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Accounting for Liabilities

Question 1
1. Sales taxes payable is a/an:

a)estimated liability.

b)contingent liability.

c)current liability for retailers.

d)business expense.

Question 2
1. 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 employer's payroll taxes liabilities?

a)$ 56.00

b)$120.18

c)$ 378.00

d)$1,068.04

Question 3
1. 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.

Question 4
1. The carrying value of a long-term note payable is:

a)computed as the future value of all remaining future payments, using the market rate of interest.

b)the face value of the long-term note less the total of all future interest payments.

c)computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.

d)computed as the present value of all remaining interest payments, discounted using the note's rate of interest.

Question 5
1. 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.

Question 6
1. A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement?

a)$0 gain or loss

b)$1,500 gain

c)$1,500 loss

d)$3,000 gain

Question 7
1. When a bond sells at a premium the:

a)contract rate is above the market rate.

b)contract rate is equal to the market rate.

c)contract rate is below the market rate.

d)bond pays no interest.

Question 8
1. Bonds that give the issuer an option of retiring them before they mature are:

a)Serial bonds.

b)Sinking fund bonds.

c)Registered bonds.

d)Callable bonds.

Question 9
1. Uncertainties such as natural disasters:

a)are not contingent liabilities because they are future events not arising out of past transactions or events.

b)are contingent liabilities because they are future events arising from past transactions or events.

c)should be disclosed because of their usefulness to financial statements.

d)are estimated liabilities because the amounts are uncertain.

Question 10
1. The amount of federal income taxes withheld from an employee's paycheck is determined by:

a)the employee's annual earnings rate and number of withholding allowances.

b)the employer's merit rating.

c)the amount of social security taxes.

d)multiplying the gross pay by 6.2%.

Solution Preview

1. c)current liability for retailers. It is collected on behalf of a government entity and due to that entity generally within 30-90 days.

2. d)$1,068.04
FICA $ 513.86 ($8,288*.062)
Medicare 120.18 ($8,288*.0145)
FUTA 56.00 ($7,000*.008)
SUTA ...

Solution Summary

This solution discusses numerous liabilities by responding to multiple choice questions on those liabilities.

$2.19