Question

The information related to interest expense of classic music, inc. is given below:

Net Income                                                     $265,000

Income tax expense                                        105,000

Interest expense                                             66,000

Based on the above data, which of the following is the times- interest- earned ratio? (round the final answer to two decimal places)

A)6.61 times

B)4.15 times

C)5.02 times

D)4.02 times

A contingency was evaluated at year- end and considered to have a reasonable possibility of becoming an actual liability. Reported in the notes to the financial statements, what is the effect on the financial reporting of the company?

A)The net income of the company would be understated

B)The liabilities on the balance sheet would be understated

C)There would be no effect

D)The information about the transaction would be inadequately disclosed in the notes

Which of the following statements regarding accounts payable is incorrect?

A)Because accounts payable are typically due in 30 days, they are current liabilities

B)Accounts payable represent debts owed to creditors

C)Accounts payable occur because the business receives the goods or services before payment has been made.

D)The accounts payable account is decreased with a credit

Venus corp sold goods, with a selling price of $9,021, for cash. The state tax rate is 9%. What amount is credited to the sales revenue account? (round calculations to the nearest dollar.)

A) $9,021

B)$812

C)$8,209

D)$9,833

Extra compensation items that are not paid directly to an employee are called______..

A) benefits

B)wages

C)bonuses

D)commissions

Stones gross pay for the week is $1,100. Stones year- to- date pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is 6% and that Stone’s year- to date pay has not yet exceeded the $7,000 cap. What is the amount of state and federal unemployment tax that his employer must record as payroll tax expense and pay to the federal and state governments ?

A)$155.27

B)$66.00

C)$147.95

D)$81.95

Answer 1

Times interest earned ratio   =    Income before interest and taxes / Interest expense
			265000+105000+66000 / 66000
			436000
			6.61 times If the contingent loss is remote, meaning it has a less than 50% chance of occurring, the liability should not be reflected on the balance sheet. Any contingent liabilities that are questionable before their value can be determined should be disclosed in the footnotes to the financial statements. D)The information about the transaction would be inadequately disclosed in the notes . Amount credited to sales revenue account is $ 9021*109/100 = $9833. Tax amount to be collected from customer on sales, so it will be included in sale price. Benefits are extra compensation, items that are not paid directly to the employee Gross pay is the total amount of salary, wages, commission, and bonus earned by the employee during a pay period. the amount of state and federal unemployment tax that his employer must record as payroll tax expense and pay to the federal and state governments is According to the problem, federal unemployment is 6% of the first $7,000 of wages paid to each employee. = $1100*6% = $66.00