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Exam 9: Reporting and Analyzing Current Liabilities

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Question 61

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A high value for the times interest earned ratio means that a company is of high risk to the borrower.

A) True
B) False

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Question 62

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Trade accounts payable are amounts owed to suppliers for products or services purchased on credit.

A) True
B) False

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Question 63

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Home Depot had income before interest expense and income taxes of $5,909 million and interest expense of $37 million.Calculate Home Depot's times interest earned ratio.

Walmart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million.Sears had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million.Calculate the times interest earned ratio for each company and comment on the results.

On October 10,2013,Printfast Company sells a commercial printer for $2,350 with a one-year warranty that covers parts.Warranty expense is projected to be 4% of sales.On February 28,2014,the printer requires repairs.The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. -What warranty expense is recorded for this printer during 2014?

If a company had net income of $1,486,875,a times interest earned ratio of 4.0,a tax rate of 35%,and operating income of $3,050,000,what is the company's interest expense for the year?

Employers must pay FICA taxes that are equal to the amount being withheld from their employees.

The difference between the amount received from issuing a note payable and the amount repaid is referred to as:

A company's employees had the following earnings records at the close of the current payroll period: The company's payroll taxes expense on each employee's earnings includes: FICA Social Security taxes of 6.2% on the first $110,100 (for 2012) plus 1.45% FICA Medicare on all wages; 0.8% federal unemployment taxes on the first $7,000; and 2.5% state unemployment taxes on the first $7,000.Compute the employer's total payroll taxes expense for the current pay period.

Karen Cooper,the founder of SmartIT Staffing,realized that effectively managing payroll was crucial to the success of her business.If an employee of the company earns $50,500 per year,SmartIT Staffing's total FICA payroll tax for this employee is:

Current liabilities are obligations not due within one year or the company's operating cycle,whichever is longer.

A company sold $12,000 worth of trampolines with an extended warranty.It estimates that 2% of these sales will result in warranty work.The company should:

Accounting for contingent liabilities covers three possibilities.(1) The future event is probable and the amount cannot be reasonably estimated.(2) The future event is remote or unlikely to recur.(3) The likelihood of the liability to occur is impossible.

A company's employer payroll taxes are 0.8% for federal unemployment taxes,5.4% for state unemployment taxes,6.2% for FICA Social Security taxes on earnings up to $110,100 (for 2012) and 1.45% for FICA Medicare taxes on all earnings.Compute the W-2 Wage and Tax Statement information required below for the following employees:

Advance ticket sales totaling $6,000,000 cash would be recognized as follows:

Companies with many employees often use a special ____________________ account to pay employees.

A company has 90 employees and a weekly payroll of $117,000.The FICA-Social Security tax is 6.2% and the FICA-Medicare tax is 1.45%.The total withholding for federal income tax is $16,500 for the current week.Calculate the amount of FICA taxes owed (assume no employee's salary is over the FICA limit) and prepare the journal entry to accrue this week's salaries expense and withholdings.

An employer's federal unemployment taxes (FUTA) are reported:

What are known current liabilities? Provide at least two examples of known current liabilities.

The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.