104) Gary Marks is paid on a monthly basis. For the month of January of the current year, he
earned a total of $8,288. FICA tax for Social Security is 6.2% on the first $128,400 of earnings
each calendar year and the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is
0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of
an employee’s pay. The amount of Federal Income Tax withheld from his earnings was
$1,375.17. What is the amount of the employer’s payroll taxes expenses for this employee?
(Round your intermediate calculations to two decimal places.)
A) $2,009.21
B) $1,131.31
C) $2,506.48
D) $420.00
E) $1,054.04
105) Triston Vale is paid on a monthly basis. For the month of January of the current year, he
earned a total of $5,210. FICA tax for Social Security is 6.2% on the first $128,400 of earnings
each calendar year and the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is
0.6% and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of
an employee’s pay. The amount of Federal Income Tax withheld from his earnings was $885.70.
What is the amount of the employer’s payroll taxes expenses for this employee?
A) $1,284.27
B) $312.60
C) $398.57
D) $711.17
E) $1,596.87
106) An estimated liability:
A) Is an unknown liability of a certain amount.
B) Is a known obligation of an uncertain amount that can be reasonably estimated.
C) Is a liability that may occur if a future event occurs.
D) Can be the result of a lawsuit.
E) Is not recorded until the amount is known for certain.
107) Estimated liabilities commonly arise from all of the following except:
A) Warranties.
B) Vacation benefits.
C) Pension benefits.
D) Employee benefits.
E) Unearned revenues.
108) Belkin Co. provides medical care and insurance benefits to its retirees. In the current year,
Belkin agrees to contribute 5% of the employees’ $250,000 gross salaries to a retirement
program. What is the amount of employee benefits expense for the current period?
A) $25
B) $100
C) $250
D) $12,500
E) $25,000
109) Employees earn vacation pay at a rate of one day per month. The company estimated and
must expense $1,500 of accrued vacation benefits for the year. Which of the following is the
necessary year-end adjusting entry to record accrued vacation benefits?
A) Debit Vacation Benefits Expense $1,500; credit Prepaid Vacation $1,500.
B) Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500.
C) Debit Payroll Tax Expense $1,500; credit Payroll Taxes Payable $1,500.
D) Debit Prepaid Vacation Benefits $1,500; credit Vacation Benefits Payable $1,500.
E) Debit Prepaid Benefits Payable $1,500; credit Vacation Benefits Expense $1,500.
110) Employee vacation benefits:
A) Are estimated liabilities.
B) Are contingent liabilities.
C) Are recorded as an expense when the employee takes a vacation.
D) Are recorded as an expense when the employee retires.
E) Increase net income.
111) A company sold $12,000 worth of bicycles with an extended warranty. The company’s
experience is that warranty expense averages 2% of sales. The company should:
A) Consider the warranty expense a remote liability since the rate is only 2%.
B) Recognize warranty expense at the time the warranty work is performed.
C) Recognize warranty expense and liability in the year of the sale.
D) Consider the warranty expense a contingent liability.
E) Recognize warranty liability when the company purchases the bicycles.
112) A company sold $12,000 worth of bicycles with an extended warranty. The company’s
experience is that warranty expense averages 2% of sales. The current period’s entry to record the
warranty expense is:
A) Debit Warranty Expense $240; credit Cash $240.
B) Debit Prepaid Warranties $240; credit Warranty Expense $240.
C) Debit Estimated Warranty Liability $240; credit Cash $240.
D) Debit Sales Allowances $240; credit Estimated Warranty Liability $240.
E) Debit Warranty Expense $240; credit Estimated Warranty Liability $240.
113) The deferred income tax liability:
A) Results from the income tax expense reported on the income statement differing from the
amount of income taxes payable to the government.
B) Is a contingent liability.
C) Can result in a deferred income tax asset.
D) Is never recorded.
E) Is recorded whether or not the difference between taxable income and financial accounting
income is permanent or temporary.
114) A company estimates that warranty expense will be 4% of sales. The company’s sales for
the current period are $185,000. The current period’s entry to record the warranty expense is:
A) Debit Warranty Expense $7,400; credit Sales $7,400.
B) Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C) Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400.
D) Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E) No entry is recorded until the items are returned for warranty repairs.
115) A company has a selling price of $1,800 each for its printers. Each printer has a 2 year
warranty that covers replacement of defective parts. It is estimated that 2% of all printers sold
will be returned under the warranty at an average cost of $150 each. During November, the
company sold 30,000 printers, and 400 printers were serviced under the warranty. What is the
company’s warranty expense for the month of November?
A) $26,000
B) $45,000
C) $55,000
D) $60,000
E) $90,000
116) Springfield Company offers a bonus plan to its employees and the amount of the employee
bonuses for the current year is estimated to be $32,500 to be paid during January of the following
year. The journal entry on December 31 to record the bonuses is:
A) Debit Estimated Bonus Payable $32,500; credit Cash $32,500.
B) Debit Employee Bonus Expense $32,500; credit Bonus Payable $32,500.
C) No entry since the bonuses are not paid until January.
D) Debit Employee Bonus Expense $32,500; credit Prepaid Employee Bonus $32,500.
E) Debit Unearned Bonuses $32,500; credit Bonus Payable $32,500.
117) A payroll register does not include:
A) Pay period dates.
B) Hours worked.
C) Gross pay and net pay.
D) Deductions.
E) Prior year’s earnings
118) The wage bracket withholding table is used to:
A) Compute social security withholding.
B) Compute Medicare withholding.
C) Compute federal income tax withholding.
D) Prepare the W-4.
E) Compute unemployment taxes.
119) A table that shows the amount of federal income tax to be withheld from an employee’s pay
is the:
A) Form 941.
B) Tax table.
C) Wage bracket withholding table.
D) W-2.
E) W-4.
120) Companies may use a special bank account solely for the purpose of paying employees, by
depositing an amount equal to the total employees’ net pay into the account each pay period and
drawing the employees’ payroll checks on the account. This account is a(n):
A) Federal depository bank account.
B) Employee’s Individual Earnings account.
C) Employees’ bank account.
D) Payroll register account.
E) Payroll bank account.
121) If a company uses a special payroll bank account:
A) The company does not need to issue paychecks.
B) The company draws one check for the entire payroll on the regular bank account and deposits
it in the payroll bank account.
C) The company must use a federal depository bank for the payroll bank account.
D) There is no need for a payroll register.
E) There is no need to issue W-2’s.
122) Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell
has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the
cash sales?
A) Debit Cash $8,000; credit Sales $7,360; credit Sales Taxes Payable $640.
B) Debit Sales Taxes Payable $640; debit Cash $7,360; credit Sales $8,000.
C) Debit Cash $8,000; credit Sales $8,000; and record the taxes when paid.
D) Debit Cash $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.
E) Debit Accounts Receivable $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.
123) Furniture World is required by law to collect and remit sales taxes to the state. If Furniture
World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to
record the cash sales?
A) Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.
B) Debit Sales Taxes Payable $4,680; debit Cash $73,220; credit Sales $78,000.
C) Debit Cash $78,000; credit Sales $78,000; and record the taxes when paid.
D) Debit Cash $78,000; credit Sales $73,320; credit Sales Taxes Payable $4,680.
E) Debit Accounts Receivable $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.
124) All of the following statements regarding long-term liabilities are true except?
A) Liabilities not expected to be paid within the longer of one year or the company’s operating
cycle are reported as long-term liabilities.
B) Long-term liabilities include long-term notes payable, warranty liabilities, lease liabilities,
and bonds payable.
C) Liabilities that do not have a fixed due date, but are payable on demand, are reported as long-
term liabilities.
D) Long-term liabilities can be reported on the balance sheet in a single total or in multiple
categories.
E) A single long-term liability can be divided between current and noncurrent sections on the
balance sheet.
125) On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo
Company to extend the due date on an overdue accounts payable. What is the journal entry
needed to record the transaction by Indigo Company?
A) Debit Notes Payable $4,500; credit Accounts Payable $4,500.
B) Debit Accounts Payable $4,500; credit Notes Payable $4,500.
C) Debit Accounts Receivable $4,500; credit Notes Payable $4,500.
D) Debit Cash $4,500; credit Notes Payable $4,500.
E) Debit Sales $4,500; credit Notes Payable $4,500.
126) On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo
Company to extend the due date on an overdue account. What is the journal entry that Indigo
Company would make, when it records payment of the note on the maturity date? (Use 360 days
a year.)
A) Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575.
B) Debit Notes Payable $4,500; credit Interest Expense $75, credit Cash $4,425.
C) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Payable $4,500.
D) Debit Notes Payable $4,500; debit Interest Expense $112; credit Cash $4,612.
E) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Receivable $4,500.
127) On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day,
8%, $7,500 note. What is the journal entry needed to record the transaction by Jarrett Company?
A) Debit Cash $7,500; credit Accounts Payable $7,500.
B) Debit Accounts Payable $7,500; credit Notes Payable $7,500.
C) Debit Cash $7,650; credit Notes Payable $7,650.
D) Debit Cash $7,500; credit Notes Payable $7,500.
E) Debit Notes Receivable $7,500; credit Cash $7,500.
128) On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day,
8%, $7,500 note. What is the journal entry needed to record the payment of the note by Jarrett
Company on the maturity date?
A) Debit Notes Payable $7,500; credit Interest Expense $150; credit Cash $7,350.
B) Debit Notes Payable $7,500; credit Cash $7,500.
C) Debit Notes Payable $7,650; credit Cash $7,650.
D) Debit Notes Payable $7,500; debit Interest Expense $150; credit Cash $7,650.
E) Debit Cash $7,650; credit Interest Revenue $150; credit Notes Receivable $7,500.
129) An employee earns $5,500 per month working for an employer. The FICA tax rate for
Social Security is 6.2% of the first $128,400 earned each calendar year and the FICA tax rate for
Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is
5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay. The
employee has $182 in federal income taxes withheld. The employee has voluntary deductions for
health insurance of $150 and contributes $75 to a retirement plan each month. What is the
amount of net pay for the employee for the month of January? (Round your intermediate
calculations to two decimal places.)
A) $4,827.00
B) $4,672.25
C) $4,628.25
D) $4,386.25
E) $4,430.25
130) During the first week of January, an employee works 46 hours. For this company, workers
earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour,
and her wages are subject to no deductions other than FICA Social Security, FICA Medicare,
and federal income taxes. The tax rate for Social Security is 6.2% of the first $128,400 earned
each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current
FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to
the first $7,000 of an employee’s pay. The employee has $80 in federal income taxes withheld.
What is the amount of this employee’s gross pay for the first week of January?
A) $736
B) $784
C) $1,104
D) $1,156
E) $1,004
131) During the first week of January, an employee works 46 hours. For this company, workers
earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour,
and her wages are subject to no deductions other than FICA Social Security, FICA Medicare,
and federal income taxes. The tax rate for Social Security is 6.2% of the first $128,400 earned
each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current
FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to
the first $7,000 of an employee’s pay. The employee has $80 in federal income taxes withheld.
What is the amount of this employee’s net pay for the first week of January? (Round your
intermediate calculations to two decimal places.)
A) $784.00
B) $139.98
C) $724.02
D) $644.02
E) $923.98
132) The chief executive officer earns $10,000 per month. As of May 31, her gross pay was
$50,000. The tax rate for Social Security is 6.2% of the first $128,400 earned each calendar year
and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%,
and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an
employee’s pay. What is the amount of FICA-Social Security withheld from this employee for
the month of June?
A) $7,347
B) $620
C) $1,240
D) $268
E) $290
133) The chief executive officer earns $20,000 per month. As of May 31, her gross pay was
$100,000. The tax rate for Social Security is 6.2% of the first $128,400 earned each calendar
year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is
0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of
an employee’s pay. What is the amount of FICA – Medicare withheld from this employee for the
month of June?
A) $7,347.00
B) $620.00
C) $1,240.00
D) $268.25
E) $290.00
134) An employee earned $4,600 in February working for an employer. The FICA tax rate for
Social Security is 6.2% of the first $128,400 earned during each calendar year and the FICA tax
rate for Medicare is 1.45% of all earnings. The employee has $644 in federal income taxes
withheld and has voluntary deductions for health insurance of $50 and contributes 10% of gross
pay to a retirement plan each month. The employer pays the $200 remainder of the health
insurance premium and an equal amount of contribution to the retirement fund. What is the
amount of net pay for the employee for the month of February?
A) $3,094.10
B) $3,496.00
C) $3,604.10
D) $3,446.00
E) $2,634.10
135) An employee earns $5,500 per month working for an employer. The FICA tax rate for
Social Security is 6.2% of the first $128,400 of earnings each calendar year and the FICA tax
rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax
rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay. The
employee has $182 in federal income taxes withheld. The employee has voluntary deductions for
health insurance of $150 and contributes $75 to a retirement plan each month. What is the
amount the employer should record as payroll taxes expense for the employee for the month of
January?
A) $420.75
B) $464.75
C) $602.75
D) $841.50
E) $750.75
136) An employee earned $4,600 in February working for an employer. Cumulative earnings of
the previous pay periods are $4,800. The FICA tax rate for Social Security is 6.2% of the first
$128,400 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all
earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both
unemployment taxes are applied to the first $7,000 of an employee’s pay. What is the amount the
employer should record as payroll taxes expense for the month of February?
A) $581.90
B) $110.00
C) $351.90
D) $483.90
E) $230.00
137) All of the following statements regarding FICA taxes are true except:
A) FICA taxes are deducted from the employee.
B) Employers must pay withheld FICA taxes to the IRS.
C) The amount of FICA deducted from the employee is credited to a liability account.
D) FICA taxes include Medicare taxes and state income taxes.
E) An employer must pay FICA taxes equal to the amount withheld from the employee.