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66) Which of the following is not an employer payroll cost?
A) FICA taxes.
B) Federal and state unemployment taxes.
C) Federal and state income taxes.
D) Employer contributions to a retirement plan.
67) Which of the following are employer payroll costs?
I. FICA taxes.
II. Federal and state unemployment taxes.
III. Federal and state income taxes.
IV. Employer contributions to a retirement plan.
A) I and IV
B) I, III, and IV
C) I, II, and IV
D) II and III
68) Which of the following is not withheld from an employee's salary?
A) FICA taxes.
B) Federal and state unemployment taxes.
C) Federal and state income taxes.
D) Employee portion of health insurance.
69) Which of the following are withheld from an employee's salary?
I. FICA taxes.
II. Federal and state unemployment taxes.
III. Federal and state income taxes.
IV. Employee portion of health insurance.
A) I, II, and IV
B) I, III, and IV
C) I and IV
D) II and III
70) Which of the following is true regarding FICA taxes?
A) FICA taxes are paid only by the employee.
B) FICA taxes are paid only by the employer.
C) FICA taxes are paid in equal amounts by the employee and the employer.
D) FICA taxes are paid in different amounts by the employee and the employer.
71) Which of the following are not included in an employer's payroll tax expense?
A) Employer portion of FICA taxes.
B) Federal unemployment taxes.
C) State unemployment taxes.
D) State income taxes.
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72) Which of the following are included in an employer's payroll tax expense?
A) Employer portion of FICA taxes.
B) Federal unemployment taxes.
C) State unemployment taxes.
D) All of the other answer choices are correct.
73) Suppose a college football coach makes a base salary of $2,400,000 a year ($200,000 per
month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base
amount and a 1.45% Medicare tax with no maximum. Assuming the Social Security maximum
base amount is $128,400, how much will be withheld during the year for the coach's Social
Security and Medicare taxes? (Round your answers to the nearest dollar amount.)
A) $34,800.
B) $42,761.
C) $183,600.
D) None of the other answer choices are correct.
74) Suppose a college football coach makes a base salary of $2,400,000 a year ($200,000 per
month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base
amount and a 1.45% Medicare tax with no maximum. Assuming the Social Security maximum
base amount is $128,400, through what month will Social Security be withheld?
A) Social Security will be withheld only in January.
B) Social Security will be withheld through the entire year.
C) Social Security will be withheld through the month of March.
D) Social Security will be withheld through the month of June.
75) Greger Peterson is a senior manager at a public accounting firm making a base salary of
$180,000 a year ($15,000 per month). Employers are required to withhold a 6.2% Social Security
tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Assuming the
Social Security maximum base amount is $128,400, how much will be withheld during the year
for Peterson's Social Security and Medicare taxes. (Round your answers to the nearest dollar
amount.)
A) $2,610.
B) $10,571.
C) $13,770.
D) None of the other answer choices are correct.
25
76) Greger Peterson is a senior manager at a public accounting firm making a base salary of
$180,000 a year ($15,000 per month). Employers are required to withhold a 6.2% Social Security
tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Assuming the
Social Security maximum base amount is $128,400, through what month will Social Security be
withheld?
A) Social Security will be withheld through the month of September.
B) Social Security will be withheld through the entire year.
C) Social Security will be withheld through the month of January.
D) Social Security will be withheld through the month of October.
26
77) Action Travel has 10 employees each working 40 hours per week and earning $20 an hour.
Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65%
and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual
payroll payment (Salaries Payable) for the first week of January?
A) $5,404.
B) $5,708.
C) $4,792.
D) $8,000.
27
78) Action Travel has 10 employees each working 40 hours per week and earning $20 an hour.
Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65%
and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the
employer's total payroll tax expense for the first week of January?
A) $612.
B) $1,224.
C) $916.
D) $304.
28
79) Rock Adventures has 15 employees each working 40 hours per week and earning $30 an
hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are
7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the
actual payroll payment (salaries payable) for the first week of January?
A) $13,923.
B) $12,843.
C) $5,157.
D) $18,000.
80) Rock Adventures has 15 employees each working 40 hours per week and earning $30 an
hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are
7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the
employer's total payroll tax expense for the first week of January?
A) $1,377.
B) $3,141.
C) $2,061.
D) $684.
81) Deferred Revenues is a(n):
A) Liability account.
B) Asset account.
C) Stockholders' equity account.
D) Revenue account.
82) In December 2020, Quebecor Printing received magazine subscriptions for 2021 from
customers, who paid $500 in cash. What would be the appropriate journal entry for this event in
December 2020?
A) Debit Cash, $500; credit Subscription Revenue, $500.
B) Debit Cash, $500; credit Deferred Revenue, $500.
C) Debit Subscription Revenue, $500; credit Cash, $500.
D) No journal entry is necessary.
83) In January 2021, Summit Department Store sells a gift card for $50 and receives cash. In
February, 2021, the customer comes back and spends $20 of the gift card to purchase a water
bottle. What would be the appropriate journal entry for the sale of the gift card in January?
A) Debit Cash, $50; credit Sales Revenue, $50.
B) Debit Cash, $50; credit Deferred Revenue, $50.
C) Debit Sales Revenue, $20; credit Cash, $20.
D) No journal entry is necessary.
84) In January, 2021, Summit Department Store sells a gift card for $50 and receives cash. In
February, 2021, the customer comes back and spends $20 of the gift card to purchase a water
bottle. What would be the appropriate journal entry for the customer's purchase of the water
bottle in February?
A) Debit Deferred Revenue, $50; credit Sales Revenue, $50.
B) Debit Deferred Revenue, $20; credit Sales Revenue, $20.
C) Debit Sales Revenue, $20; credit Deferred Revenue, $20.
D) No journal entry is necessary.
85) At times, businesses require advance payments from customers that will be applied to the
purchase price when goods are delivered or services provided. These customer advances
represent:
A) Liabilities until the product or service is provided.
B) A component of stockholders' equity.
C) Long-term assets until the product or service is provided.
D) Revenue upon receipt of the advance payment.
86) The sale of gift cards by a company is a direct example of:
A) Deferred revenues.
B) Sales tax payable.
C) Current portion of long-term debt.
D) Contingencies.
87) When a company delivers a product or service for which a customer has previously paid, the
company records the following:
A) A debit to a revenue account and a credit to a liability account.
B) A debit to a revenue account and a credit to an asset account.
C) A debit to an asset account and a credit to a revenue account.
D) A debit to a liability account and a credit to a revenue account.
88) Gift card breakage refers to:
A) The inability of the company to satisfy its obligation to customers that have previously
purchased gift cards.
B) The point in time when gift cards expire or when the likelihood of redemption by customers is
viewed as remote.
C) The time at which customers redeem their previously purchased gift cards for goods and
services.
D) Companies selling gift cards to customers on account and then those customers failing to pay
the amount owed.
89) On March 31, 2021, a company sells $1,200 of gift cards to customers. The gift cards expire
one year from the date of sale. What entry should the company record on March 31, 2021?
A) Debit Cash, $1,200; credit Sales Revenue, $1,200.
B) Debit Sales Revenue, $1,200; credit Cash, $1,200.
C) Debit Cash, $1,200; credit Deferred Revenue, $1,200.
D) No journal entry is necessary.
90) On October 1, 2021, a company sells $800 of gift cards to customers. The gift cards expire
one year from the date of sale. By October 1, 2022, $750 of the gift cards have been redeemed
and the sales recorded at the time of redemption. What entry, if any, should the company record
on October 1, 2022?
A) Debit Deferred Revenue, $50; credit Sales Revenue, $50.
B) Debit Sales Revenue, $50; credit Cash, $50.
C) Debit Cash, $750; credit Sales Revenue, $750.
D) No journal entry is necessary.
91) On July 1, 2021, a company sells $2,000 of gift cards to customers. The gift cards expire one
year from the date of sale. By December 31, 2021, $1,600 of the gift cards have been redeemed.
What is the appropriate balance in the Deferred Revenue account on December 31, 2021?
A) $2,000.
B) $1,800.
C) $1,600.
D) $400.
92) Sales taxes collected by a company on behalf of the state and local governments are recorded
by:
A) A debit to an expense account.
B) A credit to a revenue account.
C) A debit to a revenue account.
D) A credit to a liability account.
93) When a company collects sales tax from a customer, the event is recorded by:
A) A debit to Sales Tax Expense and a credit to Sales Tax Payable.
B) A debit to Cash and a credit to Sales Tax Payable.
C) A debit to Sales Tax Payable and a credit to Sales Tax Expense.
D) A debit to Sales Tax Payable and a credit to Cash.
94) When a company collects sales tax from a customer, the event results in a(n) ________ in
Cash and a(n) ________ in Sales Tax Payable:
A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease
95) Suppose you buy lunch for $8.39 that includes a 5% sales tax. How much did the restaurant
charge you for the lunch (excluding any tax) and how much does the restaurant owe for sales
tax? (Do not round intermediate calculations. Round the answers to 2 decimal places.)
A) $8.39 for lunch and $0.42 for sales tax.
B) $8.39 for lunch and no sales tax.
C) $8.81 for lunch and $0.42 for sales tax.
D) $7.99 for lunch and $0.40 for sales tax.
96) The Route 66 Gift Shop, which records sales and sales tax separately, had sales on account
of $1,500 and cash sales of $1,000. The state sales tax is 8%. The journal entry to record the
sales would include a:
A) Debit to Sales Tax Payable for $75.
B) Debit to Cash of $1,000.
C) Credit to Sales Revenue of $2,700.
D) Debit to Accounts Receivable of $1,620 and a debit to Cash of $1,080.
36
97) Suppose you buy dinner for $23.75 that includes an 8% sales tax. How much did the
restaurant charge you for the dinner (excluding any tax) and how much does the restaurant owe
for sales tax?
A) $23.75 for dinner and $1.90 for sales tax.
B) $23.75 for dinner and no sales tax.
C) $21.85 for dinner and $1.90 for sales tax.
D) $21.99 for dinner and $1.76 for sales tax.
98) If a 6% sales tax is recorded together with sales revenue in the sales account and the balance
at the end of the month is $5,300, how much sales tax is payable?
A) $600
B) $280
C) $318
D) $300
99) Union Apparel has sales including sales taxes for the month of $551,200. If the sales tax rate
is 6%, what are Union Apparel's sales for the month?
A) $500,000.
B) $518,128.
C) $520,000.
D) $551,200.
100) Union Apparel has sales including sales taxes for the month of $551,200. If the sales tax
rate is 6%, how much does Union Apparel owe for sales tax?
A) $51,200.
B) $33,272.
C) $31,200.
D) $551,200.
101) The current portion of long-term debt should be
A) Reported as a current liability in the balance sheet.
B) Reported as a long-term liability in the balance sheet.
C) Combined with the rest of the long-term debt in the balance sheet.
D) Paid immediately.
102) The current portion of long-term debt is:
A) The amount that will be paid within one year of the balance sheet date.
B) Reported as an asset.
C) Reported as a long-term liability.
D) None of the other answer choices is correct.
103) Region Jet has a $50 million liability at December 31, 2021, of which $10 million is
payable in 2022. In its December 31, 2021 balance sheet, the company reports the $50 million
debt as a:
A) $50 million current liability in the balance sheet.
B) $50 million long-term liability in the balance sheet.
C) $10 million current liability and a $40 million long-term liability in the balance sheet.
D) $40 million current liability and a $10 million long-term liability in the balance sheet.
104) United Supply has a $5 million liability at December 31, 2021, of which $1 million is
payable in each of the next five years. United Supply reports the liability in the balance sheet as
a:
A) $5 million current liability.
B) $5 million long-term liability.
C) $1 million current liability and a $4 million long-term liability.
D) $4 million current liability and a $1 million long-term liability.
39
105) If management can estimate the amount of loss that will occur due to litigation against the
company, and the likelihood of the loss is reasonably possible, a contingent liability should be
A) Disclosed, but not reported as a liability.
B) Disclosed and reported as a liability.
C) Neither disclosed nor reported as a liability.
D) Reported as a liability, but not disclosed.
106) If management can estimate the amount of loss that will occur due to litigation against the
company, and the likelihood of the loss is probable, a contingent liability should be
A) Disclosed, but not reported as a liability.
B) Disclosed and reported as a liability.
C) Neither disclosed nor reported as a liability.
D) Reported as a liability, but not disclosed.
107) Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations.
Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated
amount in the range of $100,000 to $200,000, with all amounts in the range considered equally
likely. How should Higgins report this litigation?
A) As a liability for $100,000 with disclosure of the range.
B) As a liability for $150,000 with disclosure of the range.
C) As a liability for $200,000 with disclosure of the range.
D) As a disclosure only. No liability is reported.
108) Away Travel filed suit against West Coast Travel seeking damages for copyright violations.
West Coast Travel's legal counsel believes it is reasonably possible that West Coast Travel will
settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts
in the range considered equally likely. How should West Coast Travel report this litigation?
A) As a liability for $100,000 with disclosure of the range.
B) As a liability for $150,000 with disclosure of the range.
C) As a liability for $200,000 with disclosure of the range.
D) As a disclosure only. No liability is reported.
