A Firm Has Just Ended the Calendar Year Making a Sale

question 112

Multiple Choice

A firm has just ended the calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. One possible problem this firm may face is ________.

• A) low profitability
• B) insolvency
• C) inability to receive credit
• D) high leverage

---

Definitions:

Social Security Administration

A U.S. government agency that administers social security, a social insurance program consisting of retirement, disability, and survivors benefits.

W-3 Transmittal Form

A tax form used by employers to report the total earnings, Social Security wages, Medicare wages, and withholding for all employees for a year.

Federal Withholding Methods

Procedures the IRS sets for employers to withhold taxes from employees' paychecks, impacting the employees' net income and tax liabilities.

Backup Withholding

A form of withholding on certain income such as interest and dividends for taxpayers who fail to provide their correct taxpayer identification number (TIN) to payers.