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Exam 8: Current Liabilities

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Question 21

True/False

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Delta,Northwest,and United Airlines have all,at one time,filed for bankruptcy.

A) True
B) False

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Question 22

Multiple Choice

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Mike Gundy is a college football coach making a salary of $2,400,000 a year ($200,000 per month) .Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the FICA maximum base amount is $106,800,how much will be withheld during the year for the coach's Social Security and Medicare.

A) $34,800.
B) $41,422.
C) $183,600.
D) None of these amounts is correct

E) C) and D)
F) A) and B)

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Question 23

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Liabilities are defined as:

A lower current ratio or acid-test ratio generally indicates a greater ability to pay current liabilities on a timely basis.

The employer is required to match the amount of FICA taxes withheld for each employee,effectively doubling the amount paid into Social Security.

Young Company is involved in a lawsuit.The liability which could arise as a result of this lawsuit should be recorded on the books if the probability of Young owing money as a result of the lawsuit is:

Brian Inc.borrowed $8,000 from First Bank and signed a promissory note.What entry should First Bank record?

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour.Federal income taxes are withheld at 15% and state income taxes at 6%.FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee.What is the actual direct deposit of payroll for the first week of January?

The journal entry to record a contingent liability requires a debit to a loss (or expense)account and a credit to a liability.

Away Travel filed suit against West Coast Travel seeking damages for copyright violations.West Coast Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000,with all amounts in the range considered equally likely.How should West Coast Travel report this litigation?

Sales taxes collected by a company on behalf of the state and local government are recorded by:

At times,businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided.These customer advances represent:

Brian Inc.borrowed $8,000 from First Bank and signed a promissory note.What entry should Brian Inc.record?

Universal Travel,Inc.borrowed $500,000 on November 1,2012,and signed a twelve-month note bearing interest at 6%.Principal and interest are payable in full at maturity on October 31,2013.In connection with this note,Universal Travel,Inc.should report interest payable at December 31,2012,in the amount of:

Strikers,Inc.sells soccer goals to customers over the Internet.History has shown that 2% of Strikers' goals are faulty and will need repair under the warranty program.For the year,Strikers has sold 4,000 goals and 45 have been repaired.If the estimated cost to repair a goal is $200,what would be the Warranty Liability at the end of the year?

Accounts payable are amounts the company owes to suppliers of merchandise or services that it has bought on credit.

Which of the following are included in an employer's payroll tax expense?

Mike Gundy is a college football coach making a salary of $2,400,000 a year ($200,000 per month) .Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the FICA maximum base amount is $106,800,through what month will Social Security be withheld?

T.Boone Pickens football stadium at Oklahoma State University has a seating capacity of about 60,000.Assume the stadium sells out all six home games before the season begins and the athletic department collects $30.6 million in ticket sales. 1.What was the average price per season ticket and average price per individual game ticket sold? 2.Record the advance collection of $30.6 million in ticket sales. 3.Record the revenue earned after the first home game was completed.

A company is said to be liquid if it has sufficient cash to pay currently maturing debts.