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Exam 9: Current Liabilities

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Question 81

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A company sells computers with a 6-month warranty. In January, the company sold 100,000 computers at $1,750 each and 1,500 computers were turned in for repairs during that same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January.

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Question 82

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All expected future payments are liabilities.

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Question 83

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Employers must pay FICA taxes that are equal to amount being withheld from their employees.

__________ allowances are items that reduce the amount of federal income taxes owed by the individual.

On November 1, 2009, Bob's Skateboards Store signed a $12,000, 3-month, 5% note payable to cover a past due account payable. a. What amount of interest expense on this note should Bob's Skateboards Store report? b. Prepare Bob's general journal entry to record the issuance of the note payable c. Prepare Bob's general journal entry to record the payment of the note on February 1, 2010.

FUTA is the abbreviation for social security taxes.

In the accounting records of a defendant, lawsuits:

______________________ is the total compensation an employee earns including wages, salaries, commissions, bonuses and any compensation earned before deductions such as taxes.

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

If Steve Company paid $350,000 in bonuses, and net income prior to the bonus was $4,200,000, what was the bonus percentage offered to the employees during 2010?

A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should:

Identify and explain the types of employer payroll taxes.

An employer's federal unemployment taxes (FUTA) are reported:

FICA taxes include:

If a company had net income of $3,003,000, interest expense of $400,000, a tax rate of 40%, and operating income of $5,405,000, what would the times interest earned ratio be for the company?

An employee earnings report:

Gross pay less all deductions is called ____________________.

A company's employer payroll taxes are 0.8% for federal unemployment taxes, 5.4% for state unemployment taxes, 6.2% for FICA social security taxes on earnings up to $106,800 and 1.45% for FICA Medicare taxes on all earnings. Compute the W-2 Wage and Tax Statement information required below for the following employees: $\begin{array} { | l | r | r | } \hline \text { Employee } & \text { Gross Earnings } & \text { Federal Income Taxes Withheld } \\\hline \text { A. Barker } & \$ 84,000 & \$ 17,600 \\\hline \text { C. Dirkson } & 52,000 & 8,200 \\\hline\end{array}$ $\begin{array} { | l | l | l | } \hline \text { W-2 Information } & \text { A. Baker } & \text { C. Dirkson } \\\hline \text { Federal Income Tax Withheld } & & \\\hline \text { Wages, Tips, Other Compensation } & & \\\hline \text { Social Security Tax Withheld } & & \\\hline \text { Social Security Wages } & & \\\hline \text { Medicare Tax Withheld } & & \\\hline \text { Medicare Wages } & & \\\hline\end{array}$

Each employee records the number of withholding allowances claimed on form W-4, the withholding allowance certificate that is filed with the employer.

A _______________________ is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.