Accounting I – Week 8

• Question 1

1 out of 1 points

	An employee earned $47,000 during the year working for an employer. 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 _____.
	Selected Answer: $3,595.50   Response Feedback: Correct! FICA taxes = wages + (FICA tax rate + Medicare tax rate); hence, FICA taxes = $47,000 + (0.062 + 0.0145) = $3,595.50.

• Question 2

0 out of 1 points

	A company’s income before interest expense and taxes is $250,000, and its interest expense is $100,000. Its times interest earned ratio is _____.
	Selected Answer: 2.5:1   Response Feedback: Try again! The times interest earned ratio = income before interest expense and income taxes/interest expense. In this scenario, the times interest earned ratio = $250,000/$100,000 = 2.50. Review the Decision Analysis and Times Interest Earned Ratio section in Chapter 11 of the textbook for more information.

• Question 3

1 out of 1 points

	Known liabilities ______.
	Selected Answer: all of the choices are correct   Response Feedback: Correct! Known liabilities are obligations set by agreements, contracts, or laws. They are measurable and definitely determinable.

• Question 4

1 out of 1 points

	All of the following statements regarding liabilities are true except which one?
	Selected Answer: Unearned future wages to be paid to employees should be recorded as liabilities.   Response Feedback: Correct! A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. This definition includes three critical factors: (a) a past transaction, (b) a present obligation, and (c) a future payment of assets or services. No liability is reported when one or more of these characteristics are absent. For example, most companies expect to pay future wages to employees, but these future payments are not liabilities because no past event, such as employee work, resulted in a present obligation.

• Question 5

1 out of 1 points

	Contingent liabilities must be recorded if _____.
	Selected Answer: the future event is probable and the amount owed can be reasonably estimated   Response Feedback: Correct! Contingent liabilities must be recorded if the future event is probable and the amount owed can be reasonably estimated.

• Question 6

1 out of 1 points

	An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2%, and the FICA tax rate for Medicare is 1.45%. The current FUTA tax rate is 0.8%, and the SUTA tax rate is 4.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes of $75 to a retirement plan each month. What amount should the employer record as payroll taxes expense for the employee for the month of January?
	Selected Answer: $706.75   Response Feedback: Correct! $706.75 is the amount the employer should record as payroll taxes expense for the employee for the month of January.

• Question 7

1 out of 1 points

	Estimated liabilities commonly arise from _____.
	Selected Answer: all of the choices are correct   Response Feedback: Correct! An estimated liability is a known obligation that is of an uncertain amount, but that can be reasonably estimated. Common examples are employee benefits such as pensions, health care, and vacation pay, as well as warranties offered by a seller.

• Question 8

1 out of 1 points

	Obligations that are not expected to be paid within the longer of one year or the company’s operating cycle are reported as _____.
	Selected Answer: long-term liabilities   Response Feedback: Correct! Obligations that are not expected to be paid within the longer of one year or the company’s operating cycle are reported as long-term liabilities.

• Question 9

1 out of 1 points

	Harvey Company is required by law to collect and remit sales taxes to the state. If Havey has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales?
	Selected Answer: debit cash $8,640; credit sales $8,000; credit sales taxes payable $640   Response Feedback: Correct! The journal entry to record the cash sales is debit cash for $8,640; credit sales for $8,000; and credit sales taxes payable for $640.

• Question 10

0 out of 1 points

	Phil Phoenix is paid monthly. For the month of January of the current year, he earned a total of $8,288. The FICA tax rate for social security is 6.2%, and the FICA tax rate for Medicare is 1.45%. The FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay. The amount of federal income tax withheld from his earnings was $1,375.17. His net pay for the month is _____.
	Selected Answer: $5,844.79   Response Feedback: Try again! Net pay = gross pay – federal income tax – FICA-Social Security tax – FICA-Medicare Tax. In this case, net pay = $8,288.00 – $1,375.17- $513.86 – $120.18. The net pay = $6,278.79. To calculate the FICA-SS tax: $8,288.00 * 0.062 = $513.86. To calculate the FICA-Medicare tax: $8,288.00 * 0.0145 = $120.18. Review the Employer Payroll Taxes section in Chapter 11 of the textbook for more information.

• Question 1

1 out of 1 points

	Contingent liabilities must be recorded if _____.
	Selected Answer: the future event is probable and the amount owed can be reasonably estimated   Response Feedback: Correct! Contingent liabilities must be recorded if the future event is probable and the amount owed can be reasonably estimated.

• Question 2

1 out of 1 points

	On March 17, Grady Company agrees to accept a 60-day, 10%, $4,500 note from Alert Company to extend the due date on an overdue account. What is the journal entry needed to record the transaction by Alert Company?
	Selected Answer: debit accounts payable $4,500; credit notes payable $4,500   Response Feedback: Correct! The journal entry needed to record the transaction by Alert Company is debit accounts payable for $4,500 and credit notes payable for $4,500.

• Question 3

1 out of 1 points

	A bank that is authorized to accept deposits of amounts payable to the federal government is a _____.
	Selected Answer: federal depository bank   Response Feedback: Correct! A bank that is authorized to accept deposits of amounts payable to the federal government is a federal depository bank.

• Question 4

1 out of 1 points

	Known liabilities ______.
	Selected Answer: all of the choices are correct   Response Feedback: Correct! Known liabilities are obligations set by agreements, contracts, or laws. They are measurable and definitely determinable.

• Question 5

1 out of 1 points

	FICA taxes include ______.
	Selected Answer: Social Security taxes   Response Feedback: Correct! FICA taxes include Social Security taxes.

• Question 6

1 out of 1 points

	Estimated liabilities commonly arise from _____.
	Selected Answer: all of the choices are correct   Response Feedback: Correct! An estimated liability is a known obligation that is of an uncertain amount, but that can be reasonably estimated. Common examples are employee benefits such as pensions, health care, and vacation pay, as well as warranties offered by a seller.

• Question 7

1 out of 1 points

	All of the following statements regarding uncertainty in liabilities are true except which one?
	Selected Answer: A company only records liabilities when it knows whom to pay, when to pay, and how much to pay.   Response Feedback: Correct! A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. This definition includes three critical factors: (a) a past transaction, (b) a present obligation, and (c) a future payment of assets or services. Liabilities arise even when uncertainty exists with whom to pay, when to pay, and how much to pay.

• Question 8

1 out of 1 points

	All of the following statements regarding liabilities are true except which one?
	Selected Answer: Unearned future wages to be paid to employees should be recorded as liabilities.   Response Feedback: Correct! A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. This definition includes three critical factors: (a) a past transaction, (b) a present obligation, and (c) a future payment of assets or services. No liability is reported when one or more of these characteristics are absent. For example, most companies expect to pay future wages to employees, but these future payments are not liabilities because no past event, such as employee work, resulted in a present obligation.

• Question 9

1 out of 1 points

	The Federal Insurance Contributions Act (FICA) requires each employer to file a _____.
	Selected Answer: Form 941   Response Feedback: Correct! FICA requires each employer to file a Form 941.

• Question 10

1 out of 1 points

	An employee earned $47,000 during the year working for an employer. 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 _____.
	Selected Answer: $3,595.50   Response Feedback: Correct! FICA taxes = wages + (FICA tax rate + Medicare tax rate); hence, FICA taxes = $47,000 + (0.062 + 0.0145) = $3,595.50.