66) If the times interest earned ratio:
A) Increases, then risk increases.
B) Increases, then risk decreases.
C) Is greater than 1.5, the company is in default.
D) Is less than 1.5, the company is carrying too little debt.
E) Is greater than 3.0, the company is likely carrying too much debt.
67) A company had interest expense of $5,000, income before interest expense and income taxes
of $17,000, and net income of $9,400. The company’s times interest earned ratio equals:
A) 0.5.
B) 1.8.
C) 1.9.
D) 3.4.
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) (Net income − Interest expense − Income taxes)/Interest expense.
D) (Net income − Interest expense + Income taxes)/Interest expense.
E) Interest expense/(Net income + Interest expense − Income taxes 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) 0.29
B) 3.50
C) 2.50
D) 1.75
E) 0.50
70) A company’s 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) 0.30.
C) 0.83.
D) 3.33.
E) 4.0.
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) Face Value.
D) Cash.
E) Accounts Payable.
72) A short-term note payable:
A) Is a written promise to pay a specified amount on a stated future date within one year or the
company’s operating cycle, whichever is longer.
B) Is a contingent liability.
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) Cannot replace an account payable.
B) Can be issued in return for money borrowed from a bank.
C) Are not negotiable.
D) Are a conditional promise to pay.
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) $75
C) $900
D) $225
E) $300
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) No adjusting entry is required.
B) Debit Interest Payable, $120; credit Interest Expense, $120.
C) Debit Interest Expense, $120; credit Interest Payable, $120.
D) Debit Interest Expense, $720; credit Interest Payable, $720.
E) Debit Interest Payable, $240; credit Interest Expense, $240.
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 (principal plus interest) of the note on March 1? (Use 360
days a year.)
A) $9,000
B) $720
C) $9,120
D) $9,720
E) $9,240
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 $9,000; debit Interest Payable $120; credit Cash $9,120.
B) Debit Cash $9,240; credit Notes Payable $9,240.
C) Debit Notes Payable $9,240; credit Interest Payable $120; credit Interest Expense $120; credit
Cash $9,000.
D) Debit Notes Payable $9,000; debit Interest Payable $120; debit Interest Expense $120; credit
Cash $9,240.
E) Debit Notes Payable $9,000; debit Interest Expense $240; credit Cash $9,240.
78) Employers’ responsibilities for payroll do not include:
A) 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.
B) Filing Form 941, the Employer’s Quarterly Federal Tax Return.
C) Filing Form 940, the Annual Federal Unemployment Tax Return.
D) Maintaining individual earnings records for each employee.
E) Recording the employee Federal Income Tax withholding as a debit to the Federal Income
Tax Expense account.
79) Gross pay is:
A) Take-home pay.
B) Total compensation earned by an employee before any deductions.
C) Salaries after taxes are deducted.
D) Deductions withheld by an employer.
E) The amount of the paycheck.
80) The employer should record deductions from employee pay as:
A) Employee receivables.
B) Payroll taxes.
C) Current liabilities.
D) Wages payable.
E) Employee payables.
81) FICA taxes include:
A) Social Security and Medicare taxes.
B) Charitable giving.
C) Employee state income tax.
D) Federal and state unemployment taxes.
E) Farming income crop adjustment taxes.
82) The amount of federal income taxes withheld from an employee’s paycheck is determined
by:
A) Current earnings for the pay period and number of withholding allowances the employee
claims.
B) The employer’s merit rating.
C) The amount of social security taxes withheld.
D) Multiplying the gross pay by 6.2%.
E) Tax rates provided by the state in which the employee works.
83) Recording employee payroll deductions may involve:
A) Liabilities to the employer.
B) Liabilities to federal and state governments.
C) Expenses for state unemployment.
D) Expenses for the gross wages and salaries.
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-4.
B) Form 941.
C) Form 1040.
D) Form 1099.
E) W-2.
85) An employee earned $37,000 during the year working for an employer when the maximum
limit for Social Security was $128,400. 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) $2,294.00.
B) $536.50.
C) $2,830.50.
D) $1,757.50.
E) $8,950.50.
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 $128,400
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) $6,246.94
C) $6,302.94
D) $5,868.94
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 $128,400
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) $3,097.17
B) $2,443.21
C) $1,957.06
D) $1,722.00
E) $1,495.36
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 $128,400
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) $3,510.14
B) $3,857.30
C) $4,190.84
D) $4,538.00
E) $3,162.98
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 $128,400
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?
A) $1,375.02
B) $746.50
C) $962.06
D) $1,027.86
E) $680.70
90) The annual Federal Unemployment Tax Return is:
A) Form 940.
B) Form 1099.
C) Form 104.
D) Form W-2.
E) Form W-4.
91) The Wage and Tax Statement given to each employee annually is:
A) Form 940.
B) Form 941.
C) Form 1040.
D) Form W-2.
E) Form W-4.
92) A bank that is authorized to accept deposits of amounts payable to the federal government is
a:
A) Credit union.
B) FDIC insured bank.
C) Federal depository bank.
D) National bank.
E) Federal Reserve Bank.
93) An employer’s federal unemployment taxes (FUTA) are reported:
A) Annually.
B) Semiannually.
C) Quarterly.
D) Monthly.
E) Weekly.
94) The rate that a state assigns reflecting a company’s stability or instability in employing
workers is the:
A) FICA rate.
B) Tax withholding rate.
C) Pay rate.
D) Credit rating.
E) Merit rating.
95) Employer payroll taxes:
A) Are added expenses beyond that for the wages and salaries earned by employees.
B) Represent the federal taxes withheld from employees.
C) Represent the social security taxes withheld from employees.
D) Are paid by the employee.
E) Are payable for up to a maximum $117,000 of employee earnings.
96) All of the following are employer payroll taxes except:
A) Social Security tax equal to that withheld from employees.
B) Medicare tax equal to that withheld from employees.
C) State unemployment tax.
D) Federal unemployment tax.
E) Federal income tax equal to that withheld from employees.
97) FUTA taxes are:
A) Social Security taxes.
B) Medicare taxes.
C) Employee income taxes.
D) Unemployment taxes.
E) Employee deductions.
98) Which of the following is not true regarding the unemployment insurance program?
A) It requires withholding from employee wages.
B) It is administered by each state.
C) It provides unemployment benefits to qualified workers.
D) It adjusts rates paid by employers based on their merit rating.
E) It is a joint federal and state program.
99) The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to
the first $7,000 of an employee’s pay. Assume that an employee earned total wages of $9,900.
What is the amount of total unemployment taxes the employer must pay on this employee’s
wages?
A) $336.00.
B) $420.00.
C) $534.60.
D) $594.00.
E) $0.00.
100) The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied
to the first $7,000 of an employee’s pay. Assume that an employee earned total wages of $2,900
in the current period and had cumulative pay for prior periods of $5,800. What is the amount of
unemployment taxes the employer must pay on this employee’s wages for the current period?
A) $420.00.
B) $348.00.
C) $72.00.
D) $174.00.
E) $0.00.
101) An employee earned $43,300 working for an employer in the current year. The current rate
for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum per year and the
rate for FICA Medicare 1.45%. The employer’s total FICA payroll tax for this employee is:
A) $8,950.50.
B) $5,638.05.
C) $3,312.45.
D) $2,684.60.
E) $0, since the FICA tax is only deducted from an employee’s pay.
102) An employee earned $100,000 working for an employer in the current year. The current
rate for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum per year
and the rate for FICA Medicare 1.45% of all earnings. The employer’s total FICA payroll tax for
this employee is:
A) $7,650.
B) $9,830.
C) $879.
D) $8,950.
E) $0, since the FICA tax is only deducted from an employee’s pay.
103) An employee earned $62,500 during the year working for an employer. The FICA tax rate
for Social Security is 6.2% of the first $128,400 of employee earnings per 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 total unemployment taxes the employee must pay?
A) $101.50
B) $56.00
C) $378.00
D) $434.00
E) $0.00