Select the appropriate response.
1. Typical current liabilities include:
a. Prepayments by customers.
b. Travel advances to employees.
c. The principal portion of a mortgage note that is due beyond one year or the operating cycle, whichever is longer.
d. Accumulated depreciation.
2. Contingent liabilities should be recorded in the accounts when:
a. It is probable that the future event will occur.
b. The amount of the liability can be reasonably estimated.
c. Both (a) and (b).
d. Either (a) or (b).
3. On June 1, Whit Corporation purchased a truck for $30,000. To pay for the truck, Whit issued and recorded a six-month note payable for $31,500. No other entry was recorded for the note until payment on December 1. The journal entry to record payment of the note would include:
a. A debit to Interest Expense for $1,500.
b. A debit to Discount on Notes Payable for $1,500.
c. A debit to Notes Payable for $30,000.
d. A debit to Cash for $31,500.
4. The Discount on Notes Payable:
a. Is a contra liability account.
b. Is a contingent liability account.
c. Should be reported as an asset because of its debit balance.
d. Is amortized to reduce interest expense over the life of the note payable.
5. If the journal entry to record an accrued liability were accidentally recorded twice, it would:
a. Understate income for the year.
b. Overstate income for the year.
c. Have no effect on income for the year.
d. Understate accrued liabilities at the end of the year.
6. Landry paid $5,000 cash for warranty service work. If a Warranty Liability account had been previously established, the proper journal entry to record the service work would be:
a. Sales 5,000
Cash 5,000
b. Warranty Expense 5,000
Warranty Liability 5,000
c. Warranty Expense 5,000
Cash 5,000
d. Warranty Liability 5,000
Cash 5,000
7. The employee's withholding allowance certificate is popularly referred to as a:
a. W-2.
b. W-4.
c. Form 1040.
d. Payroll register.
8. The FICA tax is levied on:
a. Employees only.
b. Employers only.
c. Both employees and employers.
d. Earnings in excess of base amounts.
9. Burgundy Drug Store paid $137,000 in salaries during 20X1. Salary expense for the year was $148,500 and salaries payable at the end of 20X1 amounted to $17,300. What was the amount of salaries payable as of January 1, 20X1?
a. $5,800
b. $11,500
c. $17,300
d. $28,800
10. The gross payroll for Zurich Corporation was $100,000. Federal income tax withheld from employee paychecks amounted to $24,000, state income tax withheld amounted to $3,000, Social Security amounted to $8,500 (both the employee and employer portion), and Medicare amounted to $3,500 (both the employee and employer portion). Furthermore, employees elected to have $1,000 of insurance and charitable contributions withheld from their paychecks. How much was net pay?
a. $34,000
b. $60,000
c. $66,000
d. $72,000
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