Below are five questions:
a. Your colleague says, “Value-added taxes are reported as an expense in the income statement.”
Do you agree? Please explain! (3 points)
b. What isthe difference between gross pay and net pay? Which amountshould a company record
as wages and salaries expense? Please explain! (3 points)
c. Are the income taxes withheld from employee paychecks a payroll tax expense for the
employer? Explain your answer! (3 points)
d. How does working capital differ from the current ratio? How are they similar? Explain your
answer! (3 points)
e. Alvin, a friend of yours, has recently purchased a home for €125,000, paying €25,000 down and
the remainder financed by a 6.5%, 20-year mortgage, payable at €745.57 per month. At the end
of the first month, Roy receives a statement from the bank indicating that only €203.90 of
principal was paid during the month. At this rate, he calculates that it will take over 40 years to
pay off the mortgage. Is he right? Please analyze and give your explanation! (3 points)