F:11 Current Liabilities and Payrolls

Question 1

Contingent Liability

Answer 1

A potential liability that depends on some future event

Question 2

Current Portion of Notes Payable

Answer 2

The amount of the principal that is payable within one year of the balance sheet date

Question 3

Federal Insurance Contribution Act

Answer 3

(FICA) The federal act that created the Social Security tax that provides retirement, disability, and medical benefits.

Question 4

Gross Pay

Answer 4

The total amount of salary, wages, commissions, and any other employee compensation before taxes and other deductions.

Question 5

Income Tax Withholding

Answer 5

Income tax deducted from an employees gross pay

Question 6

Net Pay

Answer 6

Gross Pay minus all deductions. The amount of compensation that the employees actually take home.

Question 7

Payroll Register

Answer 7

A schedule that summarizes the earnings, withholdings, and net pay for each employee

Question 8

Pension Plan

Answer 8

A plan that provides benefits to retired employees

Question 9

Short-term Notes Payable

Answer 9

A written promise made by the business to pay a debt, usually involving interest, within one year or less

Question 10

Social Security Tax

Answer 10

(FICA) Federal Insurance Contributions Act (FICA) tax, which is withheld from employee’s pay and matched by the employer

Question 11

Times-Interest-Earned Ratio

Answer 11

Evaluates a business’s ability to pay interest expense
(Net income + Income tax expense + Interest expense) / Interest expense

Question 12

Unemployment Compensation Taxes

Answer 12

Payroll tax paid by employers to the government, which uses the cash to pay unemployment benefits to people who are out of work

Question 13

Warranty

Answer 13

An agreement that guarantees a company’s product against defects