Current Liabilities
Easy Test
Easy Test
Click the “Check Your Answer” box below each problem to reveal the correct answer and explanation.
a. employee withholdings
b. notes payable
c. pension obligations
d. all of the above
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a. social security payments are shared by the employee and the employer
b. the pay period always ends on the day the company’s fiscal year ends
c. warranty expenses are recorded when the sale is made
d. a contingent liability is recorded when it is probable it will be paid
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a. an expense is paid before the service is provided
b. an expense is paid after the service is provided
c. the expense is paid during the period
d. a customer pays before being provided goods
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a. state unemployment taxes to be paid
b. the employee to pay social security to the company
c. the company to withhold social security from all wages earned
d. the company to withhold social security from all wages earned up to a limited amount
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a. reported in the footnotes
b. reported as a liability
c. reported as an expense
d. reported as a liability and reported in the footnotes
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a. accounts receivable, unearned revenue, goodwill
b. accrued expenses, unearned revenue, notes payable
c. accrued expenses, common stock, prepaid expenses
d. accounts payable, unearned revenues, prepaid expenses
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a. the part of long term debt that will be paid in one year or less
b. unearned revenues
c. pension liabilities
d. all of the above can be current liabilities
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a. the warranty expense is recorded
b. the warranty liability is increased
c. the warranty liability is decreased
d. warranty expense will always be higher than warranty liability
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a. paid by the employee on a set % of wages earned
b. paid by the employer on a set % of wages earned, up to a limited amount
c. payments made for social security benefits
d. refunded to the employee after employment for 5 years
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a. the company
b. the employee
c. the state the employee lives in
d. the federal government
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Unearned Revenues $ 5,000
Notes Payable $100,000
Bonds Payable $500,000
Salaries Payable $ 22,000
Accrued Expenses $ 11,000
Prepaid Expenses $ 6,000
Income Tax Payable $ 31,000
Long Term Debt $200,000
Interest Payable $ 19,000
Accounts Payable $ 43,000
Unearned revenues are related to goods that will be shipped next month. The note
payable and long-term debt is repaid in 5 equal payments, plus accrued interest on
January 1 of each year. The maturity date of the bonds is 10 years from now.
Prepare the liability section of the company’s classified balance sheet.
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Unearned Revenues 5,000
Salaries Payable 22,000
Interest Payable 19,000
Accrued Expenses 11,000
Income Tax Payable 31,000
Current maturities of LTD 40,000
Current maturities of N/P 20,000
Total Current Liabilities 191,000
Notes Payable 80,000
Long Term Debt 160,000
Bonds Payable 500,000
Total Liabilities 931,000
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x tax rate .0615
Sales Tax Payable 15,375
Cash 265,375
Sales Revenue 250,000
Sales Tax Payable 15,375
Revenue is reported on the income statement
Sales tax payable is a liability reported on the balance sheet
A. Record the journal entry to record salary expense
B. Record the journal entry to record the payroll tax expense
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Salaries and wage expense | 189,500 |
Federal income tax withholding payable | 31,200 |
Social security tax withholding payable | 11,749** |
Medicare tax withholding payable | 2,748** |
Health insurance premium payable | 5,985 |
Pension plan withholding payable | 4,200 |
Salaries payable | 133,618 |
** computed as salaries and wages expense x given %
*** salaries and wages expense less all withholdings, amount that balances the journal entry
Payroll Tax Expense | 16,848 |
Social security tax withholding payable | 11,749** |
Medicare tax withholding payable | 2,748** |
FUTA payable | 371** |
SUTA payable | 1,980** |
The payroll tax expense is the total of all payables in this entry
Do not do both entries together in the same entry. There are two plugs which will not work if it is done as one entry.
A. Record the warranty liability for last year and this year.
B. Record the claims against the warranty for last year and this year.
C. Determine the balance in the liability account at the end of this year.
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Warranty Expense 10,000
Warranty Liability 10,000
Warranty Expense 16,000
Warranty Liability 16,000
The amount recorded is sales for the year x .02
B.
Warranty Liability 8,000
Cash 8,000
Warranty Liability 11,000
Cash 11,000
C.
Beginning warranty liability | 0 |
+ Increase to liability when expense is estimated – PY | 10,000 |
+ Increase to liability when expense is estimated – CY | 16,000 |
– reduce the liability when claims are paid – PY | (8,000) |
– reduce the liability when claims are paid – CY | (11,000) |
Ending balance of the liability | 7,000 |
What should be reported in the company’s current year financial statements?
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When a contingency is reasonably possible the situation and estimated amounts are disclosed in the footnotes.
When a contingency is probable, the lowest estimated amount is recorded as an expense and a liability in the financial statements and the situation is disclosed.