Chapter 12

Question 1

accounts payable

Answer 1

Amounts due to suppliers relating to the purchase of goods and services on credit.

Question 2

compensated absences

Answer 2

Term to describe paid time off; vacations, sick leave, etc.

Question 3

contingent liabilities

Answer 3

Events that may or may not give rise to an actual liability because the outcome is uncertain; examples include lawsuits, environmental damage issues, and so forth.

Question 4

defined benefit plan

Answer 4

A type of pension plan where the benefits are a function of years of service, pay, and age; the ultimate employer cost is not know in advance.

Question 5

defined contribution plan

Answer 5

A type of pension plan where the benefits are based on amounts in trust for the benefit of the employee; employer contributions are usually a fixed percentage of pay.

Question 6

employee

Answer 6

A person who works for a specific business and whose activities are directed by that business.

Question 7

FICA

Answer 7

Federal Insurance Contributions Act (also know as social security and Medicare); establishes a tax that employers must withhold and match for government-based retiree benefit.

Question 8

Form 1099

Answer 8

A form required to be issued to an independent contractor reporting amount paid; to assist with tax compliance issues (this form used to report other payments like interest, etc.)

Question 9

FUTA

Answer 9

Federal Unemployment Tax levied on employer to provide funds for unemployed worker; rate is dependent on existence of SUTA and employer history of layoffs, etc.

Question 10

gross pay

Answer 10

Also know as gross earnings; this is the total amount earned by an employee before any deductions.

Question 11

income taxes

Answer 11

Taxes that are based on the amount income; for employees such amounts must be withheld by employers and remitted to the government.

Question 12

independent contractor

Answer 12

One who performs a designated task or service for a company, and the company has the right to control or direct only the result of the work done.

Question 13

net pay

Answer 13

Also know as net earning; this is the gross pay less all applicable deductions (“take home pay”).

Question 14

notes payable

Answer 14

Formal short-term borrowings usually evidenced by a specific written promise to pay.

Question 15

pension plan

Answer 15

A general term to describe some form of arrangement for continuing payments to retirees.

Question 16

SUTA

Answer 16

Stat Unemployment Tax levied on employer to provide funds for unemployed workers; rate is adjusted for employer history of layoffs, etc.

Question 17

W-2

Answer 17

An annual statement provided to employees stating the amount of earnings and withholdings; assists employee in preparing their own tax returns.

Question 18

W-4

Answer 18

A form filled out by an employee stating the amount of exemptions to which they are entitled for tax purposes; such exemptions bear on the amount of income tax withholdings.

Question 19

warranty liability

Answer 19

A liability that is recorded for the future costs of claims that are anticipated because of product warranty agreements.

Question 20

workers compensation insurance

Answer 20

Insurance paid by the employer to cover work related injuries sustained by employees.