The information related to interest expense of Classic​ Music, Inc. is given​ below:

The​ times-interest-earned ratios of four companies are given​ below:

Forge Company	8.9
Fellow Company	9.2
Stacy Company	6.7
Bennett Company	13.5

Which of the above companies has the highest​ debt-paying ability?

A.

Forge Company

B.

Stacy Company

C.

Bennett Company

D.

Fellow Company

The information related to interest expense of Classic​ Music, Inc. is given​ below:

Net income	​$264,000
Income tax expense	​$107,000
Interest expense	​$66,000

Based on the above​ data, which of the following is the​ times-interest-earned ratio?​ (Round the final answer to two decimal​ places.)

A.

6.62 times

B.

4.00 times

C.

5.00 times

D.

4.08 times

The information related to interest expense of Classic Music Company is given​ below:

Net income	$255,000
Income tax expense	102,000
Interest expense	66,000

Based on the above​ data, which of the following is the

timesminus−interestminus−earned

​ratio? (Round the final answer to two decimal​ places.)

A.

6.41

times

B.

4.86

times

C.

3.86

times

D.

4.15

times

The​ times-interest-earned ratio is calculated as​ ________.

A.

net income divided by interest expense

B.

profit before tax divided by interest expense

C.

earnings before interest and tax divided by interest expense

D.

income tax expense plus interest expense divided by interest expense

A high​ interest-coverage ratio indicates a company has difficulty in paying interest expense.

True

False

A restaurant is being sued because a customer claims to have found a bug in her chili. The​ company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability. Which of the following actions should be taken by the​company's management?

A.

The possible liability should not be shown in the financial statements.

B.

The liability should be estimated and accrued as an expense.

C.

An expense must be matched to the period in which the incident occurred.

D.

The situation should be described in a note to the financial statements

A contingent liability is a​ potential, rather than an actual​ liability, because it depends on a future event.

True

False

Masterpiece Sales Company offers warranties on all their electronic goods. Warranty expense is estimated at 5​% of sales revenue. In​ 2019, the company had $611,000 in sales. In the same​ year, Masterpiece Sales replaced defective goods with goods that had a cost of $8,500.

Which of the following is the entry needed to record the replacement of the defective​ goods?

Warranty Expense	8,500
Estimated Warranty Payable		8,500

B.

Warranty Expense	30,550
Merchandise Inventory		30,550

C.

Warranty Expense	30,550
Estimated Warranty Payable		30,550

D.

Estimated Warranty Payable	8,500
Merchandise Inventory		8,500

Classic Sales Company offers warranties on all their electronic goods. Warranty expense is estimated at

4​% of sales revenue. In​ 2018, the company had $613,000 of sales. In the same​ year, it paid out $9,500

of warranty payments. Which of the following is the entry needed to record the estimated warranty​ expense?

Estimated Warranty Payable	9,500
Cash		9 comma 5009,500

B.

Warranty Expense	24 comma 52024,520
Sales Revenue		24 comma 52024,520

C.

Warranty Expense	24,520
Estimated Warranty Payable		24,520

D.

Warranty Expense	9 comma 5009,500
Estimated Warranty Payable		9 comma 5009,500

Rambler Company reported sales revenue for 2019 of $914,000. The products were sold with a nine−month warranty. Members of​ Rambler's management estimate that the cost of the warranty will be equal to 6​% of sales revenue. Which of the following will be included in the entry to record the actual amounts paid out as a result of warranty​ claims?

a credit to Estimated Warranty Payable for $54,840

B.

a debit to Estimated Warranty Payable for $ 54 comma 840$54,840

C.

a debit to Estimated Warranty Payable for the actual amount of payments

D.

a debit to Warranty Expense for the actual amount of payments

​Angie's gross pay for the week is $950. Her deduction for federal income tax is based on a rate of 24​%.

She has voluntary deductions of $245.

Her year−to−date pay is under the limit for OASDI. What is the amount of FICA—Medicare Tax deducted from her​pay? (Assume a

FICA—OASDI Tax of 6.2​% and FICA—Medicare Tax of 1.45​%.

Do not round any intermediate​ calculations, and round your final answer to the nearest​ cent.)

A.

$ 228.00$228.00

B.$13.78

C.

$ 58.90$58.90

D.

$ 300.68$300.68

​Amy's gross pay for the week is $870. Her deduction for federal income tax is based on a rate of 25​%.

She has voluntary deductions of $145.

Her year−to−date pay is under the limit for OASDI. What is her net​ pay? (Assume a

FICA—OASDI Tax of 6.2​% and FICA—Medicare Tax of 1.45​%.

Round all calculations to the nearest​ cent.)

A.$440.94

B.

$ 507.50$507.50

C.

$ 585.94$585.94

D.

$ 652.50$652.50

​Tony's gross pay for the month is $3,300. Tony's deduction for federal income tax is based on a rate of 21​%.

Tony has no voluntary deductions.​ Tony's year−to−date pay is under the limit for OASDI. What is the amount of FICA tax withheld from​ Tony's pay?​(Assume a

FICA—OASDI Tax of 6.2​% and FICA—Medicare Tax of 1.45​%.

Do not round any intermediate​ calculations, and round your final answer to the nearest​ cent.)

A.$252.45

B.

$ 473.55$473.55

C.

$ 945.45$945.45

D.

$ 693.00$693.00

​Brad's gross pay for the month is $14,400. His deduction for federal income tax is based on a rate of 24​%. He has no voluntary deductions. His year−to−date pay is under the limit for OASDI. What is​ Brad's net​ pay? (Assume a FICA—OASDI Tax of 6.26.2​% and FICA—Medicare Tax of 1.45​%.

Do not round any intermediate​ calculations, and round your final answer to the nearest​ dollar.)

A.$9,842

B.$13,298

C.$14,400

D.$10,944

Hank earns $20.50 per hour with time−and−half for hours in excess of 40 per week. He worked 45 hours at his job during the first week of March 2018. Hank pays income taxes at 15​%

and 7.65​% for OASDI and Medicare. All of his income is taxable under FICA. Determine​ Hank's net pay for the week.​ (Do not round any intermediate​ calculations, and round your final answer to the nearest​ cent.)

A.

$827.69

B.

$753.20

C.

$ 642.52$642.52

D.

$ 683.16$683.16

Hank earns $20.50 per hour with time−and−half for hours in excess of 40 per week. He worked 45 hours at his job during the first week of March 2018. Hank pays income taxes at 15​% and 7.65​%

for OASDI and Medicare. All of his income is taxable under FICA. Determine​ Hank's net pay for the week.​ (Do not round any intermediate​ calculations, and round your final answer to the nearest​ cent.)

A.$827.69

B.$753.20

C.

$642.52

D.$683.16

Which of the following is a characteristic of a current​ liability?

A.

It creates a present obligation for future payment of cash or services.

B.

It cannot be settled with services.

C.

It is an avoidable obligation.

D.

It occurs because of a future transaction or event.

Any portion of a​ long-term liability that is due within the next year is reported as a current liability.

True

False

Venus Company sold​ goods, with a selling price of $17,421​, for cash. The state sales tax rate is 11​%.

What amount is credited to the Sales Revenue​ account? (Round calculations to the nearest​ dollar.)

A.

$ 15 comma 505$15,505

B.

$ 19 comma 337$19,337

C.

$ 17 comma 421$17,421

D.

$ 1 comma 916$1,916

Sales revenue for a sporting goods store amounted to $531,000 for the current period. All sales are on account and are subject to a sales tax of 11​%.

Which of the following would be included in the journal entry to record the sales​ transaction?

A.

a credit to Accounts Receivable for $ 531 comma 000$531,000

B.

a debit to Sales Tax Payable for $ 58 comma 410$58,410

C.

a debit to Accounts Receivable for $ 589 comma 410$589,410

D.

a debit to Sales Revenue for $ 531 comma 000$531,000