mgmt-026-chapter-11-hw

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1.
award:
10 out of
10.00
.............. points ·
On September 11, 20 12, Home Store sells a mower for $500 with a one-year warran~/ that covers
parts. Warran~/ expense is estimated at 8% of sales. On July 24, 20 13, the mower is brought in for
repairs covered under the warran~/ requiring $35 in materials taken from the Repair Parts Inventory.
Prepare the September 11, 20 12, entry to record the mower sale, and the July 24, 20 13, entry to record
the warran~/ repairs. (Assume all sales are cash sales and Home store uses a periodic inventory
system and estimated warranty expense is re corded at the time of the sale.}
General Journal
Date
Sep 11 , 20 14
Cash
Sales
Sep 11 , 20 14
Warranty expense
Estimated warranty liability
Jul24,20 13
Estimated warranty liability
Repair parts inventory
Debit
Credit
./
./
500./
./
./
40./
./
./
35./
500./
40./
35./
g.vard:
2.
10 out of
10.00
·· · · · · · points · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · .. ·
BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $11 0, 100 paid to its
employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.8% and
SUTA taxes are 2.9% of the first $7,000 paid to its employee.
a.
Gross Pay through August
$ 6,400
Gross Pay for September
$ 800
Prepare the employer's September 30 journal entry to record salary expense and its related payroll
liabilities for this employee. The employee's federal income taxes withheld by the employer are $80 for
this pay period. (Round your answers to 2 decimal p laces.)
Taxes to be withheld from gross pay (Employee-paid taxes)
September earnings
subiectto tax
Tax Rate
Tax Amount
_J$
FICA-Social Security
1
800 oo.;
6 20%.i
49.60
FICA-Medicare
800 .oo.;
1.45%.il
11.60
Federal income tax
Total taxes withheld
80.00
141.20
1$
·~~~~~~~~---'
Date
Sep. 30
-
General Journal
Salaries expense
FICA- Social sec. taxes payable
FICA- Medicare taxes payable
Employee fed. inc. taxes payable
Accrued payroll payable
Debit
""
""
""
""
Credit
800.00.;j
49.60.i
11 60.i
80.00.i
658.80.i
-
3.
eward:
10 out of
10.00
..............points ...................................................... ..
Ticketsales, Inc., receives $5,000,000 cash in advance ticket sales for a four-Oate tour of Bon Jovi.
Record the advance ticket sales on October 3 1. Record the revenue earned for the first concert date of
November 5, assuming it represents one-fou rth of the advance ticket sales. (Assume the company has
the policy of recording cash received in advance in the balance sheet account.)
General Journal
Date
Oct.31
Cash
Unearned ticket revenue
T
Nov.5
Debit
./
./
I
Unearned ticket revenue
Earned ticket revenue
./
./
Credit
5,000,000./
5,000,000./
I
1,250,000./
1,250,000./
-
tfii iitiiiioiliili'i iii!iiriniioiiii iiiipiiii s io oi ii iiuiis°&oiis iJisiJiarii ifiiiiiOwr
Keesha Co. borrows $200,000 cash on November 1, 20 13, by signing a 90-day, 9% note with a face
value of $200,000.
4.
sward:
10 out of
10.00
·····························poinrs ·············································································································
1. On what date does this note mature?
0 January 25, 20 14.
<::>January 26, 20 14.
0 January 27, 20 14.
0 January 28, 20 14.
@January 30, 20 14.
5.
award:
20 out of
20.00 .....................................................................................
.....................points
2. & 3. What is the amount of interest expense in 20 13 and 20 14 from this note? (Use 360 days a
year. Do not round intermediate cal'culations.)
Total through
maturity
Principal
$
Rate (%)
Time
Total interest
$
200,000./ $
Interest
Interest
Expense
Expense
2013
2014
200,000./ $
200,000./
9%./
9%./
9%./
90/360./
60/360./
30/360./
4,500./ $
3,000./ $
1,500./
6.
10 out of
10.00
·····························poinr!r ···························································································································
4(a)Prepare journal entry to record issuance of the note on November 1, 2013.
Date
General Journal
11
Debit
Credit
200,000.,i
1--N_ov. 1 _ Jcash
Notes payable
200,000.,i
--~~
4(b)Prepare journal entry to record accrual of interest at the end of 20 13.
General Journal
Date
Dec. 31
Interest expense
Debit
.I
Credit
3,000.,i
Interest payable
3,000.,i
4(c) Prepare journal entry to record payment of tl1 e note at maturity, assuming no reversing entries were
made on January 1.
General Journal
Date
Jan. 30
Notes payable
Interest payable
Interest expense
Cash
Debit
.I
.I
.I
.I
Credit
200,000.,i
3,000.,i
1,500.,i
204,500./
7.
award:
10 out of
10.00
·····························points ·
The following legal claims exist for Huprey Co. Identify the accounting treatment for each claim as
either (a) a l iab i l i ~/ that is recorded or (b) an i tem described in notes to its financial statements.
1. Huprey (d efendant) estimates that a pending lawsuit could result in damages of $1,250,000; it is
reasonably possible t11at the plaintiff will win the case.
0 A liability that is recorded.
@An item described in notes to its financia l statements.
2. Huprey faces a probable loss on a pending lawsuit; the amount is not reasonably estimable.
® An item described in notes to its financia l statements.
0 A liability that is recorded.
3. Huprey estimates damages in a case at $.3,500,000 with a high pro bability of losing the case.
® A liability that is recorded.
0 An item d escribed in notes to its financi.al statements.
8.
award:
10 out of
10.00
· ............ ·poii'its " .........................................................................................................................................................
BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $11 0, 100 paid to its
employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.8% and
SUTA taxes are 2.9% of the first $7,000 paid to its employee.
Gross Pay through August
a.
$
b.
c.
6,400
18,200
103,800
Gross Pay for
September
$ 800
2,100
8,000
Compute BMX's amounts for each of these four taxes as applied to the employee's gross earnings for
September under each of three separate situations (a), (b), and (c). (Round your answers to 2 decimal
places.)
)
September earnings
subject to tax
ax
FICA-Social Security
$
FICA-Medicare
~
Tax Rate
800.00.,I
620%,,l $
49.60
800.00.,I
1.45%.,I
11.60
600.00.,I
0.80 %.,I
4.80
600.00.,I
2.90%.,I
17.40
+--
)
September earnings
subject to tax
ifax
FICA-Social Security
....
$
FICA-Medicare
2,1 00.00.,I
~
..
Tax Rate
6.20%
....
2,1 00.00.,I
1.45%
0.00.,I
A
.J
Tax Amount
Tax Amount
$
130.20
-
30.45
-
0.00.,I
c)
September earnings
subject to tax
ifax
-
FICA-Social Security
FICA-Medicare
$
6,300.00.,I
8,000.00.,I
~UTA
0.00.,I
SUTA
0.00.,I
Tax Rate
-
I
I
I
I
I
Tax Amount
6.20%
1.45%
$
390.60
116.00
I
9.
award:
10 out of
10.00
·····························poiiits ·
Noura Company offers an annual bonus to employees if the company meets certain net income goals.
Prepare the journal entry to record a $15,000 bonus owed to its workers (to be shared equally) at
calendar year-end.
General J ournal
Date
Dec. 31
Employee bonus expense
Bonus payable
-~~~
Debit
Credit
15,000./
15,000./
-~--
10.
award:
10 out of
10.00
·· ..............poifits ....
On Januar/ 15, the end of the first biweekly pay period of the year, North Company's payroll register
showed that its employees earned $35.00 O of sales salaries. Withholdings from the employees'
salaries include FICA Social S e curi~/ taxes at the rate of 6.2%, FICA Medicare taxes at the rate of
1.45%, $6,500 of federal income taxes, $772.50 of medical insurance deductions, and $120 of union
dues. No employee earned more than $7,000 in this first period.
Prepare the journal entry to record North Company's January 15 (employee) payroll expenses and
liabilities. (Round your answers to 2 decima I places.)
Date
Jan. 15
General Journal
Sales salaries expense
FICA- Medicare taxes payable
FICA- Social sec. taxes payable
Employee medical insurance payable
Employee union dues payable
Employee fed. inc. taxes payable
Salaries payable
Debit
./
./
./
./
./
./
./
Credit
35,000.00./
507.50./
2, 170.00./
772.50./
120.00./
6,500.00./
24,930.00./
11 .
award:
10 out of
10.00
..............poir'its ...............................................................
Nishi Corporation prepares financial statements for each month-end. As part of its accounting pro cess,
estimated income taxes are accrued each month for 30% of the current month's net income. The
income taxes are paid in the first month of each quarter for the amount accrued for the prior quarter.
The following information is available for the fourth quarter of year 20 13. When tax computations are
completed on January 20, 2014, Nishi determine s that the quarter's Income Taxes Payable account
balance should be $28,300 on December 31, 20 13 (its unadjusted balance is $24,690).
October 20 13 net income
November 20 13 net income
December 20 13 net income
$28,600
19, 100
34,600
1. Determine the amount of the accounting adjustment (dated as of December 31, 20 13) to produce
the proper ending balance in the Income Taxes Payable account.
uni of accounting adjustment
$
.....~~~~__;;.....;~~~~
3,610./
2(a)Prepare journal entry to record the December 31, 20 13, adjustment to the Income Taxes Payable
account.
General Journal
Date
Dec. 31
Income taxes expense
Income taxes payable
Debit
.I
.I
Credit
3,6 10./
3,610./
2(b)Prepare journal entr1 to record the January 20, 20 14, payment of the fourth-quarter taxes.
General Journal
Date
Jan. 20
-
1Income
Cash
taxes payable
Debit
.I
.I
----
28,300./l
Credit
28,300./
12.
award:
10 out of
10.00
On November 7, 20 13, Mura Company borrows $160,000 cash by signing a 90-<iay, 8% note payable
with a face value of $160,000. (Do not round your intermediate calculations.)
1. Compute the accrued interest payable on December 31, 20 13.
Principal
x Rate
Total through maturity
$
160,000vl
8%vl 901360
Year end interest accrual
Interest recognized February
$
160,000vl
8%vl 54/360
$
160,000vl
8%vl 36/360
LL
= Interest
x Time
vi $
vi $
vi $
3,200vl
1,920vl
1,280vl
2. Prepare the journal entry to record the accrue d interest expense at December 31, 20 13.
Date
.....
,...~~~~~~
Dec 31, 20 13
~~~~
Debit
General Journal
Interest expense
Interest payable
vi
vi
Credit
1,920J
1,920vl
-~--
3. Prepare the journal entr/ to record paymen t of the note at maturity. (Assume no reversing entries
were made.)
Date
Feb 05, 20 14
Debit
General Journal
Interest payable
Interest expense
Notes payable
Gash
vi
vi
vi
vi
Credit
1,920vl
1,280vl
160,000vl
163,200vl
13 .
sward:
10 out of
10.00
.............................points ...
Sera Corporation has made and recorded its quarterly income tax payments. After a final review of
taxes for the year, the company identifies an additional $40,000 of income tax expense that should be
record ed. A portion of this additional expense, $6,000, is d eferred for payment in future years.
Prepare a journal entr/ to record Sera's year-end adjusting entry for income tax expense.
Date
Dec. 31
General Journal
Income taxes expense
Income taxes payable
Deferred income tax liability
Debit
./
./
./
Credit
40,000./
34,000./
6,000./
14.
award:
10 out of
10.00
Compute the times interest earned for Park Company, which reports income before interest expense
and income taxes of $1,885,000, and interest expense of $145,000.
Tines interest earned
Choose Numerator:
Income before interest and inc tax
$
Choose Denominator:
./
1,885,000./
Interest expense
$
./
145,000./
=
=
---t
Tmes interest earned
Times interest earned
13
times
15.
award:
10 out of
10.00
·· ··· · · · · points · · · · · · · · · · · · · · · · · · · · · · · · · · · ...
The payroll records of Speedy Software show the following information about Marsha Gottschalk, an
employee, for the weekly pay period ending September 30, 20 13. Gottschalk is single and claims one
allowance. Compute her Social S e curi~/ tax (6.2%), Medicare tax (1 .45%), federal income tax
withholding, state income tax (1 .0%), and net pay forthe current pay period. (Use the withholding table
in Exn;M 11A6) (Round your intermediate calculations and final answers to 2 decimal places.)
Total (gross) earnings for current pay period
Cumulative earnings of previous pay periods
$
Gross pay
Social security tax deduction
740
9,700
740.00.,I
$
$
45.88./
Medicare tax deduction
10.73.,I
Federal income tax deduction
96 .00.,I
State income tax deduction
7.40.,I
Total deductions
Net pay
160.01
r
$
579.99
16.
sward:
10 out of
10.00
·· · .... · · ·points · · · · · · · · · · · · · · · · · · · · · · · · · · · .. ·
The following items appear on the balance sheet of a company with a two-month operating cycle.
Identify the proper classification of each item as follows: C if it is a current liability, L if it is a long-term
liabili~/, or N if it is not a liabili~/.
Classification
Item
1.
Notes payable (due in 120 days).
c
2.
Notes payable (mature in five years).
L
3.
Notes payable (due in 6 to 12 months).
4.
Current portion of long-term debt.
c
c
5.
Notes payable (due in 13 to 24 months).
L
6.
Sales taxes payable.
c
7.
Accounts receivable.
N
8.
Wages payable.
9.
FUTA taxes payable.
10.
Salaries payable.
c
c
c
.I
.I
.I
.I
.I
.I
.I
.I
.I
.I
17
sward:
10 out of
. 10.00
·····························pointir- ·
Listed below are a few transactions and events •Of Piper Company.
a. Piper Company records an adjusting entry for $10,000,000 of previously unrecorded cash sales
(costing $5,000,000) and its sales taxes at a rate of 4%.
b. The company earned $50,000 of $125,000 previously received in advance for services.
Prepare any necessary adjusting entries at December 31, 20 13, for Piper Company's year-end
financial statements for each of the above separate transactions and events. (Piper has the policy of
recording cash received in advance in balance sheet accounts.)
ransaction
a.
General Journal
Cash
Sales
Sales taxes payable
a.
Cost of goods sold
Merchandise inventor/
b.
Unearned services revenue
Earned services revenue
•
Debit
./
./
./
10,400,000./
./
./
5,000,000./
./
./
50,000./
Credit
10,000,000./
400,000./
5,000,000./
50,000./ •
•
18.
award:
10 out of
10.00
· ··············points ········································································································································
Merger Co. has ten employees, eac11 of whom earns $2,000 per month and has been employed since
Januar/ 1. FICA Social Securi~/ taxes are 6.2% of the first $11 0,100 paid to each employee, and FICA
Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.8% and SUTA taxes are 5.4% of the first
$7,000 paid to each employee.
Prepare the March 31 journal entry to record the March payroll taxes expenses.
Date
Mar. 31
General Journal
Payroll taxes expense
FICA- Medicare taxes payable
FICA- Social sec. taxes payable
Federal unemployment taxes payable
State unemployment taxes payable
Debit
.I
.I
.I
.I
.I
Credit
2,770.00./
290.00./
1,240.00./
160.00./
1,080.00./
19 •
a'Ward:
10outof
10.00
·· ·· ·· ·· ·· ·· ·· points ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· ·· · ·
Which of the following items are normally classified as a current liability for a company that has a 15month operating cycle? (Select all that apply .)
a
a
a
a
a
a
13
Note payable due in ·18 months.
13
Mote payable maturing in 2 years.
13
13
13
13
Portion of long- term note due in 15 months.
Salaries payable.
FICA taxes payable.
Mote payable due in 11 months.
20.
award:
10 out of
10.00
· · · · · · ··poii'its · · · · · · · · · · · · · · · · · · · · · · · · · · · ·· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Dextra Computing sells merchandise for $6 ,000 cash on September 30 (cost of merchandise is
$3,900). The sales tax law requires Dextra to collect 5% sales tax on every dollar of merchandise sold.
Record the entry for the $6,000 sale and its applicable sales tax. Also record the entry that shows the
remittance of the 5% tax on this sale to the state government on October 15.
General Journal
Date
Sep 30
Sep 30
Cash
Debit
./
Sales
./
Sales taxes payable
./
Cost of goods sold
Credit
6,300.,I
3,900./
Merchandise inventory
Oct. 15
Sales taxes payable
300./
Cash
....................................
~.
21 .
award:
10 out of
10.00
Use the following information from separate companies a through f :
Net Income (Loss) Interest Expense Income Taxes
$ 35,000
$ 115,000
$44,000
110,000
16,000
b.
50,000
100,000
12,000
70,000
c.
235,000
14,000
130,000
d.
59,000
14,000
e.
30,000
(5,000)
10,000
f.
0
a.
Compute times interest earned.
Tines interest earned ratio
Company
>-
Choose Nwnerator:
Income before interest & taxes
II
I
Choose Denominator:
IInterest expense
=
Ratio
./
I
194,000./
I
b
176,000./
I
16,000./
c
182,000./
I
12,000./
d
379,000./
I
14,000./
e
103,000./
I
14,000./1 =1 -
f
5,000./
.
a
$
$
./ =
-
44,000./
4.4 1
11.00
-
-
1 0,000./~
Which company indicates the strongest ability to pay interest expense as it comes due?
O company a
O company b
O company c
@company d
O company e
O company f
=
=
=
=
15.17
270; _ j
7 ~~
0.50
oward:
10 out of
22
. 10.00
....................i>oiiits ..........................................................................................................................................................................................................
Chavez Co.'s salaried employees earn four weeks vacation per year. It pays $3 12,000.00 in total
employee salaries for 52 weeks but its employees work only 48 weeks. This means Chavez's total
weekly expense is $6,500 ($3 12,000/48 weeks) instead of the $6,000 cash paid weekly to the
employees ($3 12,000/52 weeks).
Prepare the journal entry to record Chavez's weekly vacation benefits expense.
Event
1
General Journal
Vacation benefits expense
Vacation benefits payable
Debit
500./
____
Credit
----<
_,
500./
-
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