Chapter 10 Section 6: Other Liabilities and Debt Covenants

Question 1

Are sales taxes an expense to the company collecting them from customers?

Answer 1

no, just a liability

Question 2

Explain payroll deductions

Answer 2

The portion withheld from the employees’ checks is not an expense to the employer

Question 3

Explain unemployment and employer share of payroll taxes

Answer 3

These are accrued as an expense.

Question 4

Explain the effective interest method for notes

Answer 4

Each payment on a note is divided between interest and principal
Payment - Interest = principal payment