Question 1a The journal entry a company uses to record the estimated accrued pro

Question

Question 1a

The journal entry a company uses to record the estimated accrued product warranty liability is:

debit Product Warranty Payable; credit Product Warranty Expense

debit Product Warranty Expense; credit Product Warranty Payable

debit Product Warranty Payable; credit Cash

debit Product Warranty Expense; credit Cash

Question 1b

The cost of a product warranty should be included as an expense in the:

future period when the product is repaired or replaced

period of the sale of the product

period the cash is collected for a product sold on account

future period when the cost of repairing the product is paid

Question 1c

Most employers are required to withhold from employees for:

only federal income tax

both federal and state unemployment compensation tax

only state unemployment compensation tax

only federal unemployment compensation tax

Question 1d

An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $120; social security tax rate, 6.0%; and Medicare tax rate, 1.5%; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, .8% on the first $7,000. The employee's cumulative earnings for the year prior to this week, $24,500. What is the net amount to be paid the employee?

$574.90

$601.50

$660.00

$568.74

Question 1e

During its first year of operations, a company granted employees vacation privileges and pension rights estimated at a cost of $20,500 and $15,000. The vacations are expected to be taken in the next year and the pension rights are expected to be paid in the future 5-30 years. What is the total cost of vacation pay and pension rights to be recognized in the first year?

$23,500

$35,500

$29,500

$20,500

debit Product Warranty Payable; credit Product Warranty Expense

debit Product Warranty Expense; credit Product Warranty Payable

Explanation / Answer

1a) Correct entry is debit Product Warranty Expense; credit Product Warranty Payable 1b) The correct option is period of the sale of the product 1c) The correct option is only federal income tax 1d) Hours worked 48 Compensation    40 hours @ 15 600      8 hours @ 15*1.5 180 780 less : federal income tax witheld 120 social security tax 46.8 medicare tax 11.7 178.5 Amount payable to employee 601.5 1e) Based on matching principle, both these expenses are to be accrued in the year in which they are being earned by the employee and not when the expenses are actually availed by the employees Cost to be recognised in the first year Vacation priviliges 20500 pension rights 15000 Total 35500

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