105. Vacation pay is considered a contingent liability to the extent that the obligation exists due to work already performed.
106. Contingent liabilities are only recognized if they arise from past events.
107. If a company is located in an area where floods or earthquakes are deemed to be possible, the company should record a contingent liability.
108. If a company offers a warranty on the products it sells, the company records the warranty expense at the time that service is provided to customers under the terms of the warranty.
109. Recording an adjusting entry for product warranties is a claims exchange transaction.
110. At the end of 2011, Stevens Company recorded an adjusting entry for its obligation under product warranties. During 2012, it provided services to its customers under the terms of the warranties. The 2012 service should be recorded as asset use transactions.
111. FICA taxes are both recorded as salary expense and as payroll tax expense.
112. Employers must withhold unemployment taxes from employee salaries.
113. The Wage and Tax Statement, Form W-2, is sent to the employee annually to report earnings and withheld taxes.
114. Independent contractors must be individuals who are employed by another company.