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Question(s) / Instruction(s):

On December 1, Martin Company signed a $5,000 3-month 5% note payable, with the principal plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note? Use a 360-day year for interest calculation. Round your answer to the nearest dollar.

a)            $63

b)            $21

c)            $0

d)            $42

e)            $250

 

2.

An employee earned $48,000 during the year working for an employer. The FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%. The employees share of FICA taxes is:

Zero, since the employees pay exceeds the FICA limit.

a)            $696.00.

b)            $3,672.00.

c)            $2,976.00.

d)            $4,368.00.

 

3.

A company estimates that warranty expense will be 5% of sales. The companys sales for the current period is $183,000. The current periods entry to record the warranty expense is:

a)            Warranty Expense           9150        

Sales                     9150 

b)            Estimated Warranty Liability        9150        

Estimated Warranty Expense                    9150 

c)            Warranty Expense           9150        

Estimated Warranty Liability                       9150 

d)            No entry is recorded until the items are returned for warranty repairs.

e)            Warranty Liability             9150        

Cash                     9150 

 

 

4.

A company sells computers at a selling price of $1,400 each. Each computer has a 2 year warranty that covers replacement of defective parts. It is estimated that 8% of all computers sold will be returned under the warranty at an average cost of $100 each. During November, the company sold 20,000 computers, and 400 computers were serviced under the warranty during November at a total cost of $67,000. The balance in the Estimated Warranty Liability account at November 1 was $43,000. What is the companys warranty expense for the month of November?

a)            $200,000

b)            $140,000

c)            $67,000

d)            $43,000

e)            $160,000

 

 

5.

If Steve Company paid $270,000 in bonuses, and net income prior to the bonus was $3,400,000, what was the bonus percentage offered to the employees during 2010?

a)            5.23%

b)            5.73%

c)            7.94%

d)            8.63%

e)            6.33%

 

6.

Conner Company borrows $186,400 cash on November 1, 2010, by signing a 90-day, 7% note. What is the total amount of interest expense that Conner will recognize?

a)            $13,048

b)            $1,305

c)            $2,175

d)            $0, no interest expense is recognized

e)            $3,262

 

 

7.

On October 10, 2010, Printfast Company sells a commercial printer for $2,360 with a one year warranty that covers parts. Warranty expense is project to be 5% of sales. On February 28, 2011, the printer requires repairs. The cost of the parts for the repair is $81 and Printfast pays their technician $160 to perform the repair. What is the warranty liability at the end of 2010?

a)            $105.95

b)            $0, there is no liability at the end of 2010

c)            $59.00

d)            $118.00

e)            $241.00

 

 

8.

If a company had net income of $2,379,600, interest expense of 234,000, a tax rate of 40%, and operating income of 4,200,000, what would the times interest earned ratio be for the company?

a)            17.95

b)            7.18

c)            10.17

d)            7.78

e)            4.07

 

 

9.

On October 10, 2010, Printfast Company sells a commercial printer for $2,350 with a one year warranty that covers parts. Warranty expense is project to be 4% of sales. On February 28, 2011, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability at the end of 2011?

a)            $230.00

b)            $0, there is no expense at the end of 2011

c)            $14.00

d)            $94.00

e)            $84.80

 

10.

A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should:

a)            Recognize warranty liability when the company purchases the trampolines

b)            Recognize warranty expense at the time the warranty work is performed

c)            Recognize warranty expense and liability in the year of the sale

d)            Consider the warranty expense a remote liability since the rate is only 2%

e)            Consider the warranty expense a contingent liability


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