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Exam 10: Current Liabilities and Payroll

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Question 61

Multiple Choice

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Mobile Co. issued a $45,000, 60-day, discounted note to Guarantee Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay:

A) $45,450
B) $42,300
C) $45,000
D) $44,550

E) None of the above
F) C) and D)

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Question 62

True/False

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For an interest bearing note payable, the amount borrowed is equal to the face amount of the note.

A) True
B) False

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Question 63

Multiple Choice

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Current liabilities are:

For which of the following taxes is there no ceiling on the amount of employee annual earnings subject to the tax?

Payroll taxes levied against employers become an employer liability at the time the employee wages are incurred.

Federal unemployment compensation tax becomes an employer's liability at the time the employee is paid.

During May, Blast sold 650 portable CD players for $50 each. Each CD player cost Blast $25 to purchase and carried a one-year warranty. If 10 percent of the goods sold typically need to be replaced over the warranty period, what amount should Blast debit Product Warranty Expense for in May?

For a current liability to exist, the following two tests must be met. The liability must be due usually within a year and must be paid out of current assets.

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.

Assuming a 360-day year, the interest charged by the bank, at the rate of 9%, on a 90-day, discounted note payable of $100,000 is

For paying their payroll, most employers use payroll checks drawn on a special bank account.

The Crafter Company had the following assets and liabilities as of December 31, 2012: Determine the quick ratio for the end of the year (rounded to one decimal point) .

The journal entry a company uses to record the issuance of a discounted note for the purpose of borrowing funds for the business is

Ecco Company sold $150,000 of kitchen appliances during September under a 6 month warranty. 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.

Notes may be issued

An employee's take home pay is equal to gross pay less all voluntary deductions.

Aqua Construction installs swimming pools. They calculate that warranty obligations are 5% of gross sales. For the year just ending Aqua's gross sales were $1,500,000. Due to previous quarter recognitions, the Warranty Liability account has a credit balance of $48,700. Determine the year's total warranty liability and journalize any necessary value to establish the year's liability at December 31st.

Another name for the quick ratio is

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 1/2% in State Disability Insurance. Journalize the recognition the pay period ending January 19th which will be paid to the employees January 26th. (Keep in mind that none of the employees is subject to a ceiling amount for social security.)

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.