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Exam 11: Current Liabilities and Payroll Accounting

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Question 31

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On January 31,Hale Company's payroll register showed that its employers earned $30,320 of office salaries and $82,750 of sales salaries.Withholdings from the employees' salaries include FICA Social Security taxes as the rate of 6.2%,FICA Medicare taxes at the rate of 1.45%,$16,960 of federal income taxes,$2,350 of medical insurance deductions (which represents 50% of the total cost of the employee medical insurance),and $4,210 of 401(k)retirement contribution deductions.Hale Company pays the other 50% of the employee insurance cost and matches the employee 401(k)contributions.Several employees earned more than $7,000 for the period which reduced salaries subject to unemployment to $110,000.No employees exceeded the FICA-Social Security taxable wage base. 1.Prepare the journal entry to record Hale Company's January 31 payroll expenses and liabilities. 2.Prepare the journal entry to record Hale Company's employer payroll taxes resulting from the January 31 payroll.Hale's merit rating reduces its state unemployment to 4% of the first $7,000 paid each employee.The federal unemployment tax rate is .8%. 3.Prepare the journal entry to record Hale's additional employee expenses.

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Question 32

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A note payable can be used to extend the payment due on an account payable.

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Question 33

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During August,Arena Company sells $356,000 in product that has a one year warranty.Experience shows that warranty expenses average about 5% of the selling price.The warranty liability account has a balance of $12,800 before adjustment.Customers returned product for warranty repairs during the month that used $9,400 in parts for repairs.The entry to record the estimated warranty expense for the month is:

An employee earns $5,500 per month working for an employer.The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%.The current FUTA tax rate is 0.8%,and the SUTA tax rate is 4.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The employee has $182 in federal income taxes withheld.The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month.What is the amount the employer should record as payroll taxes expense for the employee for the month of January?

ZMart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million.XMart had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million.Calculate the times interest earned for each company and comment on the results.

Arena Company provides health insurance to its employees that costs $15,000 per month.In addition,the company contributes 5% of the employees' $150,000 gross salary to a retirement program.The entry to record the accrued benefits for the month would include a:

Classify each of the following items as either: a.Current liability b.Long-term liability c.Not a liability 1.30-day promissory note 2.Payment of a 4-year term loan due this year 3.Salaries payable 4.Debt guarantees 5.FICA taxes payable 6.Income taxes payable 7.Payment of a 30-year term loan due this year 8.Payment of a 30-year term loan due next year.(The company's operating cycle is 2 months.) 9.Warranty work completed this year 10.Accounts payable

The payroll records of a company provided the following data for the current weekly pay period ended March 7. Assume that the Social Security portion of the FICA taxes is 6.2% on the first $106,800 and the Medicare portion is 1.45% of all wages paid to each employee for this pay period.The federal and state unemployment tax rates are 0.8% and 5.4%,respectively,on the first $7,000 paid to each employee.Calculate the net pay for each employee.

A high merit rating means that an employer has high employee turnover or seasonal hiring.

A contingent liability is a potential obligation that depends on a future event arising from a future transaction or event.

Describe employer responsibilities for reporting payroll taxes.(To the extent possible,reference the form to be filed for each tax.)

Recording employee payroll deductions may involve:

Employer payroll taxes:

A special bank account used solely for the purpose of paying employees,by depositing in the account each pay period an amount equal to the total employees' net pay and drawing the employees' payroll checks on the account,is a(n) :

Explain the responsibilities of and the accounting by employers for employee payroll deductions.

An employer has an employee benefit package that includes employer-paid health insurance and an employer-paid retirement program.During January,the employer paid $7,500 for health insurance,and contributed to the employee retirement program 10% of the employees' $150,000 gross salaries.Prepare the journal entry to record these employee benefits.

A potential lawsuit claim is recorded when the claim can be reasonably estimated and it is reasonably possible.

All of the following statements related to current liabilities for U.S.GAAP and IFRS are true except:

Agro Depot's income before interest expense and income taxes was $5,909 million,and interest expense was $37 million.Calculate Agro Depot's times interest earned.

The times interest earned ratio is calculated by dividing income before interest expense and income taxes by interest expense.