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Journalize the following entries on the books of the borrower and creditor. Label accordingly. (Assume a 360-day year is used for interest calculations.) Journalize the following entries on the books of the borrower and creditor. Label accordingly. (Assume a 360-day year is used for interest calculations.)

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The use of a separate payroll bank account is not an advantageous control, because it creates more complexity in reconciliation functions for a company and invites theft.

A) True
B) False

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The payroll register of Seaside Architecture Company indicates $870 of social security and $217 of Medicare tax withheld on total salaries of $14,500 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $5,250 at the federal rate of 0.8% and state rate of 5.4%. Prepare the journal entry to record the payroll tax expense for the period.

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Amounts withheld from each employee for social security and Medicare vary by state.

A) True
B) False

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Taylor Bank lends Guarantee Company $150,000 on January 1. Guarantee Company signs a $150,000, 8%, 9-month, interest-bearing note. The entry made by Guarantee Company on January 1 to record the proceeds and issuance of the note is


A)
 Interest Expense 12,000 Cash 138,000 Notes Payable 150,000\begin{array}{lr}\text { Interest Expense } & 12,000 \\\text { Cash } & 138,000\\\text { Notes Payable }&150,000\end{array}
B)
 Cash 150,000 Notes Payable 150,000\begin{array} { l r } \text { Cash } & 150,000 \\\quad \text { Notes Payable } & 150,000\end{array}

C)
 Cash 162,000 Interest Expense 12,000 Notes Payable 150,000\begin{array} { l r } \text { Cash } & 162,000 \\\quad \text { Interest Expense } & 12,000 \\\text { Notes Payable } & 150,000\end{array}

D)
 Notes Payable 120,000 Interest Payable 7,200 Cash 120,000 Interest Expense 7,200\begin{array}{lr}\text { Notes Payable } & 120,000 \\\text { Interest Payable } & 7,200\\\text { Cash } & 120,000 \\\text { Interest Expense } & 7,200\end{array}

E) All of the above
F) None of the above

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Notes may be issued


A) when assets are purchased
B) to creditors to temporarily satisfy an account payable created earlier
C) when borrowing money
D) for all of these

E) All of the above
F) A) and B)

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


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

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

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Which of the following is the most desirable quick ratio?


A) 2.20
B) 1.80
C) 1.95
D) 1.50

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

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An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the first week of the calendar year are as follows: hours worked, 46; federal income tax withheld, $110; 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? If required, round your answers to the nearest cent.


A) $569.87
B) $539.00
C) $625.00
D) $544.88

E) A) and C)
F) All of the above

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The journal entry to record the cost of warranty repairs that were incurred during the current period, but related to sales made in prior years, includes a debit to Warranty Expense.

A) True
B) False

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On June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using a 360-day year, what is the amount of interest revenue recognized by Garcia in the following year? When required, round your answer to the nearest dollar.


A) $700
B) $1,600
C) $1,062
D) $4,200

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

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For proper matching of revenues and expenses, the estimated cost of fringe benefits must be recognized as an expense of the period during which the employee earns the benefits.

A) True
B) False

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On July 8, Jones Inc. issued an $80,000, 6%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using a 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year? When required, round your answer to the nearest dollar.


A) $700
B) $4,200
C) $307
D) $1,400

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

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All long-term liabilities eventually become current liabilities.

A) True
B) False

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Which of the following is required to be withheld from employee's gross pay?


A) both federal and state unemployment compensation taxes
B) only federal unemployment compensation tax
C) only federal income tax
D) only state unemployment compensation tax

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

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Florida Keys Construction installs swimming pools. It calculates that warranty obligations are 3% of sales. For the year just ending, Florida Keys' sales were $1,450,000. Previous quarterly entries debiting Product Warranty Expense totaled $28,700. Determine the estimated warranty expense for the year and make the journal entry necessary to bring the account to the needed balance.

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Due to sales of $1,450,000, wa...

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Davis and Thompson have earnings of $850 each. The social security tax rate is 6% and the Medicare tax rate is 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?


A) $102.00
B) $127.50
C) $96.00
D) $25.50

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

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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?


A) $3,250
B) $1,625
C) $650
D) $1,300

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

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Roseland Design borrowed $700,000 on a 90-day note from CorpOne Funding Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for interest calculations.) (a) Joumalize Roseland's entries to record: a. The issuance of the note. b. The payment of the note at maturity. (b) Journalize CorpOne's entries to record: a. The receipt of the note. b. The receipt of the payment of the note at maturity.

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The entry to record accrual of employer's payroll taxes would include a


A) debit to Payroll Tax Expense for $2,500
B) debit to FICA Taxes Payable for $1,800
C) credit to Payroll Tax Expense for $248
D) debit to Payroll Tax Expense for $1,148

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

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