Chapter 9 Take Home Quiz 25 Points
Name:
Make sure you show your calculations.
Problem 1: 1 pt A company sells leaf blowers for $170 each. Each unit has a 3 year warranty that covers replacement of defective parts. It is estimated that 4% of all leaf blowers sold will be returned under the warranty at an average cost of $30 each. During October, the company sold 400,000 leaf blowers. 800 leaf blowers were serviced under the warranty during October at a total cost of $25,000. The balance in the Estimated Warranty Liability account on October 1 was $12,500. What is the company’s warranty expense for the month of October?
A. $24,000
B. $25,000
C. $37,500
D. $467,500
E. $480,000
Answer
:
Problem 2: 1 pt Employees earn vacation pay at the rate of one day per month. During July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense for the month of July?
A. $25
B. $100
C. $1,200
D. $2,500
E. $30,000
Answer:
Problem 3: 1 pt 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
B.
Warranty Expense
7,400
Estimated Warranty Liability
7,400
C.
Estimated Warranty Liability
7,400
Estimated Warranty Expense
7,400
D.
Warranty Liability
7,400
Cash
7,400
E. No entry is recorded until the items are returned for warranty repairs
Answer:
Problem 4: 1 pt A company sells computers at a selling price of $1,800 each. Each computer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all computers sold will be returned under the warranty with an average cost of $150 each. During November, the company sold 30,000 computers and 400 computers were serviced under the warranty during November at a total cost of $55,000. The balance in the Estimated Warranty Liability account at November 1 was $29,000. What is the company’s warranty expense for the month of November?
A. $26,000
B. $45,000
C. $55,000
D. $60,000
E. $90,000
Answer:
Problem 5: 1 pts The current FUTA tax rate is 0.8% and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee’s pay. Assume that an employee earned $8,900. What is the amount of total unemployment taxes the employer must pay on this employee’s wages?
A. $322.00
B. $434.00
C. $480.60
D. $551.80
E. Zero, since the employee’s wages exceed the maximum of $7,000
Answer
Problem 6: 1 pt For the year ended December 31, 2010, Mason Company has implemented an employee bonus program equal to 7% of Mason’s net income, which employees will share equally. Mason’s net income (pre-bonus) is expected to be $3,500,000, and bonus expense is deducted in computing net income. What is the amount that needs to be recorded for estimated bonus liability for 2010?
A. $245,000
B. $144,118
C. $228,972
D. $50,000
E. $125,000
Answer:
Problem 7: 1 pt Conner Company borrows $185,600 cash on November 1, 2010, by signing a 120-day, 8% note. What is the total amount of interest expense that Conner will recognize?
A. $4,949
B. $14,848
C. $2,467
D. $0, no interest expense is recognized
E. $1485
Answer:
Problem 8: 1 pt On October 10, 2010, Printfast Company sells a commercial printer for $2,350 with a one year warranty that covers parts. Warranty expense is project to be 4% of sales. On February 28, 2011, 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 at the end of 2011?
A. $14.00
B. $84.80
C. $94.00
D. $0, there is no expense at the end of 2011
E. $230.00
Answer:
Problem 9: 1 pt If a company had net income of $2,379,600, interest expense of 234,000, a tax rate of 40%, and operating income of 4,200,000, what would the times interest earned ratio be for the company?
A.10.17
B. 17.95
C. 7.78
D. 7.18
E. 4.07
Answer:
Problem 10: 1 pt What are estimated liabilities? Provide at least two examples and explain why they are classified as estimated liabilities.
Answer:
Problem 11: 1 pt A company’s income before interest expense and income taxes in 2010 was $225,000 and $200,000 in 2011. Its interest expense was $45,000 for both years. Calculate the company’s times interest earned ratio and comment on its level of risk.
Answer:
Problem 12: 3 pts On November 1, 2009, Bob’s Skateboards Store signed a $12,000, 3-month, 5% note payable to cover a past due account payable.
a.
What amount of interest expense on this note should Bob’s Skateboards Store report?
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, 2010.
Answer:
a.
b.
11/1/09
c.
2/1/10
Problem 13: 2 pts On September 15, SportsWorld borrowed $75,000 cash from FirstBank on a 12%, 60-day note payable.
a. Prepare SportsWorld’s general journal entry to record the issuance of the note payable
b. Prepare SportsWorld’s general journal entry to record the payment of the note at maturity.
Answer:
a.
9/15
b.
11/14
Problem 14: 3 pts A company’s payroll information for the month of May follows:
Administrative salaries
$2,000
Sales salaries
3,500
Shop wages
4,000
FICA taxes withheld
700
Federal income taxes withheld
1,300
Medical insurance premiums withheld
415
Union dues withheld
205
On May 31 the company issued Check No. 335 payable to the Payroll Bank Account for the May payroll. It issued payroll checks to the employees after depositing the check.
(1) Prepare the journal entry to record (accrue) the employer’s payroll for May. (2) Prepare the journal entry to pay for the May payroll. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee-the wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record the employer’s payroll taxes.
Answer:
Problem 15: 3 pts On December 1, 2010 Gates Company borrowed $45,000 cash from FirstBank on a 90-day, 9% note payable.
a. Prepare Gate’s general journal entry to record the issuance of the note payable
b. Prepare Gate’s general journal entry to record the accrued interest due at December 31, 2010
c. Prepare Gate’s general journal entry to record the payment of the note on March 1, 2013.
Answer:
a.
b.
c.
Problem 16: 3 pts A company’s payroll information for the month of May follows:
Administrative salaries
$2,000
Sales salaries
3,500
Shop wages
4,000
FICA taxes withheld
700
Federal income taxes withheld
1,300
Medical insurance premiums withheld
415
Union dues withheld
205
On May 31 the company issued Check No. 335 payable to the Payroll Bank Account for the May payroll. It issued payroll checks to the employees after depositing the check.
(1) Prepare the journal entry to record (accrue) the employer’s payroll for May. (2) Prepare the journal entry to pay for the May payroll. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee-the wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record the employer’s payroll taxes.
Answer:
