Current and Employee Liabilities Quiz

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Questions and Answers

Which of the following is an example of a current liability in the form of payables?

Gift Cards

Sales Taxes Payable (correct)

Guarantee

Assurance-Type Warranty

What is an example of unearned revenue?

Unearned Ticket Revenue (correct)

Warranties

Income Taxes Payable

Vacation Pay

Which of the following is an example of a loss contingency?

Interest-Bearing Note Payable

Lawsuit (correct)

Employee-Related Liabilities

Vacation Pay

What is the nature of liabilities?

Probable future sacrifices of economic benefits arising from present obligations Signup and view all the answers

What are typical current liabilities?

Accounts payable, notes payable, dividends payable Signup and view all the answers

What are notes payable?

Written promises to pay a certain sum of money on a specified future date Signup and view all the answers

What is the purpose of discount on notes payable?

It is a contra account to notes payable, representing the cost of borrowing Signup and view all the answers

What are customer advances and deposits?

Returnable cash deposits received to guarantee performance or cover future obligations Signup and view all the answers

What are income taxes payable based on?

Taxable income and tax rates Signup and view all the answers

What is the FICA tax rate currently based on the employee's gross pay?

6.2% Signup and view all the answers

Who pays the Hospital Insurance tax?

Both the employee and employer Signup and view all the answers

What is the rate of the Federal Unemployment Tax Act (FUTA) paid by employers?

6% Signup and view all the answers

Who receives a tax credit under the Federal Unemployment Tax Act (FUTA)?

Employers Signup and view all the answers

What are compensated absences?

Paid absences for vacation, illness, and holidays Signup and view all the answers

What are bonus agreements in the context of employment?

Payments to certain or all employees in addition to their regular salaries or wages Signup and view all the answers

What is a gain contingency?

Possible receipts of monies from gifts, donations, asset sales, and so on Signup and view all the answers

What is the Medicare program designed to alleviate?

High cost of medical care for those over age 65 Signup and view all the answers

What is the OASDI tax commonly referred to as?

FICA tax Signup and view all the answers

What is the rate of the Hospital Insurance tax paid by both employee and employer?

1.45% Signup and view all the answers

Who is responsible for withholding income tax from employees’ pay?

Employers Signup and view all the answers

In which situations are employers paid absences for vacation, illness, and holidays considered?

Contingent liabilities Signup and view all the answers

What is the Federal Unemployment Tax Act (FUTA) paid only by?

Employers Signup and view all the answers

Which tax is paid by both employee and employer at the rate of 1.45 percent on the employee’s total compensation?

Medicare tax Signup and view all the answers

What is the rate at which Federal Unemployment Tax Act (FUTA) is paid by employers?

6 percent Signup and view all the answers

What is the responsibility of employers regarding income tax?

Withholding income tax from employees’ pay Signup and view all the answers

What are compensated absences?

Paid absences for vacation, illness, and holidays Signup and view all the answers

What do bonus agreements entail?

Additional compensation to employees Signup and view all the answers

What is a gain contingency related to?

Possible gain or loss to an enterprise Signup and view all the answers

Which of the following is an example of a current liability in the form of unearned revenues?

Unearned ticket revenue Signup and view all the answers

What is the accounting treatment for a gain contingency?

Not recorded Signup and view all the answers

Which of the following represents a gain contingency?

Assurance-type warranty Signup and view all the answers

What does the term 'current liabilities' refer to?

Probable future sacrifices of economic benefits arising from present obligations Signup and view all the answers

What is the rate of the Hospital Insurance tax paid by both employee and employer on the employee’s total compensation?

1.45 percent Signup and view all the answers

Who pays the Federal Unemployment Tax Act (FUTA)?

Employers only Signup and view all the answers

What is the purpose of the tax credit received by employers under the Federal Unemployment Tax Act (FUTA)?

To offset state unemployment tax Signup and view all the answers

What are compensated absences in the context of employment?

Paid absences for vacation, illness, and holidays Signup and view all the answers

What is the OASDI tax commonly referred to as?

FICA tax Signup and view all the answers

What is the rate at which the Federal Unemployment Tax Act (FUTA) is paid by employers?

6 percent Signup and view all the answers

Who is responsible for withholding income tax from employees’ pay?

Employers Signup and view all the answers

What do bonus agreements entail in the context of employment?

Payments to certain or all employees in addition to their regular salaries or wages Signup and view all the answers

What are typical gain contingencies related to?

Possible receipts of monies from gifts, donations, asset sales, and so on Signup and view all the answers

What is the nature of compensated absences?

Current liabilities Signup and view all the answers

Who pays the Hospital Insurance tax?

Both employee and employer Signup and view all the answers

What is the rate of the Federal Unemployment Tax Act (FUTA) tax credit to the federal government?

0.8 percent Signup and view all the answers

Which of the following is a contra account to notes payable, representing the cost of borrowing?

Discount on notes payable Signup and view all the answers

What is the time between acquiring goods and services and realizing cash from sales and subsequent collections called?

Operating cycle Signup and view all the answers

What are returnable cash deposits received to guarantee performance or cover future obligations called?

Customer advances and deposits Signup and view all the answers

What is the FICA tax rate currently based on the employee's gross pay up to a $142,800 annual limit?

6.2% Signup and view all the answers

What is the category of balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period?

Accounts payable Signup and view all the answers

What are written promises to pay a certain sum of money on a specified future date, classified as short-term or long-term?

Notes payable Signup and view all the answers

Which of the following is collected from customers and remitted to the government, with companies sometimes segregating the sales tax and sale amount or recording both in total sales revenue?

Sales taxes payable Signup and view all the answers

What are obligations expected to be settled using current assets or by creating other current liabilities called?

Current liabilities Signup and view all the answers

What are computed based on taxable income and tax rates, with differences between taxable and accounting income sometimes occurring?

Income taxes payable Signup and view all the answers

What is the rate of the FICA tax currently based on the employee's gross pay?

6.2% Signup and view all the answers

What is a returnable cash deposit received to guarantee performance or cover future obligations called?

Customer advances and deposits Signup and view all the answers

What are payroll deductions such as social security taxes (FICA), insurance premiums, employee savings, and union dues considered as?

Employee-related liabilities Signup and view all the answers

Which of the following is an example of a zero-interest-bearing note?

12.3 Zero-Interest-Bearing Note Signup and view all the answers

What is the purpose of discount on notes payable?

To adjust the carrying amount of the note to present value Signup and view all the answers

What are typical gain contingencies related to?

12.16 Assurance-Type Warranty Signup and view all the answers

What is the nature of compensated absences?

They are potential future sacrifices of economic benefits Signup and view all the answers

What is the contra account to notes payable, representing the cost of borrowing?

Discount on notes payable Signup and view all the answers

What are returnable cash deposits received to guarantee performance or cover future obligations called?

Customer advances and deposits Signup and view all the answers

What are written promises to pay a certain sum of money on a specified future date, classified as short-term or long-term?

Interest-bearing notes Signup and view all the answers

What is the nature of compensated absences?

Paid absences for vacation, illness, and holidays Signup and view all the answers

What are typical current liabilities?

Accounts payable and employee-related liabilities Signup and view all the answers

What is the FICA tax rate currently based on the employee's gross pay up to a $142,800 annual limit?

6.2% Signup and view all the answers

What is the category of balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period?

Accounts payable Signup and view all the answers

What is the accounting treatment for a gain contingency?

Recognized when probable and the amount can be reasonably estimated Signup and view all the answers

What are obligations expected to be settled using current assets or by creating other current liabilities called?

Current liabilities Signup and view all the answers

What are payroll deductions such as social security taxes (FICA), insurance premiums, employee savings, and union dues considered as?

Employee-related liabilities Signup and view all the answers

What is the purpose of the tax credit received by employers under the Federal Unemployment Tax Act (FUTA)?

To encourage hiring and provide funds for unemployment benefits Signup and view all the answers

What is the Medicare program designed to alleviate?

Healthcare costs for the elderly and disabled Signup and view all the answers

What is the rate of the Hospital Insurance tax paid by both employee and employer on the employee’s total compensation?

2.9% Signup and view all the answers

What is the rate at which Federal Unemployment Tax Act (FUTA) is paid by employers?

6% Signup and view all the answers

What is the rate at which the Federal Unemployment Tax Act (FUTA) tax credit is received by employers if subject to a state unemployment tax of 5.2% or more?

0.8% Signup and view all the answers

What are compensated absences in the context of employment?

Paid absences for vacation, illness, and holidays Signup and view all the answers

What are bonus agreements in the context of employment?

Payments to certain or all employees in addition to their regular salaries or wages Signup and view all the answers

What is the OASDI tax commonly referred to as?

FICA tax Signup and view all the answers

What is the nature of liabilities?

Obligations expected to be settled using current assets Signup and view all the answers

What is the purpose of the tax credit received by employers under the Federal Unemployment Tax Act (FUTA)?

To offset state unemployment tax Signup and view all the answers

What are customer advances and deposits?

Payments received in advance for goods or services Signup and view all the answers

What is the category of balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period?

Accounts payable Signup and view all the answers

What is the time between acquiring goods and services and realizing cash from sales and subsequent collections called?

Cash conversion cycle Signup and view all the answers

What are notes payable?

Written promises to pay a certain sum of money on a specified future date Signup and view all the answers

What is the rate of the Hospital Insurance tax paid by both employee and employer on the employee’s total compensation?

1.45% Signup and view all the answers

What is the rate of the Federal Unemployment Tax Act (FUTA) tax credit to the federal government?

0.8% Signup and view all the answers

What is the rate at which the Federal Unemployment Tax Act (FUTA) is paid by employers?

6% Signup and view all the answers

What are compensated absences?

Paid absences for vacation, illness, and holidays Signup and view all the answers

What are bonus agreements in the context of employment?

Payments to certain or all employees in addition to their regular salaries or wages Signup and view all the answers

What is the OASDI tax commonly referred to as?

FICA Signup and view all the answers

What are typical gain contingencies related to?

Possible receipts of monies from gifts, donations, asset sales, and so on Signup and view all the answers

What is the category of balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period?

Accounts payable Signup and view all the answers

What is the nature of liabilities?

Obligations to transfer economic benefits as a result of past transactions or events Signup and view all the answers

What is the responsibility of employers regarding income tax?

Withholding income tax from employees’ pay Signup and view all the answers

What are payroll deductions such as social security taxes (FICA), insurance premiums, employee savings, and union dues considered as?

Current liabilities Signup and view all the answers

What is the Medicare program designed to alleviate?

High cost of medical care for those over age 65 Signup and view all the answers

What is the rate of the Federal Unemployment Tax Act (FUTA) paid by employers?

6 percent Signup and view all the answers

What is the rate at which the Hospital Insurance tax is paid by both employee and employer on the employee’s total compensation?

1.45 percent Signup and view all the answers

Who pays the Federal Unemployment Tax Act (FUTA)?

Employers only Signup and view all the answers

What is the Medicare program designed to alleviate?

High cost of medical care for those over age 65 Signup and view all the answers

What is the OASDI tax commonly referred to as?

Social Security tax Signup and view all the answers

What is the purpose of the tax credit received by employers under the Federal Unemployment Tax Act (FUTA)?

To reduce the FUTA tax rate Signup and view all the answers

Who is responsible for withholding income tax from employees’ pay?

Employers Signup and view all the answers

What are compensated absences?

Paid absences for vacation, illness, and holidays Signup and view all the answers

What are gain contingencies related to?

Possible gain or loss to an enterprise Signup and view all the answers

What is the category of balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period?

Accounts payable Signup and view all the answers

What are bonus agreements in the context of employment?

Payments to certain or all employees in addition to their regular salaries or wages Signup and view all the answers

What are typical gain contingencies related to?

Possible gain or loss to an enterprise Signup and view all the answers

Study Notes

Payroll Deductions and Employee-Related Liabilities

In 1965, Congress passed the first federal health insurance program for the aged—popularly known as Medicare.
Medicare alleviates high cost of medical care for those over age 65.
Hospital Insurance tax, paid by both employee and employer at the rate of 1.45 percent on the employee’s total compensation.
OASDI tax (FICA) and the federal Hospital Insurance Tax is referred to as the Social Security tax.
Federal Unemployment Tax Act (FUTA) is paid only by employers at a rate of 6 percent on the first $7,000 of compensation paid to each employee during the calendar year.
Employers receive a tax credit if subject to a state unemployment tax of 5.2 percent or more and pays only 0.8 percent tax to the federal government.
Employers must refer to the unemployment tax laws in each state in which they pay wages and salaries.
Employers are responsible for withholding income tax from employees’ pay.
Employers report these amounts as liabilities until remitted.
Compensated absences are paid absences for vacation, illness, and holidays.
Bonus agreements are payments to certain or all employees in addition to their regular salaries or wages.
Contingencies involve uncertainty as to possible gain or loss to an enterprise, with typical gain contingencies including possible receipts of monies from gifts, donations, asset sales, and so on.

Current Liabilities and Their Types

Current liabilities are obligations expected to be settled using current assets or by creating other current liabilities.
The operating cycle is the time between acquiring goods and services and realizing cash from sales and subsequent collections.
Typical current liabilities include accounts payable, notes payable, dividends payable, customer advances and deposits, unearned revenues, sales taxes payable, income taxes payable, and employee-related liabilities.
Accounts payable are balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period.
Notes payable are written promises to pay a certain sum of money on a specified future date, classified as short-term or long-term.
Interest-bearing notes involve interest expense recognition and payment at maturity, while zero-interest-bearing notes involve upfront interest charges.
Discount on notes payable is a contra account to notes payable, representing the cost of borrowing.
Customer advances and deposits are returnable cash deposits received to guarantee performance or cover future obligations.
Sales taxes payable are collected from customers and remitted to the government, with companies sometimes segregating the sales tax and sale amount or recording both in total sales revenue.
Income taxes payable are computed based on taxable income and tax rates, with differences between taxable and accounting income sometimes occurring.
Employee-related liabilities include payroll deductions such as social security taxes (FICA), insurance premiums, employee savings, and union dues.
The FICA tax rate is currently 6.2% based on the employee's gross pay up to a $142,800 annual limit.

Current Liabilities and Their Types

Current liabilities are obligations expected to be settled using current assets or by creating other current liabilities.
The operating cycle is the time between acquiring goods and services and realizing cash from sales and subsequent collections.
Typical current liabilities include accounts payable, notes payable, dividends payable, customer advances and deposits, unearned revenues, sales taxes payable, income taxes payable, and employee-related liabilities.
Accounts payable are balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period.
Notes payable are written promises to pay a certain sum of money on a specified future date, classified as short-term or long-term.
Interest-bearing notes involve interest expense recognition and payment at maturity, while zero-interest-bearing notes involve upfront interest charges.
Discount on notes payable is a contra account to notes payable, representing the cost of borrowing.
Customer advances and deposits are returnable cash deposits received to guarantee performance or cover future obligations.
Sales taxes payable are collected from customers and remitted to the government, with companies sometimes segregating the sales tax and sale amount or recording both in total sales revenue.
Income taxes payable are computed based on taxable income and tax rates, with differences between taxable and accounting income sometimes occurring.
Employee-related liabilities include payroll deductions such as social security taxes (FICA), insurance premiums, employee savings, and union dues.
The FICA tax rate is currently 6.2% based on the employee's gross pay up to a $142,800 annual limit.

Payroll Deductions and Employee-Related Liabilities

In 1965, Congress passed the first federal health insurance program for the aged—popularly known as Medicare.
Medicare alleviates high cost of medical care for those over age 65.
Hospital Insurance tax, paid by both employee and employer at the rate of 1.45 percent on the employee’s total compensation.
OASDI tax (FICA) and the federal Hospital Insurance Tax is referred to as the Social Security tax.
Federal Unemployment Tax Act (FUTA) is paid only by employers at a rate of 6 percent on the first $7,000 of compensation paid to each employee during the calendar year.
Employers receive a tax credit if subject to a state unemployment tax of 5.2 percent or more and pays only 0.8 percent tax to the federal government.
Employers must refer to the unemployment tax laws in each state in which they pay wages and salaries.
Employers are responsible for withholding income tax from employees’ pay.
Employers report these amounts as liabilities until remitted.
Compensated absences are paid absences for vacation, illness, and holidays.
Bonus agreements are payments to certain or all employees in addition to their regular salaries or wages.
Contingencies involve uncertainty as to possible gain or loss to an enterprise, with typical gain contingencies including possible receipts of monies from gifts, donations, asset sales, and so on.

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Test your knowledge of current liabilities and employee-related liabilities with this quiz. Explore types of current liabilities such as accounts payable, notes payable, and customer advances, as well as employee-related liabilities like payroll deductions, FICA tax, and Medicare.

Current and Employee Liabilities Quiz

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Questions and Answers

Which of the following is an example of a current liability in the form of payables?

What is an example of unearned revenue?

Which of the following is an example of a loss contingency?

What is the nature of liabilities?

What are typical current liabilities?

What are notes payable?

What is the purpose of discount on notes payable?

What are customer advances and deposits?

What are income taxes payable based on?

What is the FICA tax rate currently based on the employee's gross pay?

Who pays the Hospital Insurance tax?

What is the rate of the Federal Unemployment Tax Act (FUTA) paid by employers?

Who receives a tax credit under the Federal Unemployment Tax Act (FUTA)?

What are compensated absences?

What are bonus agreements in the context of employment?

What is a gain contingency?

What is the Medicare program designed to alleviate?

What is the OASDI tax commonly referred to as?

What is the rate of the Hospital Insurance tax paid by both employee and employer?

Who is responsible for withholding income tax from employees’ pay?

In which situations are employers paid absences for vacation, illness, and holidays considered?

What is the Federal Unemployment Tax Act (FUTA) paid only by?

Which tax is paid by both employee and employer at the rate of 1.45 percent on the employee’s total compensation?

What is the rate at which Federal Unemployment Tax Act (FUTA) is paid by employers?

What is the responsibility of employers regarding income tax?

What are compensated absences?

What do bonus agreements entail?

What is a gain contingency related to?

Which of the following is an example of a current liability in the form of unearned revenues?

What is the accounting treatment for a gain contingency?

Which of the following represents a gain contingency?

What does the term 'current liabilities' refer to?

What is the rate of the Hospital Insurance tax paid by both employee and employer on the employee’s total compensation?

Who pays the Federal Unemployment Tax Act (FUTA)?

What is the purpose of the tax credit received by employers under the Federal Unemployment Tax Act (FUTA)?

What are compensated absences in the context of employment?

What is the OASDI tax commonly referred to as?

What is the rate at which the Federal Unemployment Tax Act (FUTA) is paid by employers?

Who is responsible for withholding income tax from employees’ pay?

What do bonus agreements entail in the context of employment?

What are typical gain contingencies related to?

What is the nature of compensated absences?

Who pays the Hospital Insurance tax?

What is the rate of the Federal Unemployment Tax Act (FUTA) tax credit to the federal government?

Which of the following is a contra account to notes payable, representing the cost of borrowing?

What is the time between acquiring goods and services and realizing cash from sales and subsequent collections called?

What are returnable cash deposits received to guarantee performance or cover future obligations called?

What is the FICA tax rate currently based on the employee's gross pay up to a $142,800 annual limit?

What is the category of balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period?

What are written promises to pay a certain sum of money on a specified future date, classified as short-term or long-term?

Which of the following is collected from customers and remitted to the government, with companies sometimes segregating the sales tax and sale amount or recording both in total sales revenue?

What are obligations expected to be settled using current assets or by creating other current liabilities called?

What are computed based on taxable income and tax rates, with differences between taxable and accounting income sometimes occurring?

What is the rate of the FICA tax currently based on the employee's gross pay?

What is a returnable cash deposit received to guarantee performance or cover future obligations called?

What are payroll deductions such as social security taxes (FICA), insurance premiums, employee savings, and union dues considered as?

Which of the following is an example of a zero-interest-bearing note?

What is the purpose of discount on notes payable?

What are typical gain contingencies related to?

What is the nature of compensated absences?

What is the contra account to notes payable, representing the cost of borrowing?

What are returnable cash deposits received to guarantee performance or cover future obligations called?

What are written promises to pay a certain sum of money on a specified future date, classified as short-term or long-term?

What is the nature of compensated absences?

What are typical current liabilities?

What is the FICA tax rate currently based on the employee's gross pay up to a $142,800 annual limit?

What is the category of balances owed for goods, supplies, or services purchased on open account, with commonly 30 to 60 days credit period?

What is the accounting treatment for a gain contingency?

What are obligations expected to be settled using current assets or by creating other current liabilities called?

What are payroll deductions such as social security taxes (FICA), insurance premiums, employee savings, and union dues considered as?

What is the purpose of the tax credit received by employers under the Federal Unemployment Tax Act (FUTA)?

What is the Medicare program designed to alleviate?

What is the rate of the Hospital Insurance tax paid by both employee and employer on the employee’s total compensation?

What is the rate at which Federal Unemployment Tax Act (FUTA) is paid by employers?

What is the rate at which the Federal Unemployment Tax Act (FUTA) tax credit is received by employers if subject to a state unemployment tax of 5.2% or more?

What are compensated absences in the context of employment?