Current Liabilities and Payroll Accounting

On January 1, 2020, the ledger of Accardo Company contains the following liability accounts.

Accounts Payable$52,000
Sales Taxes Payable7,700
Unearned Service Revenue16,000

During January, the following selected transactions occurred.

Jan. 5Sold merchandise for cash totaling $20,520, which includes 8% sales taxes.
12Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.)
14Paid state revenue department for sales taxes collected in December 2019 ($7,700).
20Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax. This new product is subject to a 1-year warranty.
21Borrowed $27,000 from Girard Bank on a 3-month, 8%, $27,000 note.
25Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.

Instructions

  1. Journalize the January transactions.
  2. Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product. ( Hint: Use one-third of a month for the Girard Bank note.)
  3. Prepare the current liabilities section of the balance sheet at January 31, 2020. Assume no charge in accounts payable.

The following are selected transactions of Blanco Company. Blanco prepares financial statements quarterly.

Jan. 2Purchased merchandise on account from Nunez Company, $30,000, terms 2/10, n/30. (Blanco uses the perpetual inventory system.)
Feb. 1Issued a 9%, 2-month, $30,000 note to Nunez in payment of account.
Mar. 31Accrued interest for 2 months on Nunez note.
Apr. 1Paid face value and interest on Nunez note.
July 1Purchased equipment from Marson Equipment paying $11,000 in cash and signing a 10%, 3-month, $60,000 note.
Sept. 30Accrued interest for 3 months on Marson note.
Oct. 1Paid face value and interest on Marson note.
Dec. 1Borrowed $24,000 from the Paola Bank by issuing a 3-month, 8% note with a face value of $24,000.
Dec. 31Recognized interest expense for 1 month on Paola Bank note

Instructions

  1. Prepare journal entries for the listed transactions and events.
  2. Post to the accounts Notes Payable, Interest Payable, and Interest Expense.
  3. Show the balance sheet presentation of notes and interest payable at December 31.
  4. What is total interest expense for the year?

Mann Hardware has four employees who are paid on an hourly basis plus time-and-a-half for all hours worked in excess of 40 a week. Payrolll data for the week ended March 15, 2019, are presented below.

Abel and Hager are married. They claim 0 and 4 withholding allowances, respectively. The following tax rates are applicable: FICA 7.65%, state income taxes 3%, state unemployment taxes 5.4%, and federal unemployment 0.8%.

Instructions

  1. Prepare a payroll register for the weekly payroll. (Use the wage-bracket withholding table in the text for federal income tax withholdings.).
  2. Journalize the payroll on March 15, 2019, and the accrual of employer payroll taxes.
  3. Journalize the payment of the payroll on March 16, 2019.
  4. Journalize the deposit in a Federal Reserve bank on March 31, 2019, of the FICA and federal income taxes payable to the government.

The following payroll liability accounts are included in the ledger of Harmon Company on January 1, 2019

FICA Taxes Payable$760.00
Federal Income Taxes Payable1,204.60
State income Taxes Payable108.95
Federal Unemployment Taxes Payable288.95
State Unemployment Taxes Payable1,954.40
Union Dues Payable870.00
U.S. Savings Bonds Payable360.00

In January, the following transactions occurred.

Jan. 10Sent check for $870.00 to union treasurer for union dues.
12Remitted check for $1,964.60 to he Federal Reserve bank for FICA taxes and federal income taxes withheld.
15Purchased U.S. Savings Bonds for employees by writing check for $360.00.
17Paid state income taxes withheld from employees.
20Paid federal and state unemployment taxes.
31Completed monthly payroll register, which shows salaries and wages $58,000, FICA taxes withheld $4,437, federal income taxes payable $2,158, state income taxes payable $454, union dues payable $400, United Fund contributions payable $1,888, and net pay $48,663.
31Prepared payroll checks for the net pay and distributed checks to employees.

At January 31, the company also makes the following accrued adjustments pertaining to employee compensation.

  1. Employer payroll taxes: FICA taxes 7.65%, federal unemployment taxes 0.8%, and state unemployment taxes 5.4%.
  2. Vacation pay: 6% of gross earnings.

Instructions

  1. Journalize the January transactions.
  2. Journalize the adjustments pertaining to employee compensation at January 31.

For the year ended December 31, 2019, Denkinger Electrical Repair Company reports the following summary payroll data.

Denkinger Company's payroll taxes are Social Security tax 6.2%, Medicare tax 1.45%, state unemployment 2.5% (due to a stable employment record), and 0.8% federal unemployment. Gross earnings subject to Social Security taxes of 6.2% total $490,000, and gross earnings subject to unemployment taxes total $135,000.

Instructions

  1. Prepare a summary journal entry at December 31 for the full year's payroll.
  2. Journalize the adjusting entry at December 31 to record the employer's payroll taxes.
  3. The W-2 Wage and Tax Statement requires the following dollar data.

C.S. Lewis Company had the following transactions involving notes payable.

July 1, 2020Borrows $50,000 from First National Bank by signing a 9-month, 8% note.
Nov. 1, 2020Borrows $60,000 from Lyon County Sate Bank by signing a 3-month, 6% note.
Dec. 31, 2020Prepare adjusting entries.
Feb. 1, 2021Pays principal and interest to Lyon County State Bank.
Apr. 1, 2021Pays principal and interest to First National Bank.

Instructions

Prepare journal entries for each of the transactions

On June 1, Merando Company borrows $90,000 from First Bank on a 6-month, $90,000, 8% note

Instructions

  1. Prepare the entry on June 1
  2. Prepare the adjusting entry on June 30.
  3. Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30.
  4. What was the total financing cost (interest expense)?

In performing accounting services for small businesses, you encounter the following situations pertaining to cash sales.

  1. Poole Company enters sales and sales taxes separately on its cash register. On April 10, the register totals are sales $30,000 and sales taxes $1,500.
  2. Waterman Company does not segregate sales and sales taxes. Its register total for April 15 is $25,680, which includes a 7% sales tax

Instructions

Prepare the entry to record the sales transactions and related taxes for each client.

Moreno Company publishes a monthly sports magazine, Fishing Preview, Subscriptions to the magazine cost $20 per year. During November 2019, Moreno sells 15,000 subscriptions beginning with the December issue, Moreno prepares financial statements quarterly and recognizes subscription revenue at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue.

Instructions

  1. Prepare the entry in November for teh receipt of the subscriptions.
  2. Prepare the adjusting entry at December 31, 2019, to record sales revenue recognized in December 2019.
  3. Prepare the adjusting entry at March 31, 2020, to record sales revenue recognized in in the first quarter of 2020.

Betancourt Company sells automaticcan openers under a 75-day warranty for defective merchandise, Based on past experience, Betancourt estimates that 3% of the units sold will become defective during the warranty period, Management estimates that the average cost of replacing or repairing a defective unit is $15. The units sold and units defective that occurred during the last 2 months of 2019 are as follows.


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