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Exam 9: Reporting and Analyzing Current Liabilities

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Question 91

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Tree Frog Company is organized as a LLC and does not pay income taxes.The company has fixed interest expense of $5,750,sales of $253,000,and variable expenses of $189,750.What is the company's times interest earned ratio?

A) 44
B) 33
C) 11
D) 10
E) $63,250

F) A) and C)
G) A) and D)

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Question 92

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When the times interest earned ratio declines,the likelihood of default on liabilities increases.

A) True
B) False

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Question 93

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A single liability can be divided between current and noncurrent liabilities.

In the accounting records of a defendant,lawsuits:

Debt guarantees are not disclosed because the guarantor is not the primary debtor.

Accounts payable:

The matching principle requires that interest expense not be accrued on a note payable until the note is paid,even if the end of an accounting period occurs between the signing of a note payable and its maturity date.

A ________________________ is a potential obligation arising from a past transaction or event that depends on a future event.

FUTA taxes are:

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 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.

The payroll records of a company provided the following data for the weekly pay period ended December 7: The FICA Social Security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this week's wages paid to each employee.The federal and state unemployment tax rates are 0.8% and 5.4%,respectively,on the first $7,000 paid to each employee.Prepare the journal entries to (a) accrue the payroll and (b) record payroll taxes expense.

A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000.Its times interest earned ratio is equal to .4.

On December 1,Martin Company signed a $5,000,3-month,6% note payable,with the principle plus interest due on March 1 of the following year.What amount of interest expense is accrued at December 31 on the note?

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $1,000.

Experience shows that when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods,the default rate on liabilities increases sharply.

Unearned revenues are amounts received _________from______ for future products or services.

Times interest earned ratio is computed by dividing _______________ by interest expense.

An employee earnings report:

Apple Company has three employees: What is the amount that Apple Company will record as total payroll taxes for August?

An estimated liability is a known obligation of an uncertain amount that can at least be reasonably estimated.