Description
Week Four Exercise Assignment
Liability
1. Payroll accounting. Assume that the following tax
rates and payroll information pertain to Brookhaven Publishing:
·
Social Security taxes: 6% on the first $55,000
earned per employee
·
Medicare taxes: 1.5% on the first $130,000
earned per employee
·
Federal income taxes withheld from wages: $7,500
·
State income taxes: 5% of gross earnings
·
Insurance withholdings: 1% of gross earnings
·
State unemployment taxes: 5.4% on the first
$7,000 earned per employee
·
Federal unemployment taxes: 0.8% on the first
$7,000 earned per employee
The company incurred a salary expense of $50,000 during
February. All employees had earned less than $5,000 by month-end.
a. Prepare the necessary entry to
record Brookhaven’s February payroll. The entry will include deductions for the
following:
·
Social Security taxes
·
Medicare taxes
·
Federal income taxes withheld
·
State income taxes
·
Insurance withholdings
b. Prepare the journal entry to
record Brookhaven’s payroll tax expense. The entry will include the following:
·
Matching Social Security taxes
·
Matching Medicare taxes
·
State unemployment taxes
·
Federal unemployment taxes
2. Current
liabilities: entries and disclosure.A review of selected financial
activities of Visconti’s during 20XX disclosed the following:
12/1
|
Borrowed $20,000 from the First City Bank by signing a 3-
|
12/10
|
Established a warranty liability for the XY-80, a new
|
12/22
|
Purchased $16,000 of merchandise on account from Oregon
|
12/26
|
Borrowed $5,000 from First City Bank; signed a 15% note
|
12/31
|
Repaired six XY-80s during the month at a total cost of
|
12/31
|
Accrued 3 days of salaries at a total cost of $1,400.
|
Instructions
a. Prepare journal entries to
record the transactions.
b. Prepare adjusting entries on
December 31 to record accrued interest for each of the notes payable.
3.Notes
payable. Red Bank Enterprises was involved in
the following transactions during the fiscal year ending October 31:
8/2:
|
Borrowed $75,000 from the Bank of
|
8/20:
|
Issued a $40,000 note to Harris
|
9/10:
|
Purchased inventory from Pans
|
9/11:
|
Issued a $60,000 note to Datatex
|
10/10:
|
The note to Pans Enterprises was
|
10/11: The note to Datatex Equipment was paid
in full.
11/30: Paid note to Bank of Kingsville
Instructions
a. Prepare journal entries to
record the transactions.
b. Prepare adjusting entries on
December 31 to record accrued interest (daily interest is calculated utilizing
the 360 day method).
c. Prepare the Current
Liability section of Red Bank’s balance sheet as of December 31. Assume that
the Accounts Payable account totals $203,600 on this date.
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