ACC 112 – WAGERS
REVIEW SHEET FOR TEST THREE
CHAPTERS 11 AND 13
Overview: This test will consist of two groups of multiple-choice questions
(some “general” and some “quantitative”), as well as several problems requiring
you to record journal entries.
This test will require you to do the following:
1 ANSWER “GENERAL” MULTIPLE-CHOICE QUESTIONS -ADDRESSING VARIOUS TOPICS WE HAVE COVERED IN
THESE CHAPTERS
2 ANSWER “QUANTITATIVE” MULTIPLE-CHOICE
QUESTIONS – ADDRESSING THE FOLLOWING TOPICS:
 COMPUTING THE ACID-TEST (QUICK) RATIO

Acid-test (quick) ratio = Quick Assets / Current Liabilities

Quick Assets = Cash + Cash Equivalents + Short-Term Investments +
Net Receivables
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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 COMPUTING
PAYABLE
INTEREST
AND
MATURITY
VALUE
ON
NOTE

Interest = Principal * Annual Interest Rate * Time

Time = Percentage of Year = Elapsed Days / 360 Days per Year

Maturity Value (for REGULAR Note Payable) = Face Value
(principal) + Interest

Maturity Value (for DISCOUNTED Note Payable) = Face Value
(because interest is deducted in advance, and at maturity we repay
the face value)
 COMPUTING PAYROLL TAX EXPENSES

I will give both the tax rates and the caps

The four employer payroll taxes are Social Security, Medicare,
Federal Unemployment Tax, and State Unemployment Tax
 COMPUTING NET PAY

Gross Pay – Employee Deductions =- Net Pay
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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3 JOURNALIZE TRANSACTIONS ABOUT NOTES PAYABLE –
REGULAR AND DISCOUNTED ONES!
 ISSUING A “REGULAR” NOTE PAYABLE

Amount of cash (or other asset) we receive when we issue the note
is the face value
Cash (), Accounts Payable (), Equipment (), etc.
Notes Payable ()
 PAYING OFF A “REGULAR” NOTE PAYABLE



Must pay MORE than the face value – the face value PLUS
interest!!
Interest = Principal * Annual Interest Rate * Time
Time = Percentage of Year = Elapsed Days / 360 Days per Year
Note Payable (amount = principal) ()
Interest Expense (amount = incurred this period) ()
Cash (amount = maturity value) ()
 ISSUING A “DISCOUNTED” NOTE PAYABLE

Amount of cash (or other asset) we receive is NOT the face value,
but instead the face value LESS the total interest (discount) on
the note!
Cash (), Accts. Pay. (), Equip. (), etc.
(amount = face value – interest)
Interest Expense ()
Notes Payable () (amount = face value)
 PAYING OFF A DISCOUNTED NOTE PAYABLE

Must pay the face value only!!
Note Payable (amount = face value) ()
Cash (amount = face value) ()
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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4 JOURNALIZE TRANSACTIONS ABOUT PAYROLL
 HINT: BE SURE TO USE THESE KEY WORDS OF “PAYABLE” AND
“EXPENSE” IN THESE JOURNAL ENTRIES!!
 JOURNAL ENTRY TO RECORD THE PAYROLL
Expenses (Wages Exp., Salary Exp., OT Exp. (amount = gross pay) ()
Social Security Tax Payable ()
Medicare Tax Payable ()
Employees Federal Income Tax Payable ()
Other Ded. Payable (Insurance Prem. Pay., 401K Ded. Pay., etc.) ()
Salaries (or Wages) Payable (amount = net pay) ()
 JOURNAL ENTRY TO RECORD THE EMPLOYER’S PAYROLL TAX
EXPENSE
Payroll Tax Expense (amount = total) ()
Social Security Tax Payable ()
Medicare Tax Payable ()
State Unemployment Tax Payable ()
Federal Unemployment Tax Payable ()
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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5 FORMING A PARTNERSHIP
 Record property received by partnership at its market value on day it
is transferred to the partnership (may differ from the value it is
recorded on partner's personal books)
 Credit each partner's capital account for market value of assets they
contribute LESS any liabilities the partnership assumes
Assets (market value of assets received) ()
Liabilities (assumed from partners) ()
Partner A, Capital ()
Partner B, Capital (etc.) ()
6 PROBLEM: JOURNAL ENTRIES TO DIVIDE PARTNERSHIP
PROFITS AND LOSSES
 JOURNAL ENTRY
If Net Income
Income Summary ()
Partner A Capital ()
Partner B Capital ()
If Net Loss
Partner A Capital ()
Partner B Capital ()
Income Summary ()
 IF BASED ON A RATIO
 Add up the numbers in the ratio, then each partner’s share is “their”
number divided by the total
 IF BASED UPON SALARY ALLOWANCE, INTEREST ALLOWANCE,
AND RATIO
 Compute SALARY allowance per partner (will be given to you)
 Compute INTEREST allowance per partner (multiply rate given times
the capital balance)
 Divide REMAINDER (positive OR negative!) according to RATIO
 Make journal entry for each partner’s final total (NOT remainder!)
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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7 PROBLEM: JOURNAL ENTRIES TO ADMIT A NEW
PARTNER TO A PARTNERSHIP
 OPTION 1: ONE PARTNER BUYS AN INTEREST FROM AN
EXISTING PARTNER


Total partnership assets do not change; amount paid for the
purchase does not affect the partnership
Transfer old partner's existing capital balance to new partner
“Leaving” Partner, Capital ()
“Purchasing” Partner, Capital ()
 OPTION 2: NEW PARTNER INVESTS ASSETS IN PARTNERSHIP

STEP 1: Record year-to-date net income and distribute to existing
partners
If Net Income
If Net Loss
Income Summary ()
Partner A Capital ()
Partner A Capital ()
Partner B Capital ()
Partner B Capital ()
Income Summary ()

STEP 2: Revalue existing partnership assets (make the asset
account balances equal their current market value)

Allocate the amount of any gain or loss directly to the partners’
capital accounts in their income-sharing ratio
If Assets Overall INCREASED in Value
Assets (that INCREASED in value) ()
Assets (that DECREASED in value) ()
Old Partner A, Capital (if assets overall INCREASED) ()
Old Partner B, Capital (if assets overall INCREASED) ()
If Assets Overall DECREASED in Value
Assets (that INCREASED in value) ()
Old Partner A, Capital (if assets overall DECREASED) ()
Old Partner B, Capital (if assets overall DECREASED) ()
Assets (that DECREASED in value) ()
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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
STEP 3: Negotiate the amount to be credited to the NEW partner's
capital – it can be either:

Amount EQUAL TO market value of assets they contribute
(no bonus)
Cash (or other asset contributed) ()
New Partner, Capital ()

Amount LESS THAN market value of assets they contribute
(bonus to OLD partners)

Bonus is distributed to old partners according to the
partnership agreement (profit/loss sharing ratio)
Cash (or other asset contributed) ()
New Partner, Capital ()
Old Partner A, Capital ()
Old Partner B, Capital ()

Amount GREATER THAN market value of assets they
contributed (bonus to NEW partner)

Bonus comes from old partners according to the
partnership agreement (profit/loss sharing ratio)
Cash (or other asset contributed) ()
Old Partner A, Capital ()
Old Partner B, Capital ()
New Partner, Capital ()
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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8 PROBLEM: JOURNAL ENTRIES FOR WITHDRAWAL OF
PARTNER
 OPTION 1: ONE PARTNER SELLS THEIR INTEREST TO A NEW
OR EXISTING PARTNER

Transfer “leaving” partner's existing capital balance to the
“purchasing” partner(s)
“Leaving” Partner, Capital ()
“Purchasing” Partner, Capital ()
 OPTION 2: ONE PARTNER WITHDRAWS ASSETS FROM THE
PARTNERSHIP

STEP 1: Recognize year-to-date profits/losses and distribute to
partners
If Net Income
If Net Loss
Income Summary ()
Partner A Capital ()
Partner A Capital ()
Partner B Capital ()
Partner B Capital ()
Income Summary ()

STEP 2: Revalue assets to their current market value and
distribute gains/losses to partners
If Assets Overall INCREASED in Value
Assets (that INCREASED in value) ()
Assets (that DECREASED in value) ()
Old Partner A, Capital (if assets overall INCREASED) ()
Old Partner B, Capital (if assets overall INCREASED) ()
If Assets Overall DECREASED in Value
Assets (that INCREASED in value) ()
Old Partner A, Capital (if assets overall DECREASED) ()
Old Partner B, Capital (if assets overall DECREASED) ()
Assets (that DECREASED in value) ()

STEP 3: Distribute assets to withdrawing partner (voluntary
withdrawal) or record liability to partner's estate (death)
“Leaving” Partner, Capital ()
Cash (for amount paid to partner) ()
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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Note Payable (if promissory note issued to partner) ()
Liability to Estate (if partner has died) ()
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
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9 PROBLEM: JOURNAL ENTRIES FOR LIQUIDATION OF
PARTNERSHIP
 STEP
1:
SELL
ASSETS AND
GAINS/LOSSES TO PARTNERS
DISTRIBUTE
RESULTING
To record the sale (with GAIN)
Cash ()
Assets ()
Gain on Sale of Assets ()
To record the sale (with LOSS)
Cash ()
Loss on Sale of Assets ()
Assets ()
To distribute GAIN
Gain on Sale of Assets ()
Partner A, Capital ()
Partner B, Capital ()
To distribute LOSS
Partner A, Capital ()
Partner B, Capital ()
Loss on Sale of Assets ()
 STEP 2: PAY CREDITORS
Liabilities (like Accounts Payable, Notes Payable) ()
Cash ()
 STEP 3: PARTNERS WITH NEGATIVE BALANCES MUST PAY UP (I
WILL NOT GIVE YOU A PROBLEM WHERE A DEFICIENT
PARTNER ISN’T SOLVENT!)
Cash ()
Deficient Partner’s Capital ()
 STEP 4: DISTRIBUTE CASH TO PARTNERS ACCORDING TO
THEIR ENDING CAPITAL
TO THE RATIO!)
Partner A, Capital ()
Partner B, Capital ()
Cash ()
BALANCES
(NOT ACCORDING
ACC 112 - Review for Test 2
Chapters 11 and 13 - Wagers
Page 11 of 11
The key to doing well on this test is PRACTICE, PRACTICE, and
PRACTICE!! Some EXTRA homework problems (in addition to those that
were assigned for in-class work or homework AND in addition to those given in
the “Extra Practice Problems” on the web site) from your textbook that will
help you assess your current level of knowledge on the certain topics are:
 Notes Payable
Problem 11-1B
 Payroll Entries
Problems 11-4A, 11-5A, 11-2B, 11-4B, 11-5B, 11-6B (but omit any vacation pay
entries)
 Partnerships
Exercises 13-5, 13-7, 13-8, 13-9, 13-19, 13-20, 13-21, 13-22, 13-25
Problems 13-1A, 13-3A, 13-4A, 13-1B, 13-2B, 13-3B, 13-4B13-5B, 13-6B
Be sure that by test day you can work homework problems WITHOUT having to
constantly flip back to the textbook, handouts, etc.! Answers to all homework
problems are available on-line! GOOD LUCK!!
DON’T FORGET-- WHAT YOU GET OUT OF THIS
COURSE DEPENDS ON WHAT YOU PUT INTO IT!
SO PUT A LOT INTO PREPARING FOR THIS EXAM!!