ACC 206 Week 3 Quiz – Strayer



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CHAPTER11


CURRENTLIABILITIESANDPAYROLLACCOUNTING


CHAPTERSTUDYOBJECTIVES


1.Explainacurrentliability,andidentifythemajortypesofcurrentliabilities.

2.Describetheaccountingfornotespayable.

3.Explaintheaccountingforothercurrentliabilities.

4.Explainthefinancialstatementpresentationandanalysisofcurrentliabilities.

5.Describetheaccountinganddisclosurerequirementsforcontingentliabilities.

6.Computeandrecordthepayrollforapayperiod.

7.Describeandrecordemployerpayrolltaxes.

8.Discusstheobjectivesofinternalcontrolforpayroll.

9.Identifyadditionalfringebenefitsassociatedwithemployeecompensation.



TRUE-FALSESTATEMENTS

1.     A currentliability must bepaidoutof currentearnings.

2.     Currentliabilitiesareexpectedtobepaidwithinoneyearortheoperatingcycle, whichever islonger.

3.     Therelationshipbetweencurrentliabilitiesandcurrentassetsisimportantinevaluatinga company'sabilityto payoffits long-termdebt.

4.     Acompanywhosecurrentliabilitiesexceeditscurrentassetsmayhavealiquidity problem.

5.     Notespayableusuallyrequiretheborrowerto payinterest.

6.     Notespayableare oftenusedinsteadofaccountspayable.

7.     A notepayablemustalwaysbepaidbeforeanaccountpayable.

8.     A $30,000,8%,9-monthnotepayablerequiresaninterestpayment of$1,800 atmaturity.

9.     Mostnotesarenotinterest bearing.

10.     Withaninterest-bearingnote,theamountofcashreceiveduponissuanceofthenote generallyexceedsthenote'sfacevalue.

11.     Interestexpenseonanote payableis onlyrecordedatmaturity.

12.     Interestexpenseis reportedunderOtherExpensesandLossesinthe incomestatement.

13.    UnearnedrevenuesshouldbeclassifiedasOtherRevenuesandGainsontheIncome Statement.

14.     Thehigherthesalestaxrate,themoreprofitaretailercanearn.

15.     MetropolitanSymphonysells200seasonticketsfor$60,000thatincludesafiveconcert season. TheamountofUnearnedTicketRevenueafterthesecondconcertis$24,000.

16.     Duringthemonth,acompanysellsgoodsforatotalof$108,000,whichincludessales taxesof$8,000;therefore,thecompanyshouldrecognize$100,000inSalesRevenues and $8,000in SalesTaxExpense.

17.     Current maturitiesoflong-termdebtreferstotheamountofinterestonanotepayable that must be paidinthecurrent year.

18.     Thecurrentratiopermitsanalyststocomparethe liquidityofdifferent sizedcompanies.

19.     Workingcapital is currentassetsdivided bycurrentliabilities.

20.     Contingentliabilitiesshouldberecordedintheaccountsifthereisaremotepossibility that thecontingencywillactuallyoccur.

21.     A contingentliabilityisa liabilitythatmayoccur ifsomefutureeventtakesplace.

22.     Inconcept,theestimatingofWarrantyExpensewhenproductsaresoldunderwarrantyis similar to theestimatingofBadDebtsExpensebasedon creditsales.

23.     FICAtaxesandfederalincometaxesare leviedonemployees'earningswithoutlimit.

24.     FICAtaxeswithheldandfederalincometaxes withheldaremandatorypayrolldeductions.

25.     Theemployerincursapayrolltaxexpenseequaltotheamountwithheldfromthe employees'wagesforfederalincometaxes.

26.     Internalcontroloverpayrollisnotnecessarybecauseemployeeswillcomplainiftheydo not receivethecorrectamount ontheirpayrollchecks.

27.     Thetimekeepingfunctionincludessupervisorsmonitoringhoursworkedthroughtime cardsandtimereports.

28.     Thehumanresourcesdepartmentdocumentsandauthorizesemploymentofnew employees.

29.     Payrollactivitiesinvolvethreefunctions:hiringemployees,preparingthepayroll,and payingthepayroll.

a30.     Post-retirementbenefitsconsistofpaymentsbyemployerstoretiredemployees forhealth care, life insurance,andpensions.

Additional True-FalseQuestions

31.     A debt that isexpectedto be paidwithinone yearthroughthecreationof long-termdebt is a current liability.

32.     Notespayableusuallyareissuedtomeet long-termfinancingneeds.

33.     Currentmaturitiesoflong-termdebtareoftenidentifiedaslong-termdebtduewithinone yearon thebalancesheet.

34.     Inagivenyear,totalwarrantyexpenseisthesumofactualwarrantycostsincurredon unitssoldplustheestimatedcostofservicingthose unitsinthefuture.

35.     FICAtaxesarea voluntarydeductionfromemployeeearnings.

36.     FICAtaxesareadeductionfromemployeeearningsandarealsoimposedupon employersas an expense.


37.     Theobjectivesofinternalaccountingcontrolforpayrollsare(a)tosafeguardcompany assetsfromunauthorizedpaymentsofpayrollsand(b)toassureaccuracyandreliability oftheaccountingrecordspertainingto payroll.

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