Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely you will be able to recall information. o These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here. o In addition, most text book exhibits have been removed as they are available in your text directly.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Current Liabilities and Payroll Chapter 11

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe and illustrate current liabilities related to accounts payable, current portion of long- term debt, and notes payable 1

_________ Liabilities o When a company or a bank advances _________, it is making a loan. o The company or bank is called a _________ (or _________ ). o The individuals or companies receiving the loans are called _________ (or _________ ).

Current _________ o Long-term _________ are _________ due beyond _________ _________. o _________ _________ are debts that will be paid out of _________ _________ and are due within _________ year.

Accounts _________ o _________ payable transactions arise from purchasing _________ or _________ for use in a company’s _________ or from _________ _________ for resale.

_________ Portion of ____-_____ Debt o ____-_____ liabilities are often paid back in periodic payments, called _________. _________ that are due within the coming _________ must be classified as a _________ _________. The _________ due after the _________ year are classified as a ____-_____ _________.

Interest Expense appears on the as an “.” _______ _________ Interest Expense appears on the _________ _________ as an “_________ _________.” ____-_____ _________ Payable o When the note matures, the entry to record the payment of $1,000 plus $30 interest ($1,000 x 12% x 90/360) is as follows:

Short-Term Notes Payable o A discounted _________ has the following characteristics:  _______________________________________________ _______________________________________________.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Determine employer liabilities for payroll, including liabilities arising from employee earnings and deductions from earnings. 2

Payroll and _______ Taxes o In accounting, _______ refers to the amount paid to _______ for services they provided during the period. A company’s _______ is important for the following reasons:  ____________________________________________ ____________________________________________.

_______ for Employee Earnings o _______ usually refers to payment for managerial and administrative _______. _______ is normally expressed in terms of a _______ or a year. o _______ usually refers to payment for employee manual labor. The _______ of wages is normally stated on an _______ or _______ basis.

Earnings at regular rate (40 x $34)$1,360 Earnings at overtime rate (2 x $51) 102 Total earnings$1,462 Liability for Employee Earnings o John T. McGrath is employed by McDermott Supply Co. at the rate of $34 per hour, plus 1.5 times the normal hourly rate for hours over 40 per week. For the week ended December 27, McGrath worked 42 hours. His earnings are computed as follows:

_______ from Employee Earnings o The _______ _______ of an employee for a _______ period, including any overtime pay, are called _______ _______. o From this amount is subtracted one or more _______ to arrive at the _______ pay.

Deductions from Employee Earnings o The _______ _______ _______ _______ (FICA) tax withheld contributes to the following two federal programs.  _____________________________________________ _____________________________________________ _____________________________________________

LO 2 Deductions from Employee Earnings o John T. McGrath’s earnings for the week ending December 27 are $1,462. Total FICA tax to be withheld is calculated as follows:  Earnings subject to 6% social security tax $1,462  Social security tax ratex %  Social security tax $  Earnings subject to 1.5% Medicare tax  Medicare tax rate x 1.5% Medicare tax Total FICA tax $

___________ earnings for the week$1, ____________ : __________________$ __________________ __________________ __________________ __________________ 5.00 Total ___________ ___________ ___________ $1, Computing Employee Net Pay o John T. McGrath’s Net Pay

Liability for Employer’s Payroll Taxes o ___________ are subject to the following ___________ taxes for amounts paid their employees:  ________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe payroll accounting systems that use a payroll register, employee earnings records, and a general journal. 3

____________ ____________ for Payroll and Payroll Taxes ____________ ____________ for Payroll and Payroll Taxes o Payroll ____________ should be designed to:  ______________________________________________

___________ Register o The ___________ ___________ is a multicolumn report used for ___________ the data for each ___________ period. Exhibit 5 illustrates a payroll register for McDermott Supply Co.

______ ______ tax$ ______ ($13,902 x 6%) ___________ tax ______ ($13,902 x 1.5%) ______ ______ ($2,710 x 5.4%) ______ ($2,710 x 0.8%) Total payroll taxes$1, ___________ and Paying ___________ Taxes o Employers must ______ the employee’s ______ ______ and ______ tax contributions. In addition, the employer must pay SUTA tax of ______ % and ______ tax of ______ % (assume on $2,710). For McDermott Supply’s payroll of December 27, these payroll taxes are computed as follows:

Employee’s Earnings Record o A ______ ______ record must be kept for each employee. This record is called an ______ ______ ______. Exhibit 6 shows a portion of John T. McGrath’s employee’s earnings record.

______ Checks o At the end of each ______ period, ______ checks are prepared. Each check includes a ______ ______ showing the details of how the net pay was ______.

______ System Design o The ______ into a payroll ______ may be classified as:  _________, which are data that remain ______ from payroll to payroll. ________________ ________________  _________, which are data that change from payroll to payroll. ________________ ________________

______ ______ for Payroll Systems o Some examples of ______ ______ include the following:  ______________________________________________ ______________________________________________ ______________________________________________ (continued)

Internal Controls for Payroll Systems  ______________________________________________ ______________________________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Journalize entries for employee fringe benefits, including vacation pay and pensions. 4

Employees’ ______ ______ o Many companies provide their employees ______ ______ ______ to salary and wages earned. Such ______ ______ may include:  ______________________________________________

Vacation Pay o Assume that employees ______ one day of ______ for each ______ worked. The estimated vacation pay for the year ending December 31 is $325,000. The adjusting entry for the accrued vacation is shown below.

Pensions o A ______ is a ______ payment to ______ employees. ______ rights are ______ by employees as they work, based on the ______ ______ plan. Two types of pension plans are:  ____________________________________________

Pensions o In a ______ contribution plan, the company invests ______ on behalf of the employee during the ______ ______ years.  ____________________________________________ ____________________________________________

______ o In a ______ benefit plan, the employer is obligated to ______(______) the employee’s future ______ ______.  ____________________________________________ ____________________________________________

______ ______ Other than Pensions o Employees may earn rights to other postretirement benefits, such as:  _____________________________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe the accounting treatment for contingent liabilities and journalize entries for product warranties. 5

Contingent ______ o Some ______ may arise from past ______ if certain ______ occur in the future. These potential ______ are called ______ ______. The accounting for ______ ______ depends on the following two factors:  _________________________________________ _________________________________________

C ONTINGENT L IABILITIES

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe and illustrate the use of the quick ratio in analyzing a company’s ability to pay its current liabilities. 6

Quick Ratio o Current ________ analysis helps ________ evaluate a company’s ability_____ ________ its ________ ________. It is based on:  Working capital,___________________________________ ___________________________________________________  Current Ratio,_______________________________________ ____________________________________________________  Quick Ratio,_________________________________________ ____________________________________________________

________ ________ o The ________ ________ measures the “ instant” ________ - ________ ________ of a company and is computed as follows: o ________ ________ are ________ and ________ ________ ________ that can be ________ ________ to ________. Quick Ratio =

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Current Liabilities and Payroll The End