114. Which of the following is not an internal control procedure for payroll?
115. A pension plan which requires the employer to make annual pension contributions, with no promise to
employees regarding future pension payments, is termed
116. During its first year of operations, a company granted employees vacation privileges and pension rights
estimated at a cost of $21,500 and $15,000. The vacations are expected to be taken in the next year and the
pension rights are expected to be paid in the future 5-30 years. What is the total cost of vacation pay and
pension rights to be recognized in the first year?
117. A pension plan which promises employees a fixed annual pension benefit, based on years of service and
compensation, is called a(n)
118. Vacation pay payable is reported on the balance sheet as a(n)
119. An unfunded pension liability is reported on the balance sheet as
120. The journal entry a company uses to record accrued vacation privileges for its employees at the end of the
year is
121. The journal entry a company uses to record fully funded pension rights for its salaried employees at the
end of the year is
122. The journal entry a company uses to record partially funded pension rights for its salaried employees, at
the end of the year is
123. The journal entry a company uses to record pension rights that have not been funded for its salaried
employees, at the end of the year is
124. Zennia Company provides its employees with varying amount of vacation per year, depending on the
length of employment. The estimated amount of the current year’s vacation cost is $135,000. The journal
entry to record the adjusting entry required on December 31, the end of the current year, to record the current
month’s accrued vacation pay is
125. Quick assets include
126. Which of the following is the most desirable quick ratio?
127. Another name for the quick ratio is
128. Based on the following data, what is the acid-test ratio, rounded to one decimal point?
Accounts payable
$ 30,000
Accounts receivable
60,000
Accrued liabilities
5,000
Cash
30,000
Intangible assets
50,000
Inventory
69,000
Long-term investments
80,000
Long-term liabilities
100,000
Marketable securities
30,000
Fixed assets
670,000
Prepaid expenses
1,000
129. Research Company sells merchandise with a one year warranty. In 2012, sales consisted of 2,500
units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made
130. During September, Excom sold 100 radios for $50 each. Each radio cost Excom $30 to purchase, and
carried a two-year warranty. If 5% of the goods sold typically need to be replaced over the warranty period and
one is actually replaced during September, for what amount in September would Excom debit Product Warranty
Expense?
131. The Crafter Company had the following assets and liabilities as of December 31, 2012:
ASSETS
Cash
$35,000
Accounts receivable
15,000
Inventory
30,000
Equipment
50,000
LIABILITIES
Current portion of long-term debt
10,000
Accounts payable
2,000
Long-term debt
25,000
Determine the quick ratio for the end of the year (rounded to one decimal point).
132. Garrett Company sells merchandise with a one year warranty. In 2012, sales consisted of 3,500 units. It
is estimated that warranty repairs will average $15 per unit sold, and 30% of the repairs will be made in 2012
and 70% in 2013. In the 2012 income statement, Garrett should show warranty expense of
133. Elgin Company sells merchandise with a one year warranty. Sales consisted of 2,500 units in 2012 and
2,000 units in 2013. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs
will be made in 2012 and 70% in 2013 for the 2012 sales. Similarly, 30% of repairs will be made in 2013 and
70% in 2014 for the 2013 sales. In the 2013 income statement, how much of the warranty expense shown will
be due to 2012 sales?
134. The cost of a product warranty should be included as an expense in the
135. Power Company sells merchandise with a one year warranty. In 2012, sales consisted of 1,600 units. It is
estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and
70% in 2013. In the 2012 income statement, Power should show warranty expense of
136. During May, Blast sold 650 portable CD players for $50 each. Each CD player cost Blast $25 to purchase
and carried a one-year warranty. If 10 percent of the goods sold typically need to be replaced over the warranty
period, what amount should Blast debit Product Warranty Expense for in May?
137. Estimating and recording product warranty expense in the period of the sale best follows which of the
following accounting concepts?
138. The Crafter Company had the following assets and liabilities as of December 31, 2012:
ASSETS
Cash
$28,000
Accounts receivable
15,000
Inventory
20,000
Equipment
50,000
LIABILITIES
Current portion of long-term debt
10,000
Accounts payable
2,000
Long-term debt
25,000
Determine the quick ratio for the end of the year (rounded to one decimal point).
139. The journal entry a company uses to record the estimated accrued product warranty liability is
140. Which of the following is the most desirable quick ratio?
141. According to a summary of the payroll of Scotland Company, $450,000 was subject to the 7.0% social
security tax and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was
$98,000. Also, $15,000 was subject to state (4.2%) and federal (0.8%) unemployment taxes. The journal entry
to record accrued salaries would include:
142. According to a summary of the payroll of Scotland Company, $450,000 was subject to the 7.0% social
security tax and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was
$98,000. Also, $15,000 was subject to state (4.2%) and federal (0.8%) unemployment taxes. The journal entry
to record accrued salaries would include:
143. According to a summary of the payroll of Scotland Company, $450,000 was subject to the 7.0% social
security tax and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was
$98,000. Also, $15,000 was subject to state (4.2%) and federal (0.8%) unemployment taxes. The journal entry
to record accrued payroll taxes would include:
144. A business issued a 120-day, 6% note for $10,000 to a creditor on account. The company uses a 360-day
year for interest calculations. Journalize the entries to record (a) the issuance of the note and (b) the payment of
the note at maturity, including interest.
Ref
Account
Debit
Credit
145. On August 1, Batson Company issued a 60-day note with a face amount of $140,000 to Jergens Company
for merchandise inventory. (Assume a 360-day year is used for interest calculations.)
a.
Determine the proceeds of the note assuming the note carries an interest rate of 6%.
b.
Determine the proceeds of the note assuming the note is discounted at 6%.
a.
$140,000
$138,600 $140,000 – ($140,000 ´ 6% ´ 60/360)
Ref
Account
Debit
Credit
Accounts Payable
10,000
Notes Payable
10,000
b.
Notes Payable
10,000
Interest Expense
200*
Cash
10,200
146. Journalize the following, assuming a 360-day year is used for interest calculations:
Apr. 30
Issued a $150,000, 30-day, 6% note dated April 30 to Misner Co. on account.
May 30
Paid Misner Co. the amount owed on the note dated April 30.
147. 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.)
Required:
(1)
Journalize Roseland’s entries to record:
a.
The issuance of the note.
b.
The payment of the note at maturity.
(2)
Journalize CorpOne’s entries to record:
a.
The receipt of the note.
b.
The receipt of the payment of the note at maturity.
(1)
a.
Cash
686,000
Interest Expense
14,000*
Notes Payable
700,000
b.
Notes Payable
700,000
Cash
700,000
(2)
a.
Notes Receivable
700,000
Cash
686,000
Interest Revenue
14,000*
b.
Cash
700,000
Notes Receivable
700,000
Apr. 30
Accounts Payable-Misner Co
150,000
Notes Payable
150,000
May 30
Notes Payable
150,000
Interest Expense
750
Cash
150,750
148. A borrower has two alternatives for a loan: (a) issue a $480,000, 60-day, 8% note or (2) issue a $480,000,
60-day note that the creditor discounts at 8%. (Assume a 360-day year is used for interest calculations.)
Required:
(1)
Calculate the amount of the interest expense for each option.
(2)
Determine the proceeds received by the borrower in each situation.
149. Dixon Sales has seven sales employees which receive weekly paychecks. Each earns $10.25 per hour and
each has worked 40 hours in the pay period. Each employee pays 12% of gross in Federal Income Tax, 3% in
State Income Tax, 6% of gross in Social Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State
Disability Insurance. Journalize the recognition of the pay period ending January 19th which will be paid to the
employees January 26th. (Keep in mind that none of the employees is subject to a ceiling amount for social
security.)
Jan 19
Sales Wages Expense
2,870.00
(7 employees ´ 40 hours ´ 10.25)
Federal Income Tax Payable
344.40
($2,870.00 ´ 12%)
State Income Tax Payable
86.10
($2,870.00 ´ 3%)
Social Security Tax Payable
172.20
($2,870.00 ´ 6%)
Medicare Tax Payable
($2,870.00 ´ 1.5%)
State Disability Insurance
14.35
($2,870.00 ´ 0.5%)
Sales Wages Payable
2,209.90
Wages Expense – Deductions
(2)
(1)
(2)
150. Mobile Sales has five sales employees which receive weekly paychecks. Each earns $11.50 per hour and
each has worked 40 hours in the pay period. Each employee pays 12% of gross in Federal Income Tax, 3% in
State Income Tax, 6% of gross in Social Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State
Disability Insurance. Journalize the recognition the pay period ending January 19th which will be paid to the
employees January 26th. (Keep in mind that none of the employees is subject to a ceiling amount for social
security.)
Jan 19
151. John Woods’ weekly gross earnings for the present week were $2,500. Woods has two
exemptions. Using $80 value for each exemption, what is Woods’ federal income tax withholding?
152. Carmen Flores’ weekly gross earnings for the week ending Dec. 7th were $2,500, and her federal income
tax withholding was $525. Prior to this week Flores had earned $98,000 for the year. Assuming the social
security rate is 6% on the first $100,000 of annual earnings and Medicare is 1.5% of all earnings, what is
Flores’ net pay?
153. An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per
week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current
week totaled $58,000. Assume further that the social security tax rate was 7.0% (on earnings up to $100,000),
the Medicare tax rate was 1.5%, and the federal income tax to be withheld was $614.
Required:
(1) Determine the gross pay for the week.
(2) Determine the net pay for the week.
154. 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 current week are as follows: hours worked, 46; federal income tax
withheld, $120; cumulative earnings for the year prior to this week, $5,500; Social security tax rate, 6% on
maximum of $100,000; and Medicare tax rate, 1.5% on all earnings; state unemployment compensation tax,
3.4% on the first $7,000; federal unemployment compensation tax, .8% on the first $7,000. Prepare the journal
entries to record the salaries expense and the employer payroll tax expense.
155. Townson Company had gross wages of $200,000 during the week ended December 10. The amount of
wages subject to social security tax was $180,000, while the amount of wages subject to federal and state
unemployment taxes was $24,000. Tax rates are as follows:
Social security
6.0%
Medicare
1.5%
State unemployment
5.3%
Federal unemployment
0.8%
The total amount withheld from employee wages for federal taxes was $32,000.
Required:
(1)
Journalize the entry to record the payroll for the week of December 10.
(2)
Journalize the entry to record the payroll tax expense incurred for the week of December 10.
(1)
Wages Expense
200,000
Social Security Tax Payable ($180,000 x 6%)
10,800
Medicare Tax Payable ($200,000 x 1.5%)
3,000
Employees Federal Income Tax Payable
32,000
Wages Payable
154,200
To record unfunded pension cost for the quarter.
(2)
Payroll Tax Expense
15,264
Social Security Tax Payable
10,800
Medicare Tax Payable
3,000
State Unemployment Tax Payable ($24,000 x 5.3%)
1,272
Federal Unemployment Tax Payable ($24,000 x 0.8%)
156. According to a summary of the payroll of Scotland Company, $450,000 was subject to the 7.0% social
security tax and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was
$98,000. Also, $15,000 was subject to state (4.2%) and federal (0.8%) unemployment taxes.
Required:
(1)
Journalize the entry to record the accrual of payroll.
(2)
Journalize the entry to record the accrual of payroll taxes.
157. The payroll register of Seaside Architecture Company indicates $970 of Social Security and $257 of
Medicare tax withheld on total salaries of $16,500 for the period. Federal withholding for the period totaled
$4,235. Provide the journal entry for the period’s payroll.
Salary Expense
16,500
Social Security Taxes Payable
Medicare Taxes Payable
Federal Withholding Taxes Payable
4,235
Salaries Payable
11,038
(1)
Salaries Expense
500,000
Social Security Tax Payable (7.0% x $450,000)
31,500
Medicare Tax (1.5% ´ $500,000)
7,500
Employees Fed. Inc. Tax Payable
98,000
Salaries Payable
363,000
(2)
Payroll Tax Expense
39,750
Social Security Tax Payable
31,500
Medicare Tax Payable
7,500
State Unemployment Tax Payable
Federal Unemployment Tax Payable
158.
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%. Provide the
journal entry to record the payroll tax expense for the period.
159. List five internal controls that relate directly to payroll.
160. The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. Earnings
subject to 6% social security tax were $60,000; earnings subject to 1.5% Medicare tax were $80,000; and
earnings of $3,000 were subject to 4.3% state and 0.8% federal unemployment compensation tax. Journalize
the entry to record the accrual of payroll taxes.