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Mission Company has three employees:  Gross Pay through July Gross Pay for August  Smith $3,200$1,000 Cain 25,8003,500 Clark 94,60013,100\begin{array}{l}&\text { Gross Pay through July}&\text { Gross Pay for August }\\\text { Smith } & \$ 3,200 & \$ 1,000 \\\text { Cain } & 25,800 & 3,500 \\\text { Clark } & 94,600 & 13,100\end{array}  The company is subject to the following taxes: \text { The company is subject to the following taxes: }  Tax  Rate  Applied To  FICA-Social Security 6.20% First $106,800 FICA-Medicare 1.45 All gross pay  FUTA .80 First $7,000 SUTA 5.40 First $7,000\begin{array} { l c l } \text { Tax } & \text { Rate } & \text { Applied To } \\\text { FICA-Social Security } & 6.20 \% & \text { First } \$ 106,800 \\\text { FICA-Medicare } & 1.45 & \text { All gross pay } \\\text { FUTA } & .80 & \text { First } \$ 7,000 \\\text { SUTA } & 5.40 & \text { First } \$ 7,000\end{array} What are Mission Company's total August payroll taxes for Clark?


A) $ 946.35
B) $1,002.15
C) $1,814.35
D) $6,234.75
E) $812.20

F) B) and D)
G) A) and B)

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On November 1, 2012, Bob's Skateboards Store signed a $12,000, 3-month, 5% note payable to cover a past due account payable. This company uses a calendar year to report financial activity and updates the accounting records monthly. a. What amount of total interest expense will the company pay on this note? b. Prepare Bob's general journal entry to record the issuance of the note payable. c. Prepare Bob's general journal entry to record the payment of the note on February 1, 2013.

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a. Total interest ex...

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Required employee payroll deductions include income taxes, Social Security taxes, pension and health contributions, union dues, and charitable giving.

A) True
B) False

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Pastimes Co. offers its employees a bonus equal to 2% of the company's net income. The estimated net income for the year is expected to be $850,000. Prepare the general journal entry to record the employee bonus plan expense.

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


A) Interest
B) Principle
C) Face value
D) Cash
E) Accounts payable

F) C) and D)
G) C) and E)

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A

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

F) B) and D)
G) A) and E)

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Amounts received in advance from customers for future products or services:


A) Are revenues.
B) Increase income.
C) Are liabilities.
D) Are not allowed under GAAP.
E) Require an outlay of cash in the future.

F) D) and E)
G) None of the above

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The annual federal unemployment tax return is:


A) Form 940
B) Form 1099
C) Form 104
D) Form W-2
E) Form W-4

F) None of the above
G) D) and E)

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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 is the warranty liability for this printer at the end of 2013?


A) $49.00
B) $84.80
C) $94.00
D) $0, there is no liability at the end of 2013
E) $230.00

F) C) and E)
G) D) and E)

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A liability does not exist if there is any uncertainty about whom to pay, when to pay, or how much to pay.

A) True
B) False

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

A) True
B) False

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True

A company's income before interest expense and income taxes is $302,400 and its interest expense is $72,000. Calculate the company's times interest earned ratio.

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$302,400/$...

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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.

F) A) and B)
G) D) and E)

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The times interest earned ratio is a measure of:


A) A company's ability to pay its operating expenses on time.
B) A company's ability to pay interest incurred even if sales decline.
C) A company's profitability.
D) The relation between income and debt.
E) The relation between assets and liabilities.

F) B) and C)
G) A) and C)

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A lawsuit is an example of a contingent liability for the defendant.

A) True
B) False

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

A) True
B) False

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Unearned revenue is another name for sales.

A) True
B) False

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False

Company A and Company B each borrow $2,000 from the bank. Company A signed a 60-day, 12% note. Company B signed a 90-day, 11% note. How will each of these companies record these events in their respective general journals on the day the money was borrowed?


A) Company A
 Cash 2,000 Notes Payable 2,000\begin{array}{|l|r|r|}\hline \text { Cash } & 2,000 & \\\hline \text { Notes Payable } & & 2,000 \\\hline\end{array} Company B
 Cash 2,000 Notes Payable 2,000\begin{array}{|l|r|r|}\hline \text { Cash } & 2,000 & \\\hline \text { Notes Payable } & & 2,000 \\\hline\end{array} 00 Notes Payableompany record this event in the general journal?
B) Company A
 Cash 2,040 Interest Expense 40 Notes Payable 2,000\begin{array}{|l|r|r|}\hline \text { Cash } & 2,040 & \\\hline \text { Interest Expense } & & 40 \\\hline \text { Notes Payable } & & 2,000 \\\hline\end{array} Company B
 Cash 2,055 Interest Expense 55 Notes Payable 2,000\begin{array}{|l|r|r|}\hline \text { Cash } & 2,055 & \\\hline \text { Interest Expense } & & 55 \\\hline \text { Notes Payable } & & 2,000 \\\hline\end{array}
C) Company A
 Notes Payable 2,000 Cash 2,000\begin{array}{|c|r|r|}\hline \text { Notes Payable } & 2,000 & \\\hline \text { Cash } & & 2,000 \\\hline\end{array} Company B
 Notes Payable 2,000 Cash 2,000\begin{array}{|c|r|r|}\hline \text { Notes Payable } & 2,000 & \\\hline \text { Cash } & & 2,000 \\\hline\end{array}
D) Company A
 Interest Expense 40 Notes Payable 2,000 Cash 2,040\begin{array}{|l|r|l|}\hline \text { Interest Expense } & 40 & \\\hline \text { Notes Payable } & 2,000 & \\\hline \text { Cash } & & 2,040 \\\hline\end{array} Company B
 Interest Expense 55 Notes Payable 2,000 Cash 2,055\begin{array}{|l|r|r|}\hline \text { Interest Expense } & 55 & \\\hline \text { Notes Payable } & 2,000 & \\\hline \text { Cash } & & 2,055 \\\hline\end{array}
E) . Company A
 Cash 2,040 Notes Payable 2,040\begin{array}{|l|r|r|}\hline \text { Cash } & 2,040 & \\\hline \text { Notes Payable } & & 2,040 \\\hline\end{array} Company B
 Cash 2,055 Notes Payable 2,055\begin{array}{|l|r|r|}\hline \text { Cash } & 2,055 & \\\hline \text { Notes Payable } & & 2,055 \\\hline\end{array}

F) D) and E)
G) All of the above

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A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:


A)  Warranty Expense 7,400 Sales 7,400\begin{array}{|c|c|c|}\hline \text { Warranty Expense } & 7,400 & \\\hline \text { Sales } & & 7,400 \\\hline\end{array}
B)  Warranty Expense 7,400 Estimated Warranty Liability 7,400\begin{array}{|c|c|c|}\hline \text { Warranty Expense } & 7,400 & \\\hline \text { Estimated Warranty Liability } & & 7,400 \\\hline\end{array}
C)  Estimated Warranty Liability 7,400 Estimated Warranty Expense 7,400\begin{array}{|c|c|c|}\hline \text { Estimated Warranty Liability } & 7,400 & \\\hline \text { Estimated Warranty Expense } & & 7,400 \\\hline\end{array}
D)  Warranty Liability 7,400 Cash 7,400\begin{array}{|c|c|c|}\hline \text { Warranty Liability } & 7,400 & \\\hline \text { Cash } & & 7,400 \\\hline\end{array}
E) No entry is recorded until the items are returned for warranty repairs.

F) C) and E)
G) None of the above

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If a company had income before interest and taxes in the amount of $2,345,540 and a times interest earned ratio of 5.2, what is the total amount of the company's interest expense?


A) $451,065
B) $320,185
C) $121,968
D) $275,840
E) $230,000

F) None of the above
G) A) and E)

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