Chapter 11 Current Liabilities and Payroll Accounting
Current Liabilities and Payroll Accounting
ASSIGNMENT CLASSIFICATION TABLE
Brief Exercises 1 A Problems 1A B Problems 1B
Study Objectives 1. Explain a current liability, and identify the major types of current liabilities. 2. Describe the accounting for notes payable. 3. Explain the accounting for other current liabilities. 4. Explain the financial statement presentation and analysis of current liabilities. 5. Describe the accounting and disclosure requirements for contingent liabilities. 6. Compute and record the payroll for a pay period. 7. Describe and record employer payroll taxes. 8 Discuss the objectives of internal control for payroll. Identify additional fringe benefits associated with employee compensation. …show more content…
A contingent liability is an existing situation involving uncertainty as to a possible obligation which will be resolved when one or more future events occur or fail to occur. Contingent liabilities are only recorded in the accounts if they are probable and the amount is reasonably estimable. Warranty costs are a contingent liability usually recorded in the accounts since they are both probable in incurrence and subject to estimation. If an event is only reasonably possible, then only note disclosure is required. If the possibility of a contingent liability occurring is only remote, then neither recording in the accounts nor note disclosure is required. Gross pay is the amount an employee actually earns. Net pay, the amount an employee is paid, is gross pay reduced by both mandatory and voluntary deductions, such as FICA taxes, union dues, federal income taxes, etc. Gross pay should be recorded as wages or salaries expense. Both employees and employers are required to pay FICA taxes. No. When an employer withholds federal or state income taxes from employee paychecks, the employer is merely acting as a collection agent for the taxing body. Since the employer holds employees’ funds, these withholdings are a liability for the employer until they are remitted to the government.
Questions Chapter 11 (Continued)
11. FICA stands for Federal Insurance Contribution Act; FUTA stands for Federal Unemployment Tax Act; and SUTA