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LO 12.1Why is Accounts Payable classified as a current liability?


LO 12.1On which financial statement are current liabilities reported?


LO 12.1What is the difference between a noncurrent liability and a current liability?


LO 12.1How is the sales tax rate usually determined? Does the company get to keep the sales tax as earned revenue?


LO 12.2If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?


LO 12.2What amount is payable to a state tax board if the original sales price is $3,000, and the tax rate is 3.5%?


LO 12.2What specific accounts are recognized when a business purchases equipment on credit?


LO 12.3What is a contingent liability?


LO 12.3What are the two FASB required conditions for a contingent liability to be recognized?


LO 12.3If a bankruptcy is deemed likely to occur and is reasonably estimated, what would be the recognition and disclosure requirements for the company?


LO 12.3Name the four contingent liability treatments.


LO 12.3A company’s sales for January are $250,000. If the company projects warranty obligations to be 5% of sales, what is the warranty liability amount for January?


LO 12.4What is a key difference between a short-term note payable and a current portion of a noncurrent note payable?


LO 12.4What business circumstance could bring about a short-term note payable created from a purchase?


LO 12.4What business circumstance could produce a short-term notes payable created from a loan?


LO 12.4Jain Enterprises honors a short-term note payable. Principal on the note is $425,000, with an annual interest rate of 3.5%, due in 6 months. What journal entry is created when Jain honors the note?


LO 12.5What are examples of involuntary deductions employers are required to collect for employee and employer payroll liabilities?


LO 12.5What are the 2019 tax rates for FICA Social Security and FICA Medicare? What are the 2019 maximum taxable earnings amounts for each of these taxes?


LO 12.5What are FUTA and SUTA taxes? Is there any possible reduction in the FUTA tax rate? If so, what is the reduction, and how is this determined?


LO 12.5Use Figure 12.15 as a reference to answer the following questions.

  1. If an employee makes $1,400 per month and files as single with no withholding allowances, what would be his monthly income tax withholding?
  2. What would it be if an employee makes $2,500 per month and files as single with two withholding allowances?
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