Chapter 11: Current Liabilities and Payroll
65.
The journal entry used to record the payment of a discounted note is
a.
debit Notes Payable and Interest Expense; credit Cash
b.
debit Notes Payable; credit Cash
c.
debit Cash; credit Notes Payable
d.
debit Accounts Payable; credit Cash
66.
The journal entry to record the payment of an interest-bearing note is
a.
debit Cash; credit Notes Payable
b.
debit Accounts Payable; credit Cash
c.
debit Notes Payable and Interest Expense; credit Cash
d.
debit Notes Payable and Interest Receivable; credit Cash
67.
A current liability is a debt that is reasonably expected to be paid
a.
between 6 months and 18 months
b.
out of currently recognized revenues
c.
within one year
d.
out of cash currently on hand
Chapter 11: Current Liabilities and Payroll
68.
Taylor Bank lends Guarantee Company $150,000 on January 1. Guarantee Company signs a $150,000, 8%, 9–
month note. The entry made by Guarantee Company on January 1 to record the proceeds and issuance of the note
is
a. Interest Expense
12,000
Cash
138,000
Notes Payable
150,000
b. Cash 150,000
Notes Payable 150,000
c. Cash
162,000
Interest Expense
12,000
Notes Payable
150,000
d. Notes Payable
120,000
Interest Payable
7,200
Cash
120,000
Interest Expense
7,200
69.
The journal entry to record the conversion of a $6,300 accounts payable to a notes payable would be
a.
Cash 6,300
Notes Payable 6,300
b.
Notes Receivable 6,300
Notes Payable 6,300
c.
Notes Payable 6,300
Cash 6,300
d.
Accounts Payable 6,300
Notes Payable 6,300
Chapter 11: Current Liabilities and Payroll
70.
Current liabilities are
a.
due and receivable within one year
b.
due and to be paid out of current assets within one year
c.
due, but not payable for more than one year
d.
payable if a possible subsequent event occurs
71.
Which of the following would most likely be classified as a current liability?
a.
two-year notes payable
b.
bonds payable
c.
mortgage payable
d.
unearned rent
72.
Assuming a 360-day year, when a $20,000, 90-day, 5% interest-bearing note payable matures, total payment will
be
a. $21,000
b. $1,000
c. $20,250
d. $250
Chapter 11: Current Liabilities and Payroll
73.
The current portion of long-term debt should
a.
be classified as a long-term liability
b.
not be separated from the long-term portion of debt
c.
be paid immediately
d.
be reclassified as a current liability
74.
On January 5, Thomas Company, a calendar-year company, issued $1,000,000 of notes payable, of which
$250,000
is due on January 1 each of the next four years. The proper balance sheet presentation on December 31
is
a.
Current Liabilities, $1,000,000
b.
Current Liabilities, $250,000; Long-Term Debt, $750,000
c.
Long-Term Debt, $1,000,000
d.
Current Liabilities, $750,000; Long-Term Debt, $250,000
75.
Proper payroll accounting methods are important for a business for all the reasons below except
a.
good employee morale requires timely and accurate payroll payments
b.
payroll is subject to various federal and state regulations
c.
to help a business with cash flow problems by delayed payments of payroll taxes to federal and
state
agencies
d.
payroll and related payroll taxes have a significant effect on the net income of most businesses
Chapter 11: Current Liabilities and Payroll
76.
The amount of federal income taxes withheld from an employee’s gross pay is recorded as a(n)
a.
payroll expense
b.
contra account
c.
asset
d.
liability
77.
Which is not a determinate in calculating federal income taxes withheld from an individual’s pay?
a.
filing status
b.
types of earnings
c.
gross pay
d.
number of exemptions
78.
Which of the following would be used to compute the federal income taxes to be withheld from an
employee’s
earnings?
a.
FICA tax rate
b.
wage and tax statement
c.
FUTA tax rate
d.
wage bracket and withholding table
Chapter 11: Current Liabilities and Payroll
79.
Which of the following taxes would be deducted in determining an employee’s net pay?
a.
FUTA taxes
b.
SUTA taxes
c.
FICA taxes
d.
all are correct
80.
Which of the following taxes are employers required to withhold from employees?
a.
FICA tax
b.
FICA tax, state, and federal unemployment tax
c.
state unemployment tax
d.
federal unemployment tax
81.
Thomas Martin receives an hourly wage rate of $40, with time and a half for all hours worked in excess of 40
hours
during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax
withheld, $350;
social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the gross pay for Martin?
a. $449
b. $1,730
c. $2,080
d. $1,581
Chapter 11: Current Liabilities and Payroll
82.
Martin Jackson receives an hourly wage rate of $30, with time and a half for all hours worked in excess of 40
hours during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax
withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid
to
Jackson?
a. $1,470.00
b. $1,009.75
c. $1,097.95
d. $460.25
83.
The total earnings of an employee for a payroll period is referred to as
a.
take-home pay
b.
pay net of taxes
c.
net pay
d.
gross pay
84.
Most employers are levied a tax on payrolls for
a.
sales tax
b.
medical insurance premiums
c.
federal unemployment compensation tax
d.
union dues
Chapter 11: Current Liabilities and Payroll
85.
Which of the following will have no effect on an employee’s take-home pay?
a.
social security tax
b.
unemployment tax
c.
marital status
d.
number of exemptions claimed
86.
Sadie White receives an hourly rate of $30, with time and a half for all hours worked in excess of 40 during a
week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $300;
social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to White?
a. $1,443.00
b. $1,143.00
c. $1,260.00
d. $1,000.00
87.
Davis and Thompson have earnings of $850 each. The social security tax rate is 6% and the Medicare tax rate is
1.5%. Assuming that the payroll will be paid on December 29, what will be the employer’s total FICA tax for
this
payroll period?
a. $102.00
b. $127.50
c. $96.00
d. $25.50
Chapter 11: Current Liabilities and Payroll
88.
The following totals for the month of June were taken from the payroll register of Arcon Company:
Salaries expense
$14,000
Social security and Medicare taxes withheld
1,050
Income taxes withheld
2,600
Retirement savings
1,000
The entry to record the payment of net pay would include a
a. debit to salaries payable for $14,000
b. debit to salaries payable for $9,350
c. credit to salaries expense for $9,350
d. credit to salaries payable for $9,350
89.
Which of the following are included in the employer’s payroll taxes?
a.
SUTA taxes
b.
FUTA taxes
c.
social security taxes
d.
all are included in employer taxes
Chapter 11: Current Liabilities and Payroll
90.
Which of the following is required to be withheld from employee’s gross pay?
a.
both federal and state unemployment compensation taxes
b.
only federal unemployment compensation tax
c.
only federal income tax
d.
only state unemployment compensation tax
91.
Each year there is a ceiling for the amount that is subject to all of the following except
a.
social security tax
b.
federal income tax
c.
federal unemployment tax
d.
state unemployment tax
Chapter 11: Current Liabilities and Payroll
92.
Lee Company has the following information for the pay period of December 15–31:
$16,000
Federal income tax withheld
$4,000
6%
Federal unemployment tax rate
0.8%
1.5%
State unemployment tax rate
5.4%
Assuming no employees are subject to ceilings for taxes on their earnings, Salaries Payable would be recorded
for
a. $16,000
b. $9,808
c. $10,800
d. $11,040
93.
Payroll taxes levied against employees become liabilities
a.
the first of the following month
b.
when the payroll is paid to employees
c.
when data are entered in a payroll register
d.
at the end of an accounting period
Chapter 11: Current Liabilities and Payroll
94.
Payroll entries are made with data from the
a.
wage and tax statement
b.
employee’s earning record
c.
employer’s quarterly federal tax return
d.
payroll register
95.
Which of the following forms is typically given to employees at the end of the calendar year so that employees
can
file their individual income tax forms?
a.
Employee’s Withholding Allowance Certificate (W4)
b.
Wage and Tax Statement (Form W–2)
c.
Employer’s Quarterly Federal Tax Return (Form 941)
d.
401k plans
96.
The employee’s earnings record would contain which data that the payroll register would probably not contain?
a.
deductions
b.
payment
c.
earnings
d.
cumulative earnings
Chapter 11: Current Liabilities and Payroll
97.
The detailed record indicating the data for each employee for each payroll period and the cumulative total
earnings
for each employee is called the
a.
payroll register
b.
payroll check
c.
employee’s earnings record
d.
employer’s earnings record
98.
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, 48; federal income tax withheld, $120;
social
security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment compensation tax, 3.4% on the first
$7,000; federal unemployment compensation tax, 0.8% on the first $7,000. What is the net amount to be paid to
the
employee?
a. $568.74
b. $601.50
c. $660.00
d. $574.90
Chapter 11: Current Liabilities and Payroll
The following totals for the month of April were taken from the payroll register of Magnum Company.
Salaries
$12,000
FICA taxes withheld
900
Income taxes withheld
2,500
Medical insurance deductions
450
Federal unemployment taxes
32
State unemployment taxes
216
99.
The journal entry to record the monthly payroll on April 30 would include a
a.
credit to Salaries Payable for $8,150
b.
debit to Salaries Expense for $7,902
c.
debit to Salaries Payable for $8,150
d.
debit to Salaries Payable for $7,902
100.
The entry to record accrual of employer’s payroll taxes would include a
a.
debit to Payroll Tax Expense for $248
b.
debit to FICA Taxes Payable for $1,800
c.
credit to Payroll Tax Expense for $248
d.
debit to Payroll Tax Expense for $1,148
Chapter 11: Current Liabilities and Payroll
101.
The following totals for the month of April were taken from the payroll register of Magnum Company:
Salaries
$10,000
FICA taxes withheld
750
Income taxes withheld
2,000
Medical insurance deductions
450
Unemployment taxes
420
The entry to record accrual of employer’s payroll taxes would include a
a.
debit to Payroll Tax Expense for $1,170
b.
debit to FICA Taxes Payable for $1,500
c.
credit to Payroll Tax Expense for $420
d.
debit to Payroll Tax Expense for $1,620
102.
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,
$110;
cumulative earnings for the year prior to this week, $24,500; Social security tax rate, 6%; and Medicare
tax rate,
1.5%; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment
compensation tax,
0.8% on the first $7,000. What is the net amount to be paid to the employee?
a. $569.87
b. $539.00
c. $625.00
d. $544.88
Chapter 11: Current Liabilities and Payroll
103.
The following totals for the month of June were taken from the payroll register of Young Company:
Salaries expense
$15,000
Social security and Medicare taxes withheld
1,125
Income taxes withheld
3,000
Retirement savings
500
Salaries subject to federal and state
unemployment taxes of 6.2 percent
4,000
The entry to record the accrual of employer’s payroll taxes would include a debit to
a.
Payroll Tax Expense for $2,498
b.
Social Security and Medicare Tax Payable for $2,250
c.
Payroll Tax Expense for $1,373
d.
Payroll Tax Expense for $1,125
Assuming no employees are subject to ceilings for their earnings, Harris Company has the following information for
the pay period of January 15–31.
Gross payroll
$10,000
Federal income tax withheld
$1,800
Social security rate
6%
Federal unemployment tax rate
0.8%
Medicare rate
1.5%
State unemployment tax rate
5.4%
104.
Salaries Payable would be recorded in the amount of
a. $8,200
b. $6,830
c. $8,630
d. $7,450
Chapter 11: Current Liabilities and Payroll
105.
Assuming that all wages are subject to federal and state unemployment taxes, the employer’s payroll tax
expense
would be
a. $1,370
b. $750
c. $620
d. $2,870
106.
Assume that social security taxes are payable at a 6% rate and Medicare taxes are payable at a 1.5% rate with no
maximum earnings, and that federal and state unemployment compensation taxes total 4.6% on the first $7,000 of
earnings. If an employee earns $2,500 for the current week and the employee’s year-to-date earnings before this
week were $6,800, what is the total payroll taxes related to the current week?
a. $187.50
b. $196.70
c. $344.50
d. $9.20
107.
According to a summary of the payroll of Scotland Company, $450,000 was subject to the 6.0% 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 a
a.
debit to SUTA Payable of $630
b.
debit to SUTA Payable of $18,900
c.
credit to SUTA Payable of $630
d.
credit to SUTA Payable of $18,900
Chapter 11: Current Liabilities and Payroll
108.
Which of the following is an example of a variable component of a payroll system?
a.
hours worked
b.
Medicare tax rate
c.
rate of pay
d.
social security number
109.
According to a summary of the payroll of Scotland Company, $450,000 was subject to the 6.0% 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 a
a.
debit to Salary Payable of $450,000
b.
credit to Salary Payable of $500,000
c.
debit to Salary Expense of $500,000
d.
credit to Salary Expense of $450,000
110.
According to a summary of the payroll of Scotland Company, $450,000 was subject to the 6.0% 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 a
a.
debit to Salaries Payable of $313,000
b.
credit to Salaries Payable of $364,500
c.
debit to Salaries Expense of $364,500
d.
credit to Salaries Expense of $313,000
Chapter 11: Current Liabilities and Payroll
111.
An aid in internal control over payrolls that indicates employee attendance is
a.
time card
b.
voucher system
c.
payroll register
d.
employee’s earnings record
112.
A pension plan that requires the employer to make annual pension contributions, with no promise to
employees
regarding future pension payments, is termed
a.
funded
b.
unfunded
c.
defined benefit
d.
defined contribution
113.
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?
a. $15,000
b. $36,500
c. $6,500
d. $21,500
Chapter 11: Current Liabilities and Payroll
114.
A pension plan that promises employees a fixed annual pension benefit, based on years of service
and
compensation, is called a(n)
a.
defined contribution plan
b.
defined benefit plan
c.
unfunded plan
d.
compensation plan
115.
Vacation pay payable is reported on the balance sheet as a(n)
a.
current liability or long-term liability, depending upon when the vacations will be taken by employees
b.
current liability
c.
expense
d.
long-term liability
116.
An unfunded pension liability is reported on the balance sheet as
a.
current liability
b.
owner’s equity
c.
long-term liability
d.
current liability or long-term liability, depending upon when the pension liability is to be paid