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

6. Does the employee bear any part of the SUTA tax? Explain.
5. How are the federal and state unemployment taxes related?
4. What is an exempt employee?
3. What aspects of employment are regulated by the Fair Labor Standards Act? What is another commonly used name for this act?
2. What factors affect how much federal income tax must be withheld from an employee’s earnings?
1. How does the Fair Labor Standards Act affect the wages paid by many firms? What types of firms are regulated by the act?
5. What is the purpose of workers’ compensation insurance?
4. How is the amount of social security tax to be withheld from an employee’s earnings determined?
3. From an accounting and internal control viewpoint, would it be preferable to pay employees by check or cash? Explain.
2. How does an independent contractor differ from an employee?
1. What is the purpose of the payroll register?
6. This general journal entry was made to record the payroll liability for amounts withheld from the weekly payroll (amounts in parentheses are credit entries, others are debit entries).Office
5. Payroll deductions are recorded in a separate:a. asset account.b. expense account.c. liability account.d. revenue account.ANALYSIS
4. Details related to all employees’ gross earnings, deductions, and net pay for a period are found in the:a. payroll register.b. individual earnings record.c. general journal.d. cash payments
3. What appears on an individual earnings record?EXERCISES
2. What accounts are debited and credited when individual payroll checks are written on the regular checking account?
1. What is the purpose of a payroll bank account?
6. Jamie Jones left a voice mail asking you to withhold an additional $40 of federal income tax from her wages each pay period, starting June 1.When should you begin withholding the extra amount?
5. Stacy Carter worked 48 hours during the week ending November 17. Her regular rate is $9 per hour. Calculate her gross earnings for the week.a. $432b. $492c. $468d. $444
4. Which of the following affects the amount of Medicare tax to be withheld from an hourly rate employee’s pay?a. medical insurance premiumb. marital statusc. withholding allowances claimed on Form
3. List four payroll deductions that are not required by law but can be made by agreement between the employee and the employer.EXERCISES
2. What factors determine the amount of federal income tax to be withheld from an employee’s earnings?
1. What three payroll deductions does federal law require?
6. Henri Harvey was hired by Harvey Architects to create three oil paintings for the president’s office. Is Henri an employee? Why or why not?
5. Who pays the social security tax?a. Employee only.b. Employer only.c. Both employee and employer.d. None of the above.
4. The purpose of FUTA is to provide benefits for:a. employees who become unemployed.b. employees who become injured while on the job.c. retired workers.d. disabled employees.
3. How are social security benefits financed?EXERCISES
2. How are unemployment insurance benefits financed?
1. What is “time and a half”?
10-9 Define the accounting terms new to this chapter.
10-8 Maintain an earnings record for each employee.
10-7 Journalize payroll transactions in the general journal.
10-6 Enter gross earnings, deductions, and net pay in the payroll register.
10-5 Determine employee deductions for income tax.
10-4 Determine employee deductions for Medicare tax.
10-3 Determine employee deductions for social security tax.
10-2 Compute gross earnings of employees.
10-1 Explain the major federal laws relating to employee earnings and withholding.
8. Why is it a good practice for a business to make all payments by check except for minor payments from a petty cash fund?
7. Why do some companies require that all employees who handle cash be bonded?
6. How does management benefit when cash transactions are recorded quickly and efficiently?
5. Why should management be concerned about achieving effective internal control over cash receipts and cash payments?
4. Assume that you are the newly hired controller at Norton Company and that you have observed the following banking procedures in use at the firm. Would you change any of these procedures? Why or
3. Many banks now offer a variety of computer services to clients. Why is it not advisable for a firm to pay its bank to complete the reconciliation procedure at the end of each month?
2. Why should management be concerned about having accurate information about the firm’s cash position available at all times?
1. The new accountant for Asheville Hardware Center, a large retail store, found the following weaknesses in the firm’s cash-handling procedures. How would you explain to management why each of
18. Explain the meaning of the following terms:a. Canceled checkb. Outstanding checkc. Deposit in transitd. Debit memorandume. Credit memorandumf. Dishonored check g. Blank endorsement h. Deposit
17. Describe the major controls for cash payments.
16. Describe the major controls for cash receipts.
15. Explain what bonding means. How does bonding relate to safeguarding cash?
14. What is a promissory note? What entry is made to record the collection of a promissory note and interest?
13. When are petty cash expenditures entered in a firm’s accounting records?
12. Describe the major controls for petty cash.
11. How are cash shortages and overages recorded?
10. Which type of endorsement is most appropriate for a business to use?
9. Why are MICR numbers printed on deposit slips and checks?
8. What type of information is entered on a check stub? Why should a check stub be prepared before the check is written?
7. What is a check?
6. What procedures are used to achieve internal control over banking activities?
5. Why are journal entries sometimes needed after the bank reconciliation statement is prepared?
4. Give some reasons why the bank balance and the book balance of cash might differ.
3. What information is shown on the bank statement?
2. Why is a bank reconciliation prepared?
1. What is the book balance of cash?
5. What does the term cash mean in business?
4. What is the classification of the Notes Payable account?
3. When is the petty cash fund replenished?
2. What is a petty cash voucher?
1. Describe a full endorsement.
6. James is one of several accounting clerks at Uptown Beverage Company.His job duties include recording invoices as they are received, filing the invoices, and writing the checks for accounts
5. Which of these would not be found on a bank reconciliation?a. deposits in transitb. canceled checksc. outstanding checksd. NSF checks ANALYS I S
4. Which of the following does not require an adjustment to the financial records?a. NSF checkb. Bank service chargec. Deposits in transitd. Check that was incorrectly recorded at $85 but was written
3. What is a postdated check? When should postdated checks be deposited?EXERCISES
2. Which bank reconciliation items require journal entries?
1. Why does a payee endorse a check before depositing it?
6. Your employee is in charge of the company’s $100 petty cash fund. She asked you to replenish the fund. She is missing a receipt for $8.28, which she says she spent on postage. How should you
5. Which of the following is not an example of good internal control over cash payments?a. Use prenumbered checks.b. Issue checks only with an approved bill.c. Have checks prepared and recorded in
4. Which journal entry could be used to record the replenishment of the petty cash fund?a. Debit Petty Cash Fund, credit Cashb. Debit Supplies, debit Delivery Expense, credit Cashc. Debit Supplies,
3. What account would be credited in the issuance of a promissory note to purchase store equipment?EXERCISES
2. What journal entry records the establishment of a petty cash fund?
1. Why does a business use a petty cash fund?
6. You notice that the Cash Short or Over account has 24 entries during the month. The ending balance is a$10 shortage for the month. Is this a problem? Why or why not?
5. Which items are considered cash?a. Currencyb. Funds on deposit in the bankc. Money ordersd. All of the above
4. Tara’s Beauty Salon keeps a $100 change fund. At the end of the day, sales per the register tape were $885,and the cash count was $992. What is the amount of the cash shortage or overage?a. $7
3. How would the receipt of a $62 refund for supplies returned be recorded in a general journal?
2. What is a promissory note? In what situation would a business accept a promissory note?EXERCISES
1. What is a cash shortage? How is it recorded?
9-8 Define the accounting terms new to this chapter.
9-7 Understand how businesses use online banking to manage cash activities.
9-6 Record any adjusting entries required from the bank reconciliation.
9-5 Reconcile the monthly bank statement.
9-4 Write a check, endorse checks, prepare a bank deposit slip, and maintain a checkbook balance.
9-3 Demonstrate a knowledge of internal control routines for cash.
9-2 Demonstrate a knowledge of procedures for a petty cash fund.
9-1 Account for cash short or over.
6. Why should management be concerned about internal controls over purchases?
5. How can good controls over purchases protect a firm from fraud and errors and from excessive investment in merchandise?
4. How would excessive investment in merchandise harm a business?
3. Suppose you are the new controller of a small but growing company and you find that the firm has a policy of paying cash for all purchases of goods even though it could obtain credit. The
2. Why is it important for a firm to maintain a satisfactory credit rating?

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