Questions and Answers
Contingent liabilities must be recorded if:
What are FUTA taxes?
Unemployment taxes
What is the current warranty expense if warranty expense is 4% of sales of $185,000?
$7,400
What do FICA taxes include?
Signup and view all the answers
Recording employee payroll deductions may involve:
Signup and view all the answers
Unearned future wages to be paid to employees should be recorded as liabilities.
Signup and view all the answers
What are obligations to be paid within one year or the company's operating cycle, whichever is longer?
Signup and view all the answers
What is a written promise to pay a specified amount on a definite future date within one year or operating cycle?
Signup and view all the answers
What is a potential obligation that depends on a future event arising from a past transaction or event?
Signup and view all the answers
What are amounts received in advance from customers for future products or services?
Signup and view all the answers
Study Notes
Contingent Liabilities
- Recorded when a future event is probable and the amount owed can be reasonably estimated.
FUTA Taxes
- Stands for Federal Unemployment Tax Act, related to unemployment taxes.
Warranty Expense
- Calculated as 4% of sales; for sales of $185,000, current warranty expense is $7,400.
- Journal entry involves debiting warranty expense and crediting estimated warranty liability for the same amount.
FICA Taxes
- Comprises Social Security and Medicare taxes, crucial for employee earnings and health services.
Employee Payroll Deductions
- Involves liabilities owed to federal and state governments for withheld amounts from employee paychecks.
Misconceptions About Liabilities
- Unearned future wages for employees should not be recorded as liabilities; only actual obligations are recorded.
Current Liabilities
- Defined as obligations due within one year or the length of the operating cycle, whichever is longer.
Short Term Note Payable
- A written promise to pay a specified amount on a definite future date, typically within one year or operating cycle.
Contingent Liability Definition
- Represents a potential obligation that relies on the occurrence of a future event stemming from a past transaction or event.
Advance Payments from Customers
- Recognized as liabilities, these amounts are received ahead of delivering products or services.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on key concepts from Accounting Chapter 9 with these flashcards. Covering topics like contingent liabilities, FUTA taxes, and warranty expenses, this quiz will help reinforce your understanding of essential accounting principles.
