Questions and Answers of College Accounting A Contemporary Approach 5th Edition

15. What adjustment is made for accrued interest on a note receivable?
14. What is accrued income? Give an example of an item that might produce accrued income.
13. What is the alternative method of handling prepaid expenses?
12. What adjustment is made to record expired insurance?
11. How is the cost of an insurance policy recorded when the policy is purchased?
10. What is a prepaid expense? Give three examples of prepaid expense items.
9. What adjustment is made to record accrued salaries?
8. What is an accrued expense? Give three examples of items that often become accrued expenses.
7. What adjustment is made for depreciation on office equipment?
6. Explain the meaning of the following terms that relate to depreciation:a. Salvage valueb. Depreciable basec. Useful lifed. Straight-line method
5. What types of assets are subject to depreciation? Give three examples of such assets.
4. Why is depreciation recorded?
3. Income Summary amounts are extended to which statement columns on the worksheet?
2. When a specific account receivable is deemed uncollectible, it is written off by debiting __________ and crediting __________.
1. What adjustment is made to record the estimated expense for uncollectible accounts?
6. On July 1, 2019, a landlord received $36,000 cash from a tenant, covering rent from that date through June 30, 2020. The payment was credited to Rent Income. Assuming no entry has been made in the
5. On July 1, 2019, a landlord received $36,000 cash from a tenant, covering rent from July 1, 2019, through June 30, 2020. The payment received was credited to Unearned Rent Income.Assuming no entry
4. A completed worksheet for Holiday Company on December 31, 2019, showed a total of$930,000 in the debit column of the Income Statement section and a total credit of $902,000 in the credit column.
3. How, if at all, does “accrued income” differ from “unearned income”?
2. What is meant by the term “accrued income”?
1. Why is the accrual basis of accounting favored?
6. Explain why an error in the amount of an adjusting entry usually affects at least two accounting periods.
5. The amount of net income appears on the worksheet in the:a. Credit column of the adjusted trial balance section.b. Debit column of the balance sheet section.c. Credit column of the income
4. What account is debited and what account is credited to accrue interest on notes payable?
3. The trial balance in the first two columns of the worksheet balances and the adjustments in the next two columns balance. However, the adjusted trial balance does not balance. What is the likely
2. In its December 31, 2019, financial reports, St. Claire Company’s accountant made two errors: (1) failed to record interest of $600 accrued on a note payable and (2) failed to record interest of
1. In the adjusting entry for depreciation, is the Depreciation Expense account increased or decreased?Is the book value of the asset being depreciated increased or is it decreased?
6. Your company prepares financial statements each month, using a 10-column worksheet to assemble data. What is the primary difference between the adjustments made on a monthly basis and those made
5. Caymus Company adjusts and closes its accounts and prepares financial statements each month. In the December 31 Trial Balance column for debit balances, a balance of $9,000 is found in the Prepaid
4. In Caymus Company’s December 31 trial balance, a credit balance of$31,500 appears in Unearned Fee Income. This amount represents cash received from a customer on November 1 covering work to be
3. Why are adjusting entries necessary?EXERCISES
2. Why are there two amounts (a debit and a credit) in the adjustments column on the line for Merchandise Inventory in the 10-column worksheet?
1. Why is a 10-column worksheet used as part of the procedures for adjusting and closing accounts and preparing financial statements?
12-5 Define the accounting terms new to this chapter.
12-4 Complete a 10-column worksheet.
12-3 Compute adjustments for accrued and deferred income items, and enter the adjustments on the worksheet.
12-2 Compute adjustments for accrued and prepaid expense items, and enter the adjustments on the worksheet.
12-1 Determine the adjustment for merchandise inventory, and enter the adjustment on the worksheet.
4. What is the significance to management of the experience rating system used to determine the employer’s tax under the state unemployment insurance laws?
3. Why should management be concerned about the accuracy and promptness of payroll tax deposits and payroll tax returns?
2. Johnson Company has 20 employees. Some employees work in the office, others in the warehouse, and still others in the retail store. In the company’s records, all employees are simply referred to
1. Carolina Company recently discovered that a payroll clerk had issued checks to nonexistent employees for several years and cashed the checks himself. The firm does not have any internal control
19. Why was the unemployment insurance system established?
18. What is the purpose of allowing a credit against the FUTA for state unemployment taxes?
17. What is the purpose of Form 940? How often is it filed?
16. A state charges a basic SUTA tax rate of 5.4 percent. Because of an excellent experience rating, an employer in the state has to pay only 1.0 percent of the taxable payroll as state tax. What is
15. Is the employer required to deposit the federal unemployment tax during the year? Explain.
14. What is Form 941? How often is the form filed?
13. Who pays for workers’ compensation insurance?
12. When is the premium for workers’ compensation insurance usually paid?
11. How can an employer keep informed about changes in the rates and bases for the social security, Medicare, and FUTA taxes?
10. What happens if the employer fails to deduct enough employee income tax or FICA tax from employee earnings?
9. When must Form W-2 be issued? To whom is it sent?
8. What is the purpose of Form W-3? When must it be issued? To whom is it sent?
7. What is the lookback period?
6. What are the four taxes levied on employers?
5. What is a business tax identification number?
4. What is EFTPS? When is EFTPS required?
3. What does “semiweekly” refer to in the Semiweekly Deposit Schedule Rule?
2. What does “monthly” refer to in the Monthly Deposit Schedule Rule?
1. Which of the following are withheld from employees’ earnings?a. FUTAb. income taxc. Medicared. social securitye. SUTAf. workers’ compensation
5. Which of the following factors determine the frequency of deposits of social security, Medicare, and income tax withholdings?a. Experience rating.b. Amount of taxes reported in the lookback
4. Under the monthly deposit schedule rule, when must deposits for employee income tax and other withheld taxes be made?
3. How do the FUTA and SUTA taxes relate to each other?
2. Is the ceiling on earnings subject to unemployment taxes larger than or smaller than the ceiling on earnings subject to the social security tax?
1. What is Form W-3?
6. At the end of the year, the business has a balance due for workers’compensation insurance. If no adjusting entry is made, will the amount of net income reported be correct? If not, how will it
5. The federal unemployment taxes are reported on:a. Form 941.b. Form 8109.c. Form W-3.d. Form 940
4. State unemployment taxes are filed:a. monthly.b. quarterly.c. yearly.d. at the end of each pay period.
3. How does a favorable experience rating affect the state unemployment tax rate?
2. Who pays the federal unemployment tax? The state unemployment tax?
1. Why is it important for workers’compensation wages to be classified according to the type of work performed?
6. Your business currently owes $2,910 in payroll taxes. During the lookback period, your business paid $10,000 in payroll taxes. How often does your business need to make payroll tax deposits?
5. Employers usually record social security taxes in the accounting records at the end of:a. each payroll period.b. each month.c. each quarter.d. the year.
4. Which tax is paid equally by the employee and employer?a. federal income taxb. state income taxc. social security taxd. federal unemployment tax
3. What is the purpose of Form 941?EXERCISES
2. How does a business deposit federal payroll taxes?
1. What is the purpose of Form W-2?
11-9 Define the accounting terms new to this chapter.
11-8 Compute and record workers’ compensation insurance premiums.
11-7 Prepare an Employer’s Federal Unemployment Tax Return, Form 940.
11-6 Compute and record liability for federal and state unemployment taxes and record payment of the taxes.
11-5 Prepare Wage and Tax Statement (Form W-2)and Annual Transmittal of Wage and Tax Statements (Form W-3).
11-4 Prepare an Employer’s Quarterly Federal Tax Return, Form 941.
11-3 Record deposit of social security, Medicare, and employee income taxes.
11-2 Compute and record the employer’s social security and Medicare taxes.
11-1 Explain how and when payroll taxes are paid to the government.
4. How can detailed payroll records help managers control expenses?
3. Why should management make sure that a firm has an adequate set of payroll records?
2. The new controller for CAR Company, a manufacturing firm, has suggested to management that the business change from paying the factory employees in cash to paying them by check.What reasons would
1. Why should managers check the amount spent for overtime?
15. How does the salary basis differ from the hourly rate basis of paying employees?
14. What publication of the Internal Revenue Service provides information about the current federal income tax rates and the procedures that employers should use to withhold federal income tax from
13. What is the simplest method for finding the amount of federal income tax to be deducted from an employee’s gross pay?
12. What are the four bases for determining employee gross earnings?
11. How does the direct deposit method of paying employees operate?
10. What is the purpose of the social security tax?
9. What is the purpose of the Medicare tax?
8. How are earnings determined when employees are paid on the hourly rate basis?
7. Give two examples of common payroll fraud.

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