56)
If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the
receipt of cash would be journalized as:
A)
Debit Cash, credit Unearned Revenue.
B)
Debit Sales, credit Unearned Revenue.
C)
Debit Unearned Revenue, credit Sales.
D)
Debit Cash, credit Ticket sales payable.
E)
Debit Unearned Revenue, credit Cash.
57)
A contingent liability is:
A)
An obligation not requiring future payment.
B)
Always of a specific amount.
C)
An obligation arising from a future event.
D)
An obligation arising from the purchase of goods or services on credit.
E)
A potential obligation that depends on a future event arising from a past transaction or event.
58)
Contingent liabilities are recorded or disclosed unless they are:
A)
Possible and estimable.
B)
Probable and not estimable.
C)
Probable and estimable.
D)
Remote.
E)
Reasonably possible.
59)
Contingent liabilities must be recorded if:
A)
The future event is reasonably possible but not estimable.
B)
The amount owed cannot be reasonably estimated.
C)
The future event is probable but not estimable.
D)
The future event is remote.
E)
The future event is probable and the amount owed can be reasonably estimated.
60)
Debt guarantees are:
A)
A bad business practice.
B)
Considered to be current liabilities.
C)
Recorded as liabilities even though it is highly unlikely that the original debtor will default.
D)
Considered to be contingent liabilities.
E)
Never disclosed in the financial statements.
61)
In the accounting records of a defendant, lawsuits:
A)
Are estimated liabilities.
B)
Should always be disclosed.
C)
Should always be recorded.
D)
Should be recorded if payment for damages is probable and the amount can be reasonably
estimated.
E)
Should never be recorded.
62)
Uncertainties such as natural disasters are:
A)
Disclosed because of their usefulness to financial statements.
B)
Contingent liabilities because they are future events arising from past transactions or events.
C)
Estimated liabilities because the amounts are uncertain.
D)
Not contingent liabilities because they are future events not arising from past transactions or
events.
E)
Reported in the same way as debt guarantees.
63)
The times interest earned ratio reflects:
A)
A company’s ability to pay interest even if sales decline.
B)
The relation between assets and liabilities.
C)
A company’s ability to pay its operating expenses on time.
D)
The relation between income and debt.
E)
A company’s profitability.
64)
Interest expense is not:
A)
Likely to stay the same when sales change.
B)
A fixed expense.
C)
A factor in determining a company’s borrowing risk.
D)
Incurred on current liabilities.
E)
Likely to fluctuate when sales change.
65)
Times interest earned is calculated by:
A)
Dividing income before interest expense and income taxes by interest expense.
B)
Dividing interest expense by income before interest expense.
C)
Multiplying interest expense by income.
D)
Dividing income before interest expense by interest expense and income taxes.
E)
Multiplying interest expense by income before interest expense.
66)
If the times interest earned ratio:
A)
Is greater than 1.5, the company is in default.
B)
Increases, then risk decreases.
C)
Is greater than 3.0, the company is likely carrying too much debt.
D)
Increases, then risk increases.
E)
Is less than 1.5, the company is carrying too little debt.
67)
A company’s had fixed interest expense of $5,000, its income before interest expense and income
taxes is $17,000, and its net income is $9,400. The company’s times interest earned ratio equals:
A) 3.4. B) 1.8. C) 0.5. D) 1.9. E) 0.3.
68)
The correct times interest earned computation is:
A)
(Net income – Interest expense – Income taxes)/Interest expense.
B)
(Net income + Interest expense – Income taxes)/Interest expense.
C)
Interest expense/(Net income + Interest expense + Income taxes expense).
D)
(Net income – Interest expense + Income taxes)/Interest expense.
E)
(Net income + Interest expense + Income taxes)/Interest expense.
69)
A company’s income before interest expense and income taxes is $350,000 and its interest expense
is $100,000. Its times interest earned ratio is:
A) 1.75 B) 0.29 C) 2.50 D) 3.50 E) 0.50
70)
A company’s fixed interest expense is $8,000, its income before interest expense and income taxes
is $32,000. Its net income is $9,600. The company’s times interest earned ratio equals:
A) 0.25. B) 3.33. C) 0.30. D) 4.0. E) 0.83.
71)
The difference between the amount received from issuing a note payable and the amount repaid at
maturity is referred to as:
A)
Interest.
B)
Principal.
C)
Accounts Payable.
D)
Cash.
E)
Face Value.
72)
A short-term note payable:
A)
Is a contingent liability.
B)
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.
C)
Is an estimated liability.
D)
Is not a liability until the due date.
E)
Cannot be used to extend the payment period for an account payable.
73)
Short-term notes payable:
A)
Are not negotiable.
B)
Cannot replace an account payable.
C)
Are a conditional promise to pay.
D)
Can be issued in return for money borrowed from a bank.
E)
Rarely involve interest charges.
74)
On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of
$15,000. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a
year.)
A) $0 B) $300 C) $225 D) $75 E) $900
75)
On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000.
What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a
year.)
A)
Debit Interest Payable, $240; credit Interest Expense, $240.
B)
Debit Interest Expense, $720; credit Interest Payable, $720.
C)
Debit Interest Expense, $120; credit Interest Payable, $120.
D)
Debit interest payable, $120; credit interest expense, $120.
E)
No adjusting entry is required.
76)
On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000.
What is the maturity value of the note on March 1? (Use 360 days a year.)
A) $9,120 B) $9,240 C) $9,000 D) $720 E) $9,720
77)
On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000.
Alan made the appropriate year-end accrual. What is the journal entry as of March 1 to record the
payment of the note assuming no reversing entry was made? (Use 360 days a year.)
A)
Debit Notes Payable $9,240; credit Interest Payable $120; credit Interest Expense $120; credit
Cash $9,000.
B)
Debit Notes Payable $9,000; debit Interest Payable $120; credit Cash $9,120.
C)
Debit Notes Payable $9,000; debit Interest Expense $240; credit Cash $9,240.
D)
Debit Notes Payable $9,000; debit Interest Payable $120; debit Interest Expense $120; credit
Cash $9,240.
E)
Debit Cash $9,240; credit Notes Payable $9,240.
78)
Employers’ responsibilities for payroll do not include:
A)
Recording an expense for the employee Federal Income Tax withholding.
B)
Filing Form 941, the Employer’s Quarterly Federal Tax Return.
C)
Providing each employee with an annual report of his or her wages subject to FICA and
federal income taxes along with the amount of these taxes withheld.
D)
Maintaining individual earnings records for each employee.
E)
Filing Form 940, the Annual Federal Unemployment Tax Return.
79)
Gross pay is:
A)
Total compensation earned by an employee before any deductions.
B)
Salaries after taxes are deducted.
C)
Deductions withheld by an employer.
D)
The amount of the paycheck.
E)
Take-home pay.
80)
The employer should record deductions from employee pay as:
A)
Employee receivables.
B)
Employee payables.
C)
Payroll taxes.
D)
Current liabilities.
E)
Wages payable.
81)
FICA taxes include:
A)
Charitable giving.
B)
Employee federal income tax.
C)
Social Security and Medicare taxes.
D)
Employee state income tax.
E)
Federal and state unemployment taxes.
82)
The amount of federal income taxes withheld from an employee’s paycheck is determined by:
A)
The amount of social security taxes withheld.
B)
Multiplying the gross pay by 6.2%.
C)
Tax tables provided by the state in which the employee works.
D)
The employer’s merit rating.
E)
Current earnings for the pay period and number of withholding allowances the employee
claims.
83)
Recording employee payroll deductions may involve:
A)
Expenses for the gross wages and salaries.
B)
Liabilities to the employer.
C)
Liabilities to federal and state governments.
D)
Expenses for state unemployment.
E)
Expenses for the employer portion of any medical insurance.
84)
The Federal Insurance Contributions Act (FICA) requires that each employer file a:
A)
W-2.
B)
Form 1040.
C)
W-4.
D)
Form 941.
E)
Form 1099.
85)
An employee earned $37,000 during the year working for an employer when the maximum limit
for Social Security was $118,500. The FICA tax rate for Social Security is 6.2% and the FICA tax
rate for Medicare is 1.45%. The employee’s annual FICA taxes amount is:
A) $2,830.50. B) $1,757.50. C) $8,950.50. D) $536.50. E) $2,294.00.
86)
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she
earned a total of $8,260. The FICA tax for social security is 6.2% of the first $118,500 of employee
earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The
FUTA tax rate of .6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an
employee’s pay. The amount of federal income tax withheld from her earnings was $1,325.17. Her
net pay for the month is: (Round your intermediate calculations to two decimal places.)
A) $6,422.71 B) $5,868.94 C) $6,246.94 D) $6,302.94 E) $7,194.11
87)
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she
earned a total of $8,260. The FICA tax for social security is 6.2% of the first $118,500 earned each
calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of
0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee’s pay. The
amount of federal income tax withheld from her earnings was $1,325.17. What is the total amount
of taxes withheld from the Portia’s earnings? (Round your intermediate calculations to two
decimal places.)
A) $1,957.06 B) $1,722.00 C) $3,097.17 D) $2,443.21 E) $1,495.36
40
88)
Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he
earned a total of $4,538. The FICA tax for social security is 6.2% of the first $118,500 earned each
calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee
and the employer. The amount of federal income tax withheld from his earnings was $680.70. His
net pay for the month is:
A) $3,162.98 B) $4,190.84 C) $3,857.30 D) $3,510.14 E) $4,538.00
89)
Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he
earned a total of $4,538. The FICA tax for social security is 6.2% of the first $118,500 earned each
calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee
and the employer. The amount of federal income tax withheld from his earnings was $680.70.
What is the total amount of taxes withheld from the Trey’s earnings?