Question

1. During the month, ABC Company delivered ½ of the work to earn ½ of the initial $2,000 recorded previously as unearned revenue. The adjusting entry to show some work had been completed and some revenue had been now earned would be:

Date	Accounts and Explanation	Debit	Credit

2. During the month, ABC Company purchased merchandise inventory with a 10%, 90-day note payable, for $1,000. The company uses the perpetual inventory system. The entry to record the note and purchase of the inventory is:

Date	Accounts and Explanation	Debit	Credit

3. Based on the information in letter d above, assume ABC Company pays the note when due 90 days later. The journal entry is (take interest expense to the nearest dollar):

Date	Accounts and Explanation	Debit	Credit

50. How do companies account for and record payroll?

1. List some of the common withholdings deducted from the employee’s pay:

1.      
   

3. 
   
   iv)        
   

2. Journalize the employer payroll taxes assuming that the FICA-OASDI Taxes is $400, FICA- Medicare Taxes is $100, Federal Unemployment Taxes is $10, and State Unemployment Taxes is $25.

Date	Accounts and Explanation	Debit	Credit

50. How are current liabilities that must be estimated accounted for?

1. To journalize the estimated cost of vacation benefits, the company will debit _____________ and credit __________________.
2. To journalize the amount of estimated cost of future warranty repairs, the company will debit _____________________ and credit ________________________.
   
   
   

50. How are contingent liabilities accounting for?

1. In your own word, what is a contingent liability?   
   
2. What is a Remote Contingent Liability and is it recorded?
   
   
3. What is a Reasonably Possible Contingent Liability and is it recorded?
   
   
4. What is a Probable Contingent Liability?
   
   
   

50. How do we use the times-interest-earned ratio to evaluate business performance?

1. What is the formula for times-interest-earned?

2. If net income is $1,000, income tax expense is $100, and interest expense is $300, what is times-interest-earned (take to two decimal places)?
   

Answer 1

Date	Accounts & Explnation	Debit	Credit
a.	Cash	1000
	To Unearned Revenue A/c		1000
	(Being First 1/2 of revenue Earned)
	Unearned Revenue A/c	1000
	To Revenue A/c		1000
	(Being Later half of revenue recognised but not earned)
b.	Purchases A/c	1000
	To Accounts Payable		1000
	(Being Merchandise purchased on 90 days credit on 10% Interest on payment
	Interest A/c	25
	To Interest payable		25
	1000 x 10% = 100 x 90/360
c.	Accounts Payable A/c	1000
	Interest Payable A/c	25
	To Cash		1025
AX.	Accounting for Payroll
	Employee Expense A/c	xx
	To Employer A/c		xx
	(Being all expenses of employee debited to employee expenses a/c and nett payable to employer)
	Employer A/c	xx
	To Cash/Bank		xx
	(being employer settled for salary)
a.	List of Common withholding of employees
	Income tax
	Medicare
	Insurance
	Retirement
	State Tax
	Gross Salary
	To Employee Expense
	Employee Expense	535
	To FICA		400
	To Medicare		100
	To Fed Unemployemt		10
	To State Unemployment		25
AX	Estimated Current Liabilities Accounting
	Profit & Loss A/c	Debit
	To Provision of Current Liabilities		Credit
a.	Profit & Loss A/c	Debit
	To Provision for Vacation Benefits		Credit
b.	Profit & loss A/c	Debit
	To Provision for Future waranty & repairs		Credit
AX	Contingent Liabilities Accounting
	if resonably Certain
	Profit & loss A/c
	To Contingent Liability
	Contingent Liability means a liability which is dependent on happening of certain event
	which can be favourable or non favourable.
	Remote Contingent Liability is not recorded in books of account but
	simply indicated in notes to financial statements with estimation or judgement
	Reasonably Possible Contingent liability is a liability which is reasonably certain to occur
	based on managements judgement/decision considering past events or estimations
	It is recorded on the basis of probability in the financial statements
	Probable Contingent Liability is Liability based on probability which is estimated
	by mangement based on past events or decision.