Question

1. Which of the following accounts (items) would not be affected when an employer records a wage expense?

A.	Social Security Taxes Payable (on behalf of employee)
B.	Federal Unemployment Taxes Payable
C.	State & Federal income-tax withholdings on behalf of the employees
D.	Medicare Taxes Payable (on behalf of employee)

2. Which of the following would be an example of an investing cash flow?

A. Cash received from the sale of stock
B. Cash paid to suppliers
C. Cash received from customers
D. Cash received for the sale of equipment

Answer 1

Recording of Wage Expense-:

A) Social Security Taxes Payable (on behalf of employee) -: Yes. This will affect Wages expenses because this is paid on behalf of employees.

B) Federal Unemployment Taxes Payable -: No. This the additional expense which the employer has to record so it will affect wages expense.

C) State & Federal income-tax withholdings on behalf of the employees -: Yes. These are the withholding expenses and will affect Wages expenses.

D) Medicare Taxes Payable (on behalf of employee) -: Yes. This will affect Wages expense since it is paid on behalf of employees.

The correct options will be A,C and D.

Examples of Investing Cash Flow-:

A) Cash received from the sale of stock -: Yes. The Company must have invested this amount in earlier year's as investment in stock. Now when the sales of stock took place, cash inflow will form part of investing activities.

B) Cash paid suppliers -: No. This is an operating activity and hence will not form part of investing cash flow.

C) Cash received from customers-: No. This is also an operating activity and not investing activity.

D) Cash received from the sale of equipment -: Yes. Purchase and Sale of equipment is an investing activity. So sale of an equipment is an investing cash inflow.

The correct options will be A and D.