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ACCOUNTING PRINCIPLES I
EXAM 6 (Chapter 10)
Spring 2013 – Businsky
Name ________________________
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POINTS |
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PROBLEM |
POSSIBLE |
RECEIVED |
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1 |
10 |
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2 |
20 |
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3 |
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4 |
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TOTAL |
70 |
Problem #1 (10 points)
1. Interest expense should be recorded in the period:
a. that the expense is incurred
b. a note payable is recorded
c. when the note is paid
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d. on the date that the note is issued |
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2. Which of the following deductions is a required deduction? a. Charitable contributions b. Income taxes c. Insurance premiums d. Union dues 3. Which payroll tax is “shared” by both the employer and employer? a. State unemployment tax b. Federal income tax c. Social security tax d. Federal Unemployment 4. Which of the following is a characteristic of a current liability? a. A current liability is a liability that is due within 30 days. b. A current liability is a liability that is due within one year or one operating cycle, whichever is longer. c. A current liability is a liability that is due within 10 days. d. A current liability is a liability that is due in longer than a one-year period, or one operating cycle. 5. Which of the following principles requires that warranty expense be recorded in the period that revenue is recorded? a. Consistency principle b. Matching principle c. Revenue principle d. Materiality concept |
PROBLEM #2 (20 Points)
Marty’s German Restaurants incurred salary expense of $70,000 for 2012. The payroll expense includes employer FICA tax of 7.65%, in addition to state unemployment tax of 5.4% and federal unemployment tax of .8%. Of the total salaries, $15,000 is subject to unemployment tax. Also, the company provides the following benefits for employees health insurance (cost to the company $3050), life insurance (cost to the company, $400), and retirement benefits (cost to the company, 5% of salary expense.)
Directions:
Journalize Marty’s expenses for employee benefits and for payroll taxes.
Explanations are not required.
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DATE |
DESCRIPTION |
REF |
DEBIT |
CREDIT |
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PROBLEM #3 (20 Points)
JarJar Company had the following series of transactions:
11/01/11
JarJar Company borrowed $18,000 by issuing a 12%, 1 year note.
12/1/11
JarJar Company borrowed $25,000 by issuing a 8%, 6 month note.
5/1/12
JarJar paid the full payment due of Note 2.
11/01/12
JarJar paid the full payment due of Note 1
Directions:
1) Record all necessary journal entries for JarJar Company for 2011
2) Record all necessary journal entries for JarJar Company for 2012
Explanations are not required.
PROBLEM #4 (20 Points)
At the end of January, the payroll registry for Death Star Corporation showed $270,000 in total salaries for the month and federal income taxes withheld as $63,350. Other taxes are as follows:
FICA-Social Security
6.2%
FICA-Medicare
1.45%
FUTA
.8% of first $7,000 per employee
SUTA
4% of first $7,000 per employee
Only $30,000 of salaries were subject to unemployment taxes. All salaries are subject to FICA taxes.
Directions:
1) Prepare the journal entry to record the January salaries expense and withholdings.
2) Prepare the journal entry to record the employer’s payroll taxes for January.
Please include explanations.
Businsky
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