ACC 205 Week 1-5 Assignments and final paper.
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Week Four Exercise Assignment
Liability
1. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing:
· Social Security taxes: 4% 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: 4% 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 and no wages have been paid during the month.
a. Prepare the necessary entry to record Brookhaven’s February payroll. The entry will include deductions for the following:
· Social Security taxes 2000
· Medicare taxes 750
· Federal income taxes withheld 7500
· State income taxes 2000
· Insurance withholdings 500
· 37250
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:
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10-Dec: Established a warranty liability for the XY-80, a new product. Sales are expected to |
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total 1,000 units during the month. Past experience with similar products indicates |
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that 3% of the units will require repair, with warranty costs averaging $27 per unit (parts only). |
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31-Dec: Repaired six XY-80s during the month at a total cost of $162 |
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31-Dec: Accrued three days of salaries at a total cost of $1,400. |
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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.
2-Aug: Borrowed $55,000 from the Bank of Kingsville by signing a 90-day, 12% note. |
20-Aug: Issued a $50,000 note to Harris Motors for the purchase of a $50,000 delivery truck. The note is due in 180 days and carries a 12% interest r ate. |
10-Sep: Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued |
a 30-day, 12% note in settlement of the balance owed. |
11-Sep: Issued a $60,000 note to Datatex Equipment in settlement of an overdue account |
payable of the same amount. The note is due in 30 days and carries a 14% interest rate. |
10-Oct: The note to Pans Enterprises was paid in full. |
11-Oct: The note to Datatex Equipment was paid in full. |
30-Oct: 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.
12-1-XX |
Cash |
$10,000 |
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Note Payable |
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$10,000 |
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2-28-XX |
Interest Expense |
$375 |
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Note Payable |
10,000 |
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Cash |
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$10,375 |
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To record payment of note and interest $10,000 x .15 x (3/12) |
12-22-XX |
Accounts Receivable |
$16,000 |
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Sales |
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$16,000 |
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Cost of Goods Sold (100% of 16,000) |
$16,000 |
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Inventory |
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$16,000 |
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Sales Return and allowances |
0 |
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Accounts Receivable |
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0 |
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Inventory |
16,000 |
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Cost of Goods Sold |
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16,000 |
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Cash |
$16,000 |
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Sales Discounts (2% of $16,000) |
$325 |
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1-20-XX |
Accounts Receivable |
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$15,680 |
12-26-XX |
Cash |
$5,000 |
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Note Payable |
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$5,000 |
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11-31-XX |
Interest Expense |
$125 |
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Note Payable |
$5,000 |
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Cash |
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$5,125 |
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To record payment of note and interest $5000 x .15 x (60/360) |
Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Past experience with similar products indicates that 3% of the units will require repair, with warranty costs averaging $27 per unit (parts only).