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Exam 11: Current Liabilities and Payroll

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Question 21

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The journal entry a company uses to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is

A) debit Accounts Payable; credit Notes Payable
B) debit Cash; credit Notes Payable
C) debit Notes Payable; credit Cash
D) debit Cash and Interest Expense; credit Notes Payable

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

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Question 22

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A borrower has two alternatives for a loan: (a) issue a $480,000, 60-day, 8% note or (2) issue a $480,000, 60-day note that the creditor discounts at 8%. (Assume a 360-day year is used for interest calculations.) Required:

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Question 23

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If, prior to the last weekly payroll period of the calendar year, the cumulative earnings for an employee are $98,800, earnings subject to social security tax are $100,000, and the tax rate is 6.0%, the employer's social security tax on the $2,000 gross earnings paid on the last day of the year is $120.

Current liabilities are:

On June 8, Alton Co. issued an $90,000, 6%, 120-day note payable to Seller Co. Assuming a 360-day year for your calculations, what is the maturity value of the note?

Interest expense is reported in the operating expense section of the income statement.

One of the more popular defined contribution plans is the 401k plan.

The current assets and current liabilities for Kolbie Company and Newton Company are shown as follows at the end of 2012. *These represent prepaid expenses and other non-quick current assets. Required: (1) Determine the quick ratio for both companies. Round to two decimal places. (2) Interpret the quick ratio difference between the two companies.

The amount of money a borrower receives from the lender is called discount rate.

Assuming a 360-day year, when a $40,000, 90-day, 9% interest-bearing note payable matures, total payment will amount to:

On October 30, Seba Salon, Inc. issued a 90-day note with a face amount of $60,000 to Reyes Products, Inc. for merchandise inventory. Assuming a 360-day year, determine the proceeds of the note assuming the note is discounted at 8%.

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:

Carmen Flores' weekly gross earnings for the week ending Dec. 7th were $2,500, and her federal income tax withholding was $525. Prior to this week Flores had earned $98,000 for the year. Assuming the social security rate is 6% on the first $100,000 of annual earnings and Medicare is 1.5% of all earnings, what is Flores' net pay?

Federal income taxes withheld increase the employer's payroll tax expense.

Which of the following is not an internal control procedure for payroll?

While separation of duties may play a strong role in the internal control of inventory, it is significant in controlling payroll.

Internal controls for cash payments also apply to payrolls.

The current portion of long-term debt should

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

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: