Question

1. Sports utensils inc. makes water bottles for backpackers. Each water bottle includes a one-year warranty against manufacturing defects. The Company estimates that 3% of the water bottles sold will be returned as defective. When in the water bottles or return the company replaces the water bottle. Each water bottle cost $4 to produce. In 2016, the company sold 250,000 water bottles. The warranty expense that the company should record for 2016:

A) $750

B) $250,000

C) $3,000

D) None of the above

2. Which if the following formula compares the average collection period?

A) 365 / Average accounts receivable

B) Account receivable / Average daily sales

C) Sales / Average accounts receivable

D) 365 / Accounts Receivable turnover

3. Assume that cable earns $36.00 per hour that we worked 40 hours this week. The social security rate is 6.2% and the Medicare rate is 1.45% and Gus entire earnings are subject to both FICA taxes. Also, $225 in income taxes and $30 of union dues are withheld.

Vance’s take-home pay should be:

A) $1,329.60

B) $1,074.84

C) $1,185.00

D) $1,440.00

4. A firm has only the following monthly payroll for April 2016:

Total salaries:

$180,000

Salaries subject to FICA taxes (6.2% + 1.45%)

$180,000

Salaries subject to FUTA tax (0.8%) and state unemployment taxes (5.4%)

32,000

Income taxes withheld

$19,200

The total explorers payroll tax expense for his period is:

A) $13,158

B) $28,300

C) $15,754

D) $34,954

Answer 1

answer: 1

option C) $3,000

Using a percentage of sales to estimate warranty expense, it will be $3000 ((250000*3%*4)/100)

Answer: 2

Option D) 365 / Accounts Receivable turnover

average collection period = 365 / Accounts Receivable Turnover. It states the number of days taken by the business to collect the amount of its credit sales. It is based on accounts receivable turnover which is calculated dividing sales by average accounts receivable.

Answer: 3

Option B) $1,074.84

Gross pay = 36*40 = 1440

Net pay = gross pay- social security tax - medicare tax - income taxes - union dues = 1440-(1440*6.2%)-(1440*1.45%)-225-30 = 1074.84

answer: 4

option C) $15,754

payroll tax expense include social security, Medicare and unemployment taxes

payroll tax expense = social security tax + medicare tax + FUTA + SUTA = (180000*6.20%)+(180000*1.45%)+(32000*0.8%)+(32000*5.4%) = 15754