Chapter 11

Question 1

Current Liabilities

Answer 1

Liabilities due within one year; mostly paid using current assets
(ex: accounts payable, short-term notes payable, wages payable)

Question 2

Long-Term Liabilities

Answer 2

Obligations due after one year
(Ex: Long-term notes payable, warranty liabilities, lease liabilities, bonds payable)

Question 3

Gross Pay

Answer 3

The total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions of taxes

Question 4

Federal Insurance Contributions Act (FICA) Taxes

Answer 4

Include Social Security taxes and Medicare Taxes
Social Security = 6.2% of first $137,700 earned (per year)
Medicare = 1.45% of all amounts earned (additional 0.9% imposed on high-income employees - $200k+)

Question 5

Recording Employee Payroll

Answer 5

Question 6

Federal Unemployment Tax Act (FUTA)

Answer 6

Employers must pay a federal unemployment tax on wages and salaries earned by their employees

Question 7

State Unemployment Tax Act (SUTA)

Answer 7

All states fund their unemployment insurance programs by placing a payroll tax on employers

Question 8

Internal Control of Payroll

Answer 8

Question 9

Estimated Liability

Answer 9

A known obligation of an uncertain amount that can be reasonable estimated
(ex: pensions, health care, and vacation pay)

Question 10

Warranty

Answer 10

A seller’s obligation to replace or fix a product or service that fails to perform as expected within a specified period

Question 11

Contingent Liability

Answer 11

A potential obligation that depends on a future event arising from a past transaction or event
(ex: a pending lawsuit)