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Table 9-1
Lexie Company has a monthly payroll with the following information:

A. The monthly gross salary for all its employees is $60,000. Lexie Company withholds 20% of the
employees' gross salary for federal taxes, 6% for state taxes, and 8% for Social Security (FICA) taxes.

B. Lexie Company also incurs other employee-related costs. Specifically, the company must (1) match
the Social Security taxes withheld from the employees, (2) contribute 4% of the employees' gross pay to
the employees' pension fund, and (3) pay 3% of the employees' gross pay for health insurance
premiums on behalf of the employees.

1) Referring to Table 9-1, what is the appropriate journal entry to be made by Lexie Company for part A of
their monthly payroll, which is associated with gross pay and withholdings?
A) Compensation Expense 60,000
Salaries and Wages Payable 60,000
B) Compensation Expense 60,000
Federal Income Tax Withholding Payable 12,000
State Income Tax Withholding Payable 3,600
Social Security Withholding Payable 4,800
Salaries and Wages Payable 39,600
C) Compensation Expense 60,000
Tax Expense 20,400
Federal Tax Withholding Payable 12,000
State and FICA Tax Withholding Payable 8,400
Salaries and Wages Payable 60,000
D) Compensation Expense 60,000
Federal Tax Expense 12,000

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800 D) Unearned Employee Benefits 9.000 D) $150.000 4) Pink Flamingo.000.400 Health Insurance Withholding Payable 1. If a customer pays cash for merchandise with a sales price of $300.400 Federal Tax Withholding Payable 12.000. Inc. and December 15.000 Employer Social Security Payable 4.000 E) $200.400 Health Insurance Payable 1.000 C) $110.800 Salaries and Wages Payable 60.800 Pension Liability Payable 2. that its income before taxes for the year ended December 31.800 Pension Liability Payable 2. 20X9.800 C) Prepaid Employee Benefits 9.800 Pension Liability Payable 2. for the Schwitzer Company was $7. Pink Flamingo would record the transaction using which of the following journal entries? 2 .000 State Tax Withholding Payable 3. 20X9.600 Social Security Tax Expense 4. What was the balance in the income tax payable account at December 31.800 E) Compensation Expense 9.600 Social Security Tax Withholding Payable 4. The company made quarterly tax payments on April. September.800 Pension Liability Payable 2. what is the appropriate journal entry to be made by Lexie Company for part B of their monthly payroll. State Tax Expense 3. Schwitzer Company's tax rate for the year is 45%.800 Pension Withholding Payable 2.500.000 Employer Social Security Payable 4.400 Health Insurance Payable 1. which is associated with other employee-related costs? A) Employee Benefit Expense 9. operates in a state where there is a 7% sales tax. June. 20X9.800 Salaries and Wages Payable 80.800 3) Schwitzer Company estimated at January 1. 20X9? A) $0 B) $90. would be $7.000 Employer Social Security Payable 4.000 Employer Social Security Payable 4.400 Health Insurance Payable 1.400 Health Insurance Payable 1.000 2) Referring to Table 9-1..400 E) Compensation Expense 80.700. The actual income before taxes for the year ended December 31.000 Employer Social Security Payable 4.800 B) Compensation Expense 9.

00 D) Prepaid Subscriptions 5.A) Cash 300 Sales 300 B) Cash 300 Sales Tax Payable 21 Sales 279 C) Cash 300 Sales Tax Expense 21 Sales Tax Payable 21 Sales 300 D) Cash 321 Sales Tax Payable 21 Sales 300 E) Cash 321 Sales Tax Expense 21 Sales Tax Payable 21 Sales 321 5) James publishes the Marley Gazette.00 Prepaid Subscriptions 5.00 Subscription Revenue 5. The journal entry to record the delivery of the magazines in July would be A) Cash 5.00 6) When the market interest rate is 13% and the coupon rate is 10%.00 E) Cash 5. a bond sells at A) a discount.00 Subscription Revenue 5. B) deducted from bonds payable.00 Cash 5. C) a contra account.00 Subscription Revenue 5. Assume one issue is published per month. he collected $60 in advance for 1-year subscriptions. D) liquidation value. In June.00 B) Unearned Subscription Revenue 5. C) par. D) a trading security account.00 C) Prepaid Subscriptions 5. B) a premium. 3 . E) Cannot be determined without more information 7) Which of the following is false? The discount on bonds payable is A) amortized over the life of the bond. He delivered the first issue in July.

making a $4. D) face value of the bonds times the coupon interest rate for the appropriate time period.555. 20X9. the cash payment on each interest payment date is calculated by multiplying the A) ending net liability times the effective interest rate for the appropriate time period. She agrees to make annual payments of $6.118.038. D) serves to decrease the initial amount of cash paid by bondholders. C) serves to increase the amount of cash paid to bondholders over the stated rate of interest.920. The bonds are callable at 101 5/8 and the unamortized premium is currently $167.00 Note Payable 4. 8) Apple Markets just made the interest payment on its $4.000 of outstanding bonds.47 C) Interest Expense 483.000 down payment.000. E) None of the above 10) Under the effective-interest method of amortizing bond discount.200.47 Cash 6.400.000. and borrowing the rest on a 4-year note at 8% interest. D) debit to loss on early extinguishment of debt for $52.08 Cash 6.00 Note Payable 4. 2X10.038.47. C) face value of the bonds times the effective interest rate for the appropriate time period.038.400. 9) The premium on bonds payable A) serves to reduce interest expense on the income statement.438.000 car. What is the journal entry that Amanda would make on January 1.47 4 .E) payable at the maturity date of the bond. B) ending net liability times the coupon interest rate for the appropriate time period.555. B) credit to cash for $2.500.47 Cash 6.47 B) Interest Payable 1. for the first payment on the note? A) Note Payable 6.47 E) Interest Expense 5. The entry to retire half of the bonds would include a A) debit to premium on bonds payable for $167.038.39 Cash 6.000. 2X10. E) difference between the market value and the liquidation value by the market rate of interest.038.038.08 Note Payable 5. 11) On January 1. C) credit to gain on early extinguishment of debt for $51.038.47 Cash 6.47 D) Interest Expense 1. starting January 1.39 Note Payable 438. Amanda Mackenzie purchased a $24. E) debit to loss on early extinguishments of debt for $167. B) serves to increase interest expense on the income statement.400.600.

000 Cash 105.000 Cash 105. B) can always be calculated with great precision (i.000 Bonds Payable 210.000. what is the journal entry to record the issuance of the bonds? A) Cash 3.000.000 E) Cannot be determined from the information given 13) Referring to Table 9-4. if the market rate of interest is 7% on January 1. 12) Referring to Table 9-4.000.000 Cash 3. if the market rate of interest is 7% on January 1.000 Cash 105.e. 5 . income tax rules and foreign income tax rules. 20X9. The debentures were 12-year.000 Cash 3. always has a definite amount).000 Bonds Payable 210. which paid interest semi-annually.000.000. E) occurs when the company has a NOL (net operating loss).000 Bonds Payable 3. 15) A contingent liability A) is a potential liability that depends on a future event arising out of a past transaction.000 D) Interest Expense 105. C) arise because managers wish to maximize taxable income and minimize income for financial reporting.000 debentures on January 1.000.000 Bonds Payable 3.000 C) Cash 210.Table 9-4 Boiler Industries issued 3. 20X9? A) Bonds Payable 105.000 E) Interest Expense 210.000 B) Bonds Payable 3. 7% debt. what is the journal entry to record the payment of interest on June 30. 20X9.000 B) Interest Payable 105.000 D) Bonds Receivable 3.000.000. 20X9..000 14) A deferred income tax liability A) arises because of differences between U. B) can arise because of "permanent" and "transitory" differences.000.000 C) Bonds Receivable 3. every June 30 and December 31. The face value of each debenture is $1.S. D) can arise when a firm uses special accelerated depreciation for tax purposes while using straight-line depreciation for financial reporting.

D) must be disclosed in the body of the financial statements. including the expected dollar amount. E) is not of interest to readers of financial statements. 6 .C) include liabilities for warranty repairs.