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Exam 11: Current Liabilities and Payroll

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Question 21

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Prior to the last weekly payroll period of the calendar year, the cumulative earnings of employees A and B are $99,350 and $91,000 respectively. Their earnings for the last completed payroll period of the year are $850 each. The maximum amount of earnings subject to social security tax at 6% is $100,000. All earnings are subject to Medicare tax of 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 on the two salary amounts of $850 each?

A) $127.50
B) $115.50
C) $112.50
D) $0

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

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Question 22

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Most employers are required to withhold from employees which of the following employment taxes?

A) FICA tax
B) FICA tax, state and federal unemployment compensation tax
C) only state unemployment compensation tax
D) only federal unemployment compensation tax

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

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Question 23

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The current portion of long-term debt should

Internal controls for cash payments also apply to payrolls.

Zennia Company provides its employees with varying amount 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

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

The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. Earnings subject to 6% social security tax were $60,000; earnings subject to 1.5% Medicare tax were $80,000; and earnings of $3,000 were subject to 4.3% state and 0.8% federal unemployment compensation tax. Journalize the entry to record the accrual of payroll taxes.

Power Company sells merchandise with a one year warranty. In 2012, sales consisted of 1,600 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Power should show warranty expense of

Payroll taxes are based on the employee's net pay.

Assume that social security taxes are payable at a 6% rate on the first $100,000 of earnings 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, George Jones, earns $2,500 for the current week and Jones' year-to-date earnings before this week were $6,800, what is the total payroll taxes related to the current week?

Dixon Sales has seven sales employees which 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 1/2% in State Disability Insurance. Journalize the recognition of 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.)

Payroll taxes levied against employees become liabilities

Elgin Company sells merchandise with a one year warranty. Sales consisted of 2,500 units in 2012 and 2,000 units in 2013. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013 for the 2012 sales. Similarly, 30% of repairs will be made in 2013 and 70% in 2014 for the 2013 sales. In the 2013 income statement, how much of the warranty expense shown will be due to 2012 sales?

Most employers are levied a tax on payrolls for

According to a summary of the payroll of Scotland Company, $450,000 was subject to the 7.0% 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 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.

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.

Use the following information to answer the following questions. Assuming no employees are subject to ceilings for their earnings, Jensen Company has the following information for the pay period of January 15 - 31, 20xx. Salaries Payable would be recorded in the amount of:

The journal entry a company uses to record the payment of an interest-bearing note is

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.