1. social security payments consist of social security taxes and

1. Social security payments consist of Social Security taxes and Medicare taxes.
True
False

2. A company’s fixed interest expense is $8,000, its income before interest expense and income taxes is $32,000. Its net income is $9,600. The company’s times interest earned ratio equals:
A.     0.25.
B.     0.30.
C.     0.83.
D.     3.33.
E.     4.0.

3. The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2.
True
False

4. Times interest earned is calculated by:
A.     Multiplying interest expense times income.
B.     Dividing interest expense by income before interest expense.
C.     Dividing income before interest expense and any income tax by interest expense.
D.     Dividing interest expense by income before interest expense.
E.     Dividing income before interest expense by interest expense and income taxes.

5. Employee vacation benefits:
A.     Are estimated liabilities.
B.     Are contingent liabilities.
C.     Are recorded as an expense when the employee takes a vacation.
D.     Are recorded as an expense when the employee retires.
E.     Increase net income.

6. The unemployment insurance program:
A.     Is a joint federal-state program.
B.     Is administered by each state.
C.     Provides unemployment benefits to covered workers.
D.     Adjusts rates paid by employers based on their merit rating.
E.     All of the above.

7. On November 1, Carter Company signed a $9,000 4-month 10% note payable, with the principle plus interest due on March 1 of the following year. What is the maturity value of the note as of March 1?
A.    $9,000
B.     $9,100
C.     $9,150
D.     $9,200
E.     $9,300

8. Known liabilities:
A.     Include accounts payable, notes payable, and payroll.
B.     Are obligations set by agreements, contracts, or laws.
C.     Are measurable.
D.    Are definitely determinable.
E.     All of the above

9. When the number of withholding allowances increases, the amount of income tax withheld increases.
True
False

10. Known liabilities are obligations set by agreements, contracts, or laws, and are measurable and definitely determinable.
True
False

11. An estimated liability is a known obligation of an uncertain amount that can at least be reasonably estimated.
True
False

12. On November 1, Carter Company signed a $9,000 4-month 10% note payable, with the principle plus interest due on March 1 of the following year. What is the adjusting entry for the accrued interest at December 31 on the note?

A.     Debit interest expense, $0; credit interest payable, $0.
B.     Debit interest expense, $100; credit interest payable, $100.
C.     Debit interest expense, $150; credit interest payable, $150.
D.     Debit interest expense, $200; credit interest payable, $200.
E.     Debit interest expense, $300; credit interest payable, $300.

13. A company’s had fixed interest expense of $6,000, its income before interest expense and any income taxes is $18,000, and its net income is $8,400. The company’s times interest earned ratio equals:
A.     0.33.
B.     0.71.
C.     1.40.
D.     3.00.
E.     12,000.

14. The state unemployment tax rates applied to an employer are adjusted according to an employer’s merit rating.
True
False

15. Experience shows that when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods, the default rate on liabilities increases sharply.
True
False

16Employers can use a wage bracket withholding table to compute federal income taxes withheld from each employee’s gross pay.
True
False

17. FICA taxes include:
A.     Social Security taxes.
B.     Charitable giving.
C.     Employee income taxes.
D.     Unemployment taxes.
E.     All of the above.

18. Liabilities involve addressing issues of:
A.     When to pay.
B.     Whom to pay.
C.     How much to pay.
D.     All of the above.
E.     Both (A) and (C) only.

19. Question 19 of 30     (worth 4 points)
Gross pay is:
A.     Take-home pay.
B.     Total compensation earned by an employee before any deductions.
C.     Salaries after taxes are deducted.
D.     Deductions withheld by an employer.
E.     The amount of the paycheck.

20. Federal depository banks are authorized to accept deposits of amounts payable to the federal government.
True
False

22. The amount of federal income tax withheld from an employee’s wages is based on:
A.     Wages earned.
B.     Number of withholding allowances.
C.     Number of hours worked.
D.     Both a and b.
E.     Both b and c.

23. Unearned revenue is initially recognized with a:
A.     Credit to unearned revenue.
B.     Credit to revenue.
C.     Debit to revenue payable.
D.     Debit to revenue.
E.     Debit to unearned revenue.

23. Sales taxes payable:
A.     Is an estimated liability.
B.     Is a contingent liability.
C.     Is a current liability for retailers.
D.     Is a business expense.
E.     Is a long-term liability.

24. Contingent liabilities can be:
A.     Probable.
B.     Remote.
C.     Reasonably possible.
D.     Estimable.
E.     All of the above.

25. Phildell Phoenix is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,288. FICA tax for social security is 6.2% and the FICA tax 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. What is the amount of the employerâ€s payroll taxes liabilities?
A.     $ 56.00
B.     $ 120.18
C.     $ 378.00
D.     $ 513.86
E.     $1,068.04

26. Maryland Company offers a bonus plan to its employees equal to 3% of net income. Maryland’s net income is expected to be $960,000. The amount of the employee bonus expense is estimated to be

A.     $27,961
B.     $28,800
C.     $29,000
D.     $29,691
E.     $30,000

27. Phildell Phoenix is paid monthly. For the month of January of the current year, he earned a total of $8,288. FICA tax for social security is 6.2% and the FICA tax 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:
A.     $5,190.83
B.     $5,844.79
C.     $6,278.79
D.     $6,566.00
E.     $6,792.64

28. 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:

A.     0.40
B.     2.50
C.     1:2.5
D.     2.5:1
E.     0.50

 
29. A contingent liability:
A.     Is always of a specific amount.
B.     Is a potential obligation that depends on a future event arising out of a past transaction or event.
C.     Is an obligation not requiring future payment.
D.     Is an obligation arising from the purchase of goods or services on credit.
E.     Is an obligation arising from a future event.

30. Payment of payroll is usually done by check or an electronic funds transfer.
True
False