Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1. No. A discounted note payable has no stated interest rate, but provides interest by discounting the
4. 1. a
6. a. Constants are data that remain unchanged from payroll to payroll. These include employee
8. In a defined contribution plan, the company invests contributions on behalf of the employee
9. To match revenues and expenses properly, the liability to cover product warranties should be
CHAPTER 10
CURRENT LIABILITIES AND PAYROLL
DISCUSSION QUESTIONS
10-1
CHAPTER 10 Current Liabilities and Payroll
PE 10–1A
PE 10–1B
PE 10–2A
Total wage payment…………………………………………………………
…
$2,600.00
PE 10–2B
Total wage payment…………………………………………………………
…
$1,400.00
PRACTICE EXERCISES
10-2
CHAPTER 10 Current Liabilities and Payroll
PE 10–3A
PE 10–3B
PE 10–4A
Salaries Expense 220,000
Social Security Tax Payable 13,200
PE 10–4B
Salaries Expense 90,000
Social Security Tax Payable 5,400
10-3
PE 10–5A
Payroll Tax Expense 18,670
PE 10–5B
Payroll Tax Expense 7,370
PE 10–6A
a. Vacation Pay Expense 19,500
PE 10–6B
a. Vacation Pay Expense 35,000
10-4
CHAPTER 10 Current Liabilities and Payroll
PE 10–7A
a. Feb. 28 Product Warranty Expense 12,000
PE 10–7B
a. July 31 Product Warranty Expense 14,625
PE 10–8A
a. December 31, 2014
Quick Ratio = Quick Assets ÷ Current Liabilities
b. The quick ratio of Nabors Company has declined from 1.5 in 2013 to 1.2 in 2014. This
10-5
PE 10–8B
a. December 31, 2014
b. The quick ratio of Adieu Company has improved from 1.5 in 2013 to 1.6 in
10-6
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–1
Current liabilities:
Federal income taxes payable*……………………………………………………
…
$ 336,000
Ex. 10–2
a. 1. Merchandise Inventory 792,000
b. 1. Notes Receivable 800,000
2. Cash 800,000
EXERCISES
10-7
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–3
c. Alternative (1) is more favorable to the borrower. This can be verified by
Ex. 10–4
a. Accounts Payable 150,000
Ex. 10–5
a. Accounts Payable 89,100
10-8
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–6
a. June 30 Building 450,000
Ex. 10–7
Ex. 10–8
10-9
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–9
Regular earnings…………………………… $3,800.00 $1,600.00 $1,760.00
Withholding supporting calculations:
Gross weekly pay…………………………
…
$3,800.00 $2,800.00 $2,640.00
Computer
Consultant Programmer Administrator
Consultant Programmer
Computer
Administrator
10-10
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–10
a. Summary: (1) $460,000; (3) $540,000; (8) $6,750; (12) $135,000
Net amount paid…………………………………………………
…
$338,850
b. Factory Wages Expense 285,000
Sales Salaries Expense 135,000
10-11
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–11
a. Social security tax (6% × $880,000)………………………………………………
…
$52,800
b. Payroll Tax Expense 68,480
Ex. 10–12
a. Salaries Expense 1,250,000
b. Payroll Tax Expense 91,450
10-12
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–13
a. Wages Expense 240,000
b. Payroll Tax Expense 20,170
Ex. 10–14
Big Howie’s Hot Dog Stand does have an internal control procedure that should detect the
Ex. 10–15
a. Appropriate. All changes to the payroll system, including wage rate increases,
10-13
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–16
a. Vacation Pay Expense 3,500
Ex. 10–17
a. Dec. 31 Pension Expense 365,000
b. In a defined contribution plan, the company invests contributions on behalf of
the employee during the employee’s working years. Normally, the employee
Ex. 10–18
The $4,267 million unfunded pension liability is the approximate amount of the
pension obligation that exceeds the value of the net assets of the pension plan.
10-14
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–19
a. Product Warranty Expense 22,400
Ex. 10–20
a. The warranty liability represents estimated outstanding automobile warranty
b. Product Warranty Expense
c. In order for a product warranty to be reported as a liability in the financial
2,759,000,000
10-15
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–21
a. Damage Awards and Fines 365,000
b. The company experienced a hazardous materials spill at one of its plants during
the previous period. This spill has resulted in a number of lawsuits to which the
Ex. 10–22
Quick Assets
Current Liabilities
b. The quick ratio decreased between the two balance sheet dates. The major
a. Quick Ratio =
10-16
CHAPTER 10 Current Liabilities and Payroll
Ex. 10–23
a. Apple Inc. Dell, Inc.
Quick Ratio 1.3
b. It is clear that Apple Inc.’s short-term liquidity is stronger than Dell’s.
Apple’s quick ratio is 38% [(1.8 – 1.3) ÷ 1.3] higher. Apple has a much stronger
1.8
10-17
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–1A
1. Feb. 3 Merchandise Inventory 410,000
Accounts Payable—Onifade Co. 410,000
Mar. 3 Accounts Payable—Onifade Co. 410,000
Notes Payable 410,000
PROBLEMS
10-18
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–1A (Concluded)
2. a. Product Warranty Expense 32,500
Product Warranty Payable 32,500
10-19
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–2A
1. a. Dec. 30 Sales Salaries Expense 350,000
Warehouse Salaries Expense 180,000
Office Salaries Expense 145,000
$35,000 × 0.8%
2. a. Dec. 30 Sales Salaries Expense 350,000
Warehouse Salaries Expense 180,000
b. Jan. 5 Payroll Tax Expense 92,475
10-20
