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Reference · Chapter 9

Every term, formula, and entry

0 of 31 terms in your words

Terms

C1 Liabilities
Obligations to transfer assets or provide services to another party in the future.
C1 Current liabilities
Obligations due within one year or the operating cycle, whichever is longer.
C1 Long-term liabilities
Obligations not due within one year or the operating cycle.
C1 Known liabilities
Obligations set by agreement or law, with both the amount and the payee certain.
C1 Estimated liabilities
Obligations known to exist but whose exact amount cannot be known with certainty until later.
C1 Contingent liability
A potential obligation that depends on a future event arising from a past transaction.
C1 Accounts payable
Amounts owed to suppliers for products or services bought on credit.
C2 Sales taxes payable
Sales tax collected from customers on behalf of the government, owed until remitted.
C2 Unearned revenues
Cash received before the related products or services are delivered; a liability until earned.
P2 Short-term note payable
A written promise to pay a specified amount, due within one year.
C1 Current portion of long-term debt
The part of a long-term liability due to be paid within the next year, reclassified as current.
P1 Payroll
The amounts paid to employees for their work, along with the related deductions and employer costs.
P1 Gross pay
Total compensation earned by an employee before any deductions.
P1 Net pay
Gross pay minus all deductions; the amount an employee actually receives.
P1 Payroll deductions (withholdings)
Amounts subtracted from an employee's gross pay for taxes, insurance, and other obligations.
P1 Federal Insurance Contributions Act (FICA) taxes
Social Security and Medicare taxes, withheld from employees and matched by employers.
P1 Social Security taxes
A FICA tax funding retirement, disability, and survivor benefits.
P1 Medicare taxes
A FICA tax funding hospital insurance for the elderly and disabled.
P1 Federal income taxes withheld
An employee's estimated income tax liability, withheld from each paycheck by the employer.
P1 Federal Unemployment Tax Act (FUTA)
A federal unemployment tax paid entirely by the employer, never withheld from employees.
P1 State Unemployment Tax Act (SUTA)
A state unemployment tax paid entirely by the employer, never withheld from employees.
P1 Form W-4
An employee's certificate specifying withholding allowances for federal income tax.
P1 Form W-2
An annual statement of an employee's wages and taxes withheld during the year.
P1 Form 941
An employer's quarterly federal tax return reporting withheld income tax and FICA taxes. [book?] — check this edition's exact form references.
P1 Payroll register
A record summarizing the payroll for every employee for a pay period. [book?] — check this edition’s exact terminology.
P1 Employee earnings report
A cumulative record of each employee's pay and withholdings across the year. [book?] — check this edition's exact terminology.
P1 Employee benefits
Additional compensation, beyond wages, provided to employees — insurance, retirement, and similar programs.
P1 Vacation benefits
Paid time off employees earn as they work, estimated and accrued as a liability.
P1 Bonus plans
Additional employee compensation tied to performance, often estimated and accrued as a liability.
A1 Warranty
A seller's promise to repair or replace a product that proves defective within a specified period.
A3 Times interest earned
Income before interest expense and income taxes, divided by interest expense; a measure of how easily interest is covered.

Formulas

P1Net pay = Gross pay − Withholdings$10,000 − $620 − $145 − $1,500 − $200 = $7,535
P1Employer payroll taxes = Employer FICA + FUTA + SUTA$620 + $145 + $60 + $540 = $1,365
P1Total cost of payroll = Gross pay + Employer payroll taxes$10,000 + $1,365 = $11,365
P2Interest = Principal × Rate × Time$12,000 × 10% × 90/360 = $300
A3Times interest earned = Income before interest expense and income taxes ÷ Interest expense$150,000 ÷ $30,000 = 5.0 times

Every entry the chapter teaches

(1) Cash sale of $1,000 with 5% sales tax
Cash1,050
Sales1,000
Sales taxes payable50
(2) Sell 24 games of season tickets for $120,000 in advance
Cash120,000
Unearned ticket revenue120,000
(3) Three of the 24 games have been played
Unearned ticket revenue15,000
Ticket revenue15,000
(4) Dec 16: borrow $12,000 on a 90-day, 10% note
Cash12,000
Notes payable12,000
(5) Dec 31: accrue 15 days of interest
Interest expense50
Interest payable50
(6) Mar 16: pay the note and interest
Notes payable12,000
Interest payable50
Interest expense250
Cash12,300
(7) Record the $10,000 payroll, employee side
Salaries expense10,000
FICA—Social Security taxes payable620
FICA—Medicare taxes payable145
Employee federal income taxes payable1,500
Employee medical insurance payable200
Salaries payable7,535
(8) Record the employer's payroll taxes
Payroll taxes expense1,365
FICA—Social Security taxes payable620
FICA—Medicare taxes payable145
FUTA payable60
SUTA payable540
(9) Accrue warranty cost at 4% of $200,000 sales
Warranty expense8,000
Estimated warranty liability8,000
(10) Repair a product under warranty with $1,500 of parts
Estimated warranty liability1,500
Repair parts inventory1,500