Question 1

Fast Bikes, Inc. offers warranties on all their bikes. They estimate warranty expense at 3.5% of sales. At the beginning of 2018, the Estimated Warranty Payable account had a credit balance of $1900. During the year, Fast Bikes had $296,000 in sales and had to pay out $5900 in warranty payments. At the end of the year, what is the ending balance in the Estimated Warranty Payable accounts?

Accepted Answer

A)   $6360
B)   $7800
C)   $8460
D)   $10,360E) None of the above
F) A) and B)

Question 2

A restaurant is being sued because a customer claims to have found a bug in her chili. The company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability. Which of the following actions should be taken by the company's management?

Accepted Answer

A)   The situation should be described in a note to the financial statements.
B)   The possible liability should not be shown in the financial statements.
C)   The liability should be estimated and accrued as an expense.
D)   An expense must be matched to the period in which the incident occurred.E) None of the above
F) B) and C)

Question 3

Jack, an employee of Desert Sky, Inc., has gross salary for May of $9000. The entire amount is under the OASDI limit of $118,500 and thus subject to FICA. He is also subject to federal income tax at a rate of 21%. Which of the following is a part of the journal entry for accrual of the employer payroll taxes? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)  Jack's income to date exceeds the FUTA and SUTA tax income limits.

Accepted Answer

A)   credit to Salaries Payable for $9000
B)   debit to Cash for $6601.50
C)   debit to Employee Income Taxes payable of $1890.00
D)   credit to FICA-Medicare Taxes Payable of $130.50E) None of the above
F) A) and C)

Question 4

If a business knows that a liability exists but does not know the exact amount, the business must estimate the amount of the liability and report it on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is an important aspect of control over payroll?

Accepted Answer

A)   controls to limit salaries and wages so that they are no higher than competitors
B)   controls for efficiency in payroll procedures
C)   controls to screen potential employees for criminal records
D)   controls to monitor employee behavior, such as use of security camerasE) A) and B)
F) B) and D)

Exam 11: Current Liabilities and Payroll

A restaurant is being sued because a customer claims to have found a bug in her chili. The company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability. Which of the following actions should be taken by the company's management?

Correct Answer
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Correct Answer
verified

Correct Answer
verified

If a business knows that a liability exists but does not know the exact amount, the business must estimate the amount of the liability and report it on the balance sheet.

Correct Answer
verified

Which of the following is an important aspect of control over payroll?

Correct Answer
verified

Exam 11: Current Liabilities and Payroll

A restaurant is being sued because a customer claims to have found a bug in her chili. The company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability. Which of the following actions should be taken by the company's management?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a business knows that a liability exists but does not know the exact amount, the business must estimate the amount of the liability and report it on the balance sheet.

Correct AnswerverifiedShow Answer

Which of the following is an important aspect of control over payroll?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified