
c. $30
d. $120
124. 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
a. $9,000.
b. $21,000.
c. $30,000.
d. $0.
125. 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?
a. $6,000.
b. $14,000.
c. $20,000.
d. $0.
126.
The
cost of a product warranty should be included as an expense in the
a.
period
the cash is collected for a product sold on account
b.
future
period when the cost of repairing the product is paid
c.
period
of the sale of the product
d.
future
period when the product is repaired or replaced
127. McKay Company sells merchandise
with a one-year warranty. In Year 1,
sales consisted of 1,200 units. 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. In the Year 1 income statement, McKay should
show warranty expense of
a. $3,600
b. $8,400
c. $12,000
d. $0
128. During May, Blast sold 650
portable CD players for $50 each and provided a one-year warranty with each unit. Each CD player cost Blast $25 to
produce. If 10% of the goods sold
typically need to be replaced over the warranty
period, for what amount should Blast debit Product Warranty Expense in May?
a. $3,250
b. $1,625
c. $650
d. $1,300
129.
Estimating
and recording product warranty expense in the period of the sale best follows
the
a. cost concept
b. business entity concept
c. matching concept
d. materiality concept
130. The journal entry a company uses
to record the estimated product warranty liability expense is
a. debit Product Warranty Expense;
credit Product Warranty Payable
b. debit Product Warranty Payable;
credit Cash
c. debit Product Warranty Expense;
credit Cash
d. debit Product Warranty Payable;
credit Product Warranty Expense
131. Which of the following is the
most desirable quick ratio?
a. 2.20
b. 1.80
c. 1.95
d. 1.50
132.
The
Crafter Company has the following assets and liabilities:
|
ASSETS
|
|
|
Cash
|
$28,000
|
|
Accounts
receivable
|
15,000
|
|
Inventory
|
20,000
|
|
Equipment
|
50,000
|
|
|
|
|
LIABILITIES
|
|
|
Current
portion of long-term debt
|
10,000
|
|
Accounts
payable
|
2,000
|
|
Long-term
debt
|
25,000
|
Determine the quick ratio (rounded to one decimal point).
a. 5.3
b. 3.6
c. 3.3
d. 2.3
133.
Based
on the following data, what is the quick ratio, rounded to one decimal point?
Accounts payable $
30,000
Accounts receivable 60,000
Accrued liabilities 5,000
Cash 30,000
Intangible assets 50,000
Inventory 69,000
Long-term investments 80,000
Long-term liabilities 100,000
Marketable securities 30,000
Fixed assets 670,000
Prepaid expenses 1,000
a. 3.4
b. 3.0
c. 2.2
d. 1.8
134.
Quick
assets include
a. cash, cash equivalents,
receivables, prepaid expenses, and inventory
b. cash, cash equivalents,
receivables, and prepaid expenses
c. cash, cash equivalents,
receivables, and inventory
d. cash, cash equivalents, and
receivables
135.
The
Young Company has the following assets and liabilities:
|
ASSETS
|
|
|
Cash
|
$35,000
|
|
Accounts
receivable
|
15,000
|
|
Inventory
|
30,000
|
|
Equipment
|
50,000
|
|
|
|
|
LIABILITIES
|
|
|
Current
portion of long-term debt
|
10,000
|
|
Accounts
payable
|
2,000
|
|
Long-term
debt
|
25,000
|
Determine the quick ratio (rounded to one decimal point).
a. 6.7
b. 13.0
c. 4.2
d. 3.5
136. Which of the following is the
most desirable quick ratio?
a. 1.20
b. 1.00
c. 0.95
d. 0.50
137. 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.
|
|
Description
|
Debit
|
Credit
|
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138. 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%.
139.
Journalize
the following, assuming a 360-day year is used for interest calculations:
Apr. 30 Issued a $150,000, 30-day, 6% note dated April 30 to Misner Co.
on account. May 30 Paid Misner Co. the amount owed on the
note dated April 30.
ANSWER: Apr. 30 Accounts Payable—Misner Co. 150,000
Notes Payable—Misner Co. 150,000
|
|
May
30 Notes Payable—Misner Co. 150,000
Interest Expense 750
Cash
|
150,750
|
|
|
|
|
|
|
|
|
|
|
|
|
140. Roseland Design borrowed
$700,000 on a 90-day note from CorpOne Funding Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used
for interest calculations.)
(a) Journalize Roseland’s entries to
record:
a.
The
issuance of the note.
b.
The
payment of the note at maturity.
(b) Journalize CorpOne’s entries to
record:
a.
The
receipt of the note.
b.
The
receipt of the payment of the note at maturity.
141. Journalize the following entries
on the books of the borrower and creditor.
Label accordingly. (Assume a 360-day year
is used for interest calculations.)
Jun. 1 James Co. purchased
merchandise on account from O’Leary Co., $90,000, terms n/30.
Jun. 30 James
Co. issued a 60-day, 5% note for $90,000 on account. Aug. 29 James Co.
paid the amount due.
142. Journalize the following entries
on the books of the borrower and creditor.
Label accordingly. (Assume a 360-day year
is used for interest calculations.)
Jun. 1 Regis Co. purchased
merchandise on account from Winthrop Co., $60,000, terms n/30.
Jun. 30 Regis
Co. issued a 60-day, 5% note for $60,000 on account.
Aug. 29 Regis Co. paid the amount due.
143. On October 1, Ramos Co. signed a
$90,000, 60-day discounted note at the bank.
The discount rate was 6%, and the
note was paid on November 30. (Assume a 360-day year is used for interest
calculations.)
(a)
Journalize
the entries for October 1 and November 30.
(b)
Assume
that Ramos Co. signed a 6% note.
Journalize the entries for October 1 and November 30.
144. Journalize the following entries
on the books of Winston Co. for August 1, September 1, and November 30. (Assume a 360-day year is used for interest
calculations.)
Aug. 1 Winston
Co. purchased merchandise for $75,000 on account from Bagley Co., terms n/30. Sept.
1 Winston Co. issued a
90-day, 6% note for $75,000 on account.
Nov. 30 Winston Co. paid the amount due.
145. A borrower has two alternatives
for a loan: (a) issue a $480,000, 60-day, 8% note or (2) issue a $480,000,
60-day note that the creditor
discounts at 8%. (Assume a 360-day year is used for interest calculations.)
(a)
Calculate
the amount of the interest expense for each option.
(b)
Determine
the proceeds received by the borrower in each situation.
146. Baker Green’s weekly gross
earnings for the week ending December 7 were $2,500, and her federal income tax withholding was $525. Prior to this week Green had earned $98,000
for the year. Assuming the social
security rate is 6% and Medicare is
1.5%, what is Green’s net pay?
147. John Woods’ weekly gross
earnings for the present week were $2,500.
Woods has two exemptions. Using
$80 value for each exemption and the
tax rate schedule below, what is Woods’ federal income tax withholding?
Single person (including head of household)
If amount of wages (after
subtracting
|
withholding
allowance)
is:
|
The amount of income tax
withholding
is:
|
of excess over:
|
|
Not
over $51
|
$0
|
|
|
Over-
$51
|
But
not over-
-$192.......10%
|
of
excess over -
-$51
|
|
$192
|
-$620.......$14.10 plus 15%
|
-$192
|
|
$620
|
-$1,409....$78.30 plus 25%
|
-$620
|
|
$1,409
|
-$3,013....$275.55 plus 28%
|
-$1,409
|
|
$3,013
|
-$6,508....$724.67 plus 33%
|
-$3,013
|
|
$6,508
|
.................$1,878.02 plus 35%
|
-$6,508
|
148. An employee earns $40 per hour
and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that
the employee worked 60 hours during the week, and that the gross pay
prior to the current week totaled $58,000.
Assume further that the social security tax rate was 6.0%, the Medicare
tax rate was 1.5%, and the federal
income tax to be withheld was $614.
(a) Determine the gross pay for the
week.
(b)
Determine
the net pay for the week.
149. Dixon Sales has seven sales
employees that receive weekly paychecks. Each earns $10.25 per hour and each
has worked 40 hours in the pay period.
Each employee pays 12% of gross in federal income tax, 3% in state income tax, 6% of gross in social security tax,
1.5% of gross in Medicare tax, and 0.5% in state disability insurance. Journalize the recognition of the pay
period ending January 19 which will be paid to the employees January 26.
150. 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% in state income tax, 6% of gross in social security tax,
1.5% of gross in Medicare tax, and 0.5% in state disability insurance. Journalize the pay period ending January 19
which will be paid to the employees January 26.
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