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

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Question 61

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Wilson Cafeteria issues gift cards, which are very popular in the small town where the restaurant is located. In a recent month, Wilson issued $4,000 in gift cards. Experience indicates that 80 percent of the cards will be redeemed before they expire. What is the entry to record the estimated gift card expense?

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Gift Card Expense 3,...

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Question 62

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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

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Question 63

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Use the following key (a-d) to identify the proper treatment of each contingent liability.a.Record only b.Record and disclose c.Disclose only d.Do not record or disclose -Event is remote and amount is estimable

In order to be a recorded contingent liability, the liability must be possible and easily estimated.

The journal entry used to record the payment of an interest-bearing note is

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, 5.4% 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.

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

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

Assuming no employees are subject to ceilings for their earnings, Harris Company has the following information for the pay period of January 15-31. Use this information to answer the questions that follow. -According to a summary of the payroll of Scotland Company, total salaries were $500,000. 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. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (5.4%) and federal (0.8%) unemployment taxes. The journal entry to record accrued salaries would include a

Match each payroll item that follows to the one item (a-f) that best describes its characteristics. -FICA - Social security A)Amount is limited, withheld from employee only B)Amount is limited, withheld from employee and matched by employer C)Amount is limited, paid by employer only D)Amount is not limited, withheld from employee only E)Amount is not limited, withheld from employee and matched by employer F)Amount is not limited, paid by employer only

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.

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.​

The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. All earnings are subject to social security tax of 6.0% and Medicare tax of 1.5%. Earnings subject to state and federal unemployment compensation taxes are $3,000 at the federal rate of 0.8% and state rate of 5.4%. Journalize the entry to record the accrual of employer payroll taxes.

An employee receives an hourly wage rate of $15, with time and a half for all hours worked in excess of 40 during the first week of the calendar year. Payroll data for the first week of the calendar year are as follows: hours worked, 48; federal income tax withheld, $120; social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment tax, 5.4% on the first $7,000; federal unemployment tax, 0.8% on the first $7,000. What is the net amount to be paid to the employee?

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?

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?

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? When required, round your answer to the nearest dollar.

Notes may be issued

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 A)Current ratio B)Working capital C)Quick assets D)Quick ratio E)Record an accrual and disclose in the notes to the financial statements F)Disclose only in notes to financial statements G)No disclosure needed in notes to financial statements

Payroll taxes only include social security taxes and federal unemployment and state unemployment taxes.