Q&A Hero

Q: The following totals for the month of February were taken from the payroll register of Arcon Company:Salaries expense $13,000Social security and Medicare taxes withheld 975Income taxes withheld 2,600Retirement savings 500Salaries subject to federal and state unemployment taxes of 6.2% 4,000a. How much is the total employer’s payroll tax expense for Arcon Company for this payroll? b. Assume that the monthly salaries expense remains the same for the entire year and no employees are hired or fired during that time. Based on what you learned in Chapter 11 about payroll taxes, do you expect the total payroll tax expense to stay the same every month? Explain.

Q: horizontal analysis is a technique for evaluating a series of financial statement data over a period of time a.that has been arranged from the highest number to the lowest number b.that has been arranged from the lowest number to the highest number c.to determine which items are in error d.to determine the amount and/or percentage increase or decrease that has taken place

Q: John Woods’ weekly gross earnings for the present week were $2,500.00. Woods has 2 exemptions. Using an $81.00 value for each exemption and the following tax rate schedule, what is Woods’ federal income tax withholding?Single person (including head of household)If amount of wages (aftersubtractingwithholding allowance) is:The amount of income taxwithholding is: Not over $73 $0Over–But not over–of excess over–$73$260.......$0.00 plus 10%$73$260$832.......$18.70 plus 12%$260$832$1,692....$87.34 plus 22%$832$1,692$3,164....$276.54 plus 24%$1,692$3,164$3,998....$629.82 plus 32%$3,164$3,998$9,887....$896.70 plus 35%$3,998$9,887...............$2,957.85 plus 37%$9,887

Q: horizontal analysis is a technique for evaluating financial statement data a.within a period of time b.over a period of time c.on a certain date d.as it may appear in the future

Q: Hadley Industries warrants its products for one year. The estimated product warranty expense is 4% of sales. Assume that sales were $210,000 for June. In July, a customer received warranty repairs requiring $205 of parts and $75 of labor.a. Journalize the adjusting entry required at June 30, the end of the first month of the current fiscal year, for the estimated product warranty expense.b. Journalize the entry for the warranty work provided in July.

Q: if year 1 equals $800, year 2 equals $840, and year 3 equals $920, the percentage to be assigned for year 3 in a trend analysis, assuming that year 1 is the base year, is a.115% b.105% c.87% d.100%

Q: The payroll register of Seaside Architecture Company indicates $990.00 of social security and $247.50 of Medicare tax withheld on total salaries of $16,500.00 for the period. Federal withholding for the period totaled $4,235.00. Journalize the entry for the payroll.

Q: assume the following sales data for a company:if 2011 is the base year, what is the percentage increase in sales from 2011 to 2012?a.129%b.112%c.29%d.15%

Q: Core Company had the following assets and liabilities as of December 31:Assets Cash$58,000Accounts receivable25,000Inventory20,000Equipment50,000 Liabilities Current portion of long-term debt$20,000Accounts payable12,000Long-term debt25,000​Compute the current ratio, working capital, and quick ratio.

Q: if year 1 equals $800, year 2 equals $840, and year 3 equals $896, the percentage to be assigned for year 2 in a trend analysis, assuming that year 1 is the base year, is a.100% b.89% c.105% d.112%

Q: assume the following sales data for a company:if 2011 is the base year, what is the percentage increase in sales from 2011 to 2012?a.45%b.30%c.130%d.145%

Q: Excel Products Inc. pays its employees semimonthly. The summary of the payroll for December 31 indicated the following:Salaries expense $120,000Federal income tax withheld 20,000Assume all salary amounts are subject to social security tax of 6.0% and Medicare tax of 1.5%, and $10,000 is subject to state unemployment tax of 4.3% and federal unemployment tax of 0.8%. Journalize the entry for the employer’s payroll tax expense

Q: in horizontal or trend analysis, each item is expressed as a(n) a.amount b.percentage c.rate d.amount or a percentage

Q: The following two independent sets of transactions are for Welcott Company:a. Welcott provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year’s vacation pay is $78,000. Journalize the adjusting entry required on January 31, the end of the first month of the year, for the accrued vacation pay.b. Welcott maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Northern Trust, by the fifteenth of the month following the end of each quarter. Assuming that the pension cost is $119,600 for the quarter ended December 31, journalize entries for (1) the accrued pension liability on December 31 and (2) the payment to the funding agent on January 15.

Q: if year 1 equals $600, year 2 equals $650, and year 3 equals $780, the percentage to be assigned for year 1 in a trend analysis, assuming that year 1 is the base year, is a.100% b.89% c.105% d.112%

Q: Nelson Industries warrants its products for one year. The estimated product warranty is 4.3% of sales. Sales were $475,000 for September. In October, a customer received warranty repairs requiring $215 of parts and $65 of labor.a. Journalize the adjusting entry required at September 30, the end of the first month of the current fiscal year, for the estimated product warranty expense.b. Journalize the entry for the warranty work provided in October.

Q: in horizontal analysis, each item is expressed as a percentage of the a.net income amount b.stockholders equity amount c.total assets amount d.base-year amount

Q: Several months ago, Jones Company experienced a spill of hazardous materials into the White River from one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $405,000. The company contested the fine. In addition, an employee is seeking $180,000 damages related to the spill. Finally, a homeowner has sued the company for $260,000. Although the homeowner lives 30 miles downstream from the plant, he believes that the spill has reduced his home’s resale value by $260,000.Jones’ legal counsel believes the following will happen in relationship to these incidents:• It is probable that the EPA fine will stand.• An out-of-court settlement for $165,000 has recently been reached with the employee, with the final papers to be signed next week.• Counsel believes that the homeowner’s case is weak and will be decided in favor of Jones Company.• Other litigation related to the spill is possible, but the damage amounts are uncertain.a. Based on this information, journalize the contingent liabilities associated with the spill. Use the account “Damage Awards and Fines” to recognize the expense for the period.b. Prepare a note disclosure related to the spill.

Q: assume the following cost of goods sold data for a company:if 2011 is the base year, what is the percentage increase in cost of goods sold from 2011 to 2013?a.150%b.50%c.67%d.20%

Q: Martin Services Company provides its employees vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $39,500 for the period. The pension plan requires a contribution to the plan administrator equal to 9% of employee salaries. Salaries were $750,000 during the period. Journalize the entries for (a) the accrued vacation pay and (b) the payment to the pension plan administrator.

Q: comparative balance sheets a.are usually prepared for at least one year b.are usually prepared for at least two years c.do not show both dollar amount and percentage changes d.do not show a comparison of total stockholders equity

Q: A borrower has two alternatives for a loan: (1) issue a $480,000, 60-day, 8% note or (2) issue a $480,000, 60-day note that the creditor discounts at 8%. (Assume a 360-day year is used for interest computations.)​a. Compute the amount of the interest expense for each option.b. Determine the proceeds received by the borrower in each situation.

Q: in a common size balance sheet, the 100 percent figure is a.total current assets b.total property, plant and equipment c.total liabilities d.total assets

Q: Mobile Sales has five sales employees that receive weekly paychecks. Each employee earns $11.50 per hour and has worked 40 hours in the pay period. Total federal income tax withholdings are $276.00. Each employee pays 3.0% in state income tax, 6.0% in social security tax, 1.5% in Medicare tax, and 0.5% toward retirement savings. Journalize the pay period ending January 19 that will be paid to the employees on January 26

Q: vertical analysis is also known as a.perpendicular analysis b.common size analysis c.trend analysis d.straight-line analysis

Q: Davis Company and Bender Inc. had the following summary balances as of December 31: Davis Company Bender Inc.AccountDr.Cr.Dr.Cr.Cash$ 321​$ 425​Cash equivalents88​95​Current notes receivable56​46​Accounts receivable603​307​Prepaid expenses55​85​Merchandise inventory714​898​Fixed assets920​755​Accumulated depreciation—fixed assets​$ 415​$ 225Accounts payable​260​198Current accrued liabilities​213​149Mortgage payable​917​824Owner’s equity 952 1,215Totals$2,757$2,757$2,611$2,611​a. Compute the quick ratio for each company. Round to two decimal places.b. Comment on which company is more able to meet current liabilities.

Q: comparisons of data within a company are an example of the following comparative basis a.industry averages b.intercompany c.intracompany d.interregional

Q: Townson Company had gross wages of $200,000 during the week ended December 10. The amount of wages subject to federal and state unemployment taxes was $24,000. Assume all wages were subject to FICA taxes. Tax rates are as follows:Social security6.0%Medicare1.5State unemployment5.3Federal unemployment0.8The total amount withheld from employee wages for federal income taxes was $32,000.a. Journalize the entry for the payroll for the week of December 10.b. Journalize the entry for the employer’s payroll tax expense for the week of December 10.

Q: dent corporation reported net sales of $400,000, $440,000, and $500,000 in the years 2011, 2012, and 2013, respectively. if 2011 is the base year, what is the trend percentage for 2013? a.80% b.114% c.125% d.140%

Q: According to a summary of the payroll of Scotland Company, total gross pay was $500,000, all earnings were subject to the 6.0% social security tax and 1.5% Medicare tax, and federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%) and federal (0.8%) unemployment taxes​a. Journalize the entry for the payroll.b. Journalize the entry for the employer’s payroll tax expense.

Q: a balance sheet that displays only component percentages is called a ________ balance sheet. a.condensed b.common size c.comparative d.trendy

Q: in a common size income statement, the 100% figure is a.net income b.cost of goods sold c.gross profit d.net sales

Q: Journalize the following transactions for Riley Corporation:Dec. 31 The accrued product warranty expense for the year is estimated to be 2.5% of sales. Sales for the year totaled $8,850,000. 31 The accrued vacation pay for the year is estimated to be $75,000. 31 Paid First Insurance Co. $55,000 as fund trustee for the pension plan. The annual pension cost is $87,000.

Q: in a common size financial statement, which of the following is given a percentage of 100 percent? a.total liabilities b.net income c.total assets d.cost of goods sold

Q: The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. Assume all earnings were subject to 6.0% social security tax and 1.5% Medicare tax, and earnings of $3,000 were subject to 4.3% state and 0.8% federal unemployment compensation tax. Journalize the entry for the employer’s payroll tax expense.

Q: the best way to study the relationship of the components within a financial statement is to prepare a.common size statements b.a trend analysis c.profitability analysis d.ratio analysis

Q: On August 1, Batson Company issued a 60-day note with a face amount of $140,000 to Jergens Company for merchandise inventory. (Assume a 360-day year is used for interest computations.)a. Determine the proceeds of the note assuming the note carries an interest rate of 6%.b. Determine the proceeds of the note assuming the note is discounted at 6%.

Q: Journalize the following, assuming a 360-day year is used for interest computations:Apr. 30Issued a $150,000, 30-day, 6% note dated April 30 to Misner Co. on account.May 30Paid Misner Co. the amount owed on the note dated April 30.

Q: in vertical analysis a.a base amount is required b.a base amount is optional c.the same base is used across all financial statements analyzed d.the results of the horizontal analysis are necessary inputs for performing the analysis

Q: vertical analysis is a technique that expresses each item in a financial statement a.in dollars and cents b.as a percent of the item in the previous year c.as a percent of a base amount d.starting with the highest value down to the lowest value

Q: Journalize the following entries on the books of Winston Co. for August 1, September 1, and November 30. (Assume a 360-day year is used for interest computations.)Aug. 1 Winston Co. purchased merchandise for $75,000 on account from Bagley Co., terms n/30.Sept. 1 Winston Co. issued a 90-day, 6% note for $75,000 on account.Nov. 30 Winston Co. paid the amount due.

Q: in performing a vertical analysis, the base for cost of goods sold is a.total selling expenses b.net sales c.total revenues d.total expenses

Q: An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week and that earnings to date have not reached the maximum subject to FICA taxes. Assume further that the social security tax rate is 6.0%, the Medicare tax rate is 1.5%, and the federal income tax to be withheld is $614.​a. Determine the gross pay for the week.b. Determine the net pay for the week.

Q: The summary of the payroll for the monthly pay period ending July 15 indicated the following:Sales salaries$125,000Federal income tax withheld32,300Office salaries35,000Medical insurance withheld7,370Social security tax withheld10,200Medicare tax withheld2,550​Journalize the entries for (a) the payroll and (b) the employer's payroll tax expense for the month. The state unemployment tax rate is 3.1%, and the federal unemployment tax rate is 0.8%. Only $25,000 of salaries is subject to unemployment taxes.

Q: in performing a vertical analysis, the base for sales returns and allowances is a.sales b.sales discounts c.net sales d.total revenues

Q: Match each of the following payroll terms to the description (a–f) that best applies. Each description may be used more than once, and some descriptions may not be used.a. Amount is limited, withheld from employee onlyb. Amount is limited, withheld from employee and matched by employerc. Amount is limited, paid by employer onlyd. Amount is not limited, withheld from employee onlye. Amount is not limited, withheld from employee and matched by employerf. Amount is not limited, paid by employer onlyState unemployment compensation tax (SUTA)

Q: in performing a vertical analysis, the base for sales revenues on the income statement is a.net sales b.sales c.net income d.cost of goods available for sale

Q: in performing a vertical analysis, the base for prepaid expenses is a.total current assets b.total assets c.total liabilities d.prepaid expenses in a previous year

Q: mitchell, inc. has the following income statement (in millions):using vertical analysis, what percentage is assigned to gross profit?a.40%b.100%c.cant be computedd.60%

Q: mitchell, inc. has the following income statement (in millions):using vertical analysis, what percentage is assigned to net sales?a.150%b.cant be computedc.60%d.100%

Q: given the following data for the corky company:how would common stock appear on a common size balance sheet?a.26%b.56%c.30%d.cannot be determined from the data given

Q: richards, inc. has the following income statement (in millions):using vertical analysis, what percentage is assigned to net income?a.100%b.75%c.25%d.none of the above

Q: Match each of the following contingent liability scenarios to its proper accounting treatment (a–d). Each treatment may be used more than once, and some treatments may not be used.a. Record onlyb. Record and disclosec. Disclose onlyd. Do not record or discloseEvent is remote and amount is not estimable.

Q: richards, inc. has the following income statement (in millions):using vertical analysis, what percentage is assigned to cost of goods sold?a.67%b.33%c.100%d.none of the above

Q: which one of the following is not a characteristic generally evaluated in ratio analysis? a.liquidity b.profitability c.marketability d.solvency

Q: in vertical analysis, the base amount for salaries and wages expense is generally a.net sales b.salary & wages expense in a previous year c.gross profit d.net income

Q: the following schedule is a display of what type of analysis?a.horizontal analysisb.differential analysisc.vertical analysisd.ratio analysis

Q: ratios are most useful in identifying a.trends b.differences c.causes d.relationships

Q: a common measure of liquidity is a.return on assets b.receivables turnover c.profit margin d.debt to equity

Q: Match each of the following items with the term or phrase (a–g) that best describes it. Terms or phrases may be used more than once.a. Current ratiob. Working capitalc. Quick assetsd. Quick ratioe. Record an accrual and disclose in the notes to the financial statementsf. Disclose only in notes to financial statementsg. No disclosure needed in notes to financial statementsMeasures the “instant” debt-paying ability of a company

Q: short-term creditors are usually most interested in assessing a.solvency b.liquidity c.marketability d.profitability

Q: a common measure of long-term solvency is a.the cash debt coverage ratio b.the current ratio c.the asset turnover ratio d.inventory turnover

Q: a common measure of profitability is the a.current ratio b.current cash debt coverage ratio c.return on common stockholders equity ratio d.debt to total assets

Q: return on assets ratio is most closely related to a.profit margin and debt to total assets ratio b.profit margin and asset turnover ratio c.times interest earned and debt to stockholders equity ratio d.profit margin and free cash flow

Q: return on common stockholders equity ratio is most closely related to a.gross profit rate and operating expenses to sales ratio b.profit margin and free cash flow c.times interest earned and debt to stockholders equity ratio d.return on asset ratio and leverage (debt to total assets ratio)

Q: long-term creditors are usually most interested in evaluating a.liquidity b.marketability c.profitability d.solvency

Q: which one of the following would be considered a long-term solvency ratio? a.receivables turnover b.return on total assets c.current cash debt coverage ratio d.debt to total assets ratio

Q: in ratio analysis, the ratios are never expressed as a a.rate b.logarithm c.percentage d.simple proportion

Q: stockholders are most interested in evaluating a.liquidity b.solvency c.profitability d.marketability

Q: Which of the following is the most desirable quick ratio? a. 1.20 b. 1.00 c. 0.95 d. 0.50

Q: According to a summary of the payroll of Scotland Company, $500,000 was subject to the 6.0% social security tax and to the 1.5% Medicare tax. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%) and federal (0.8%) unemployment taxes. The journal entry for the accrued salaries would include a a. debit to Salaries Payable for $313,000 b. credit to Salaries Payable for $364,500 c. debit to Salaries Expense for $364,500 d. credit to Salaries Expense for $313,000

Q: the current ratio is a.calculated by dividing current liabilities by current assets b.used to evaluate a company's liquidity and short-term debt paying ability c.used to evaluate a company's solvency and long-term debt paying ability d.calculated by subtracting current liabilities from current assets

Q: the current ratio is a a.liquidity ratio b.profitability ratio c.long-term solvency ratio d.cash flow ratio

Q: Salaries Payable would be recorded for a. $8,200 b. $6,830 c. $8,630 d. $7,450

Q: a company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. as a result of this transaction, the current ratio and working capital will a.both decrease b.both increase c.increase and remain the same, respectively d.remain the same and decrease, respectively

Q: The total earnings of an employee for a payroll period is referred to as a. take-home pay b. pay net of taxes c. net pay d. gross payUse this information for Harris Company to answer the following questions.Harris Company has the following information for the pay period of January 15–31:Gross payroll $10,000 Federal income tax withheld $1,800Social security rate 6.0% Federal unemployment tax rate 0.8%Medicare rate 1.5% State unemployment tax rate 5.4%Assume that for the year to date no employees have reached the maximum earnings subject to FICA taxes.

Q: the receivables turnover and inventory turnover ratios are used to analyze a.long-term solvency b.profitability c.liquidity d.leverage

Q: On June 8, Williams Company issued an $80,000, 5%, 120-day note payable to Brown Industries. Assuming a 360-day year, what is the maturity value of the note? a. $82,600 b. $84,000 c. $81,333 d. $88,200

Q: Which of the following is required to be withheld from an employee's gross pay? a. both federal and state unemployment compensation taxes b. only federal unemployment compensation tax c. only federal income tax d. only state unemployment compensation tax

Q: winsor clothing store had a balance in the accounts receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. net credit sales during the year amounted to $6,800,000. the average collection period of the receivables in terms of days was a.30 days b.365 days c.45.1 days d.42.9 days