Chapter Review
11-7gProblems: Series A
Liability Transactions
OBJ. 1, 5
The following items were selected from among the transactions completed by Shin Co. during the current year:
Jan. |
10. |
Purchased merchandise on account from Beckham Co., $420,000, terms n/30. |
Feb. |
9. |
Issued a 30-day, 6% note for $420,000 to Beckham Co., on account. |
Mar. |
11. |
Paid Beckham Co. the amount owed on the note of February 9. |
May |
1. |
Borrowed $240,000 from Verity Bank, issuing a 45-day, 5% note. |
June |
1. |
Purchased tools by issuing a $312,000, 60-day note to Rassmuessen Co., which discounted the note at the rate of 5%. |
15. |
Paid Verity Bank the interest due on the note of May 1 and renewed the loan by issuing a new 45-day, 7% note for $240,000. (Journalize both the debit and credit to the notes payable account.) |
|
July |
30. |
Paid Verity Bank the amount due on the note of June 15. |
30. |
Paid Rassmuessen Co. the amount due on the note of June 1. |
|
Dec. |
1. |
Purchased office equipment from Lambert Co. for $700,500 paying $160,500 and issuing a series of ten 5% notes for $54,000 each, coming due at 30-day intervals. |
15. |
Settled a product liability lawsuit with a customer for $144,200 payable in January. Shin accrued the loss in a litigation claims payable account. |
|
31. |
Paid the amount due Lambert Co. on the first note in the series issued on December 1. |
Instructions
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Journalize the transactions.
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Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
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Product warranty cost, $19,500.
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Interest on the nine remaining notes owed to Lambert Co.
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Entries for Payroll and Payroll Taxes
OBJ. 2, 3
The following information about the payroll for the week ended December 30 was obtained from the records of Pharrell Co.:
Instructions
-
Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries:
-
December 30, to record the payroll.
-
December 30, to record the employer’s payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $40,000 is subject to unemployment compensation taxes.
AnswerCheck Figure: 1. (b) Dr. Payroll Tax Expense, $60,675
-
-
Assuming that the payroll for the last week of the year is to be paid on January 5 of the following fiscal year, journalize the following entries:
-
December 30, to record the payroll.
-
January 5, to record the employer’s payroll taxes on the payroll to be paid on January 5. Because it is a new fiscal year, all salaries are subject to unemployment compensation taxes.
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Wage and Tax Statement Data On Employer FICA Tax
OBJ. 2, 3
Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed.
None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:
Employee |
Date First Employed |
Monthly Salary |
Monthly Federal Income Tax Withheld |
Arnett |
Nov. 16 |
$ 5,500 |
$ 944 |
Cruz |
Jan. 2 |
4,800 |
833 |
Edwards |
Oct. 1 |
8,000 |
1,592 |
Harvin |
Dec. 1 |
6,000 |
1,070 |
Nicks |
Feb. 1 |
10,000 |
2,350 |
Shiancoe |
Mar. 1 |
11,600 |
2,600 |
Ward |
Nov. 16 |
5,220 |
876 |
Instructions
-
Determine the amounts to be reported on each employee’s Wage and Tax Statement (Form W-2) for 20Y8, arranging the data in the following form:
Employee
Gross Earnings
Federal Income Tax Withheld
Social Security Tax Withheld
Medicare Tax Withheld
-
Compute the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.6% on the first $10,000 of each employee’s earnings; (e) total.
AnswerCheck Figure: 2. (e) $28,450.80
Payroll Register
OBJ. 2, 3
The following data for Throwback Industries Inc. relate to the payroll for the week ended December 9, 20Y8:
Employee |
Hours Worked |
Hourly Rate |
Weekly Salary |
Federal Income Tax |
Retirement Savings |
Aaron |
46 |
$68.00 |
|
$750.20 |
$100 |
Cobb |
41 |
62.00 |
|
537.68 |
110 |
Clemente |
48 |
70.00 |
|
832.64 |
120 |
DiMaggio |
35 |
56.00 |
|
366.04 |
0 |
Griffey, Jr. |
45 |
62.00 |
|
641.84 |
130 |
Mantle |
|
$1,800 |
342.45 |
120 |
|
Robinson |
36 |
54.00 |
|
382.56 |
130 |
Williams |
|
2,000 |
398.24 |
125 |
|
Vaughn |
42 |
62.00 |
|
584.72 |
50 |
Employees Mantle and Williams are office staff, and all of the other employees are sales personnel. All sales personnel are paid times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0%, and Medicare tax is 1.5% of each employee’s annual earnings. The next payroll check to be used is No. 901.
Instructions
-
Prepare a payroll register for Throwback Industries Inc. for the week ended December 9, 20Y8. Use the following columns for the payroll register: Employee, Total Hours, Regular Earnings, Overtime Earnings, Total Earnings, Social Security Tax, Medicare Tax, Federal Income Tax, Retirement Savings, Total Deductions, Net Pay, Ck. No., Sales Salaries Expense, and Office Salaries Expense.
AnswerCheck Figure: 1. Total net pay $15,424.12
-
Journalize the entry to record the payroll for the week.
Payroll Accounts and Year-End Entries
OBJ. 2, 3, 4
The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:
211 Salaries Payable |
— |
212 Social Security Tax Payable |
$ 9,273 |
213 Medicare Tax Payable |
2,318 |
214 Employees Federal Income Tax Payable |
15,455 |
215 Employees State Income Tax Payable |
13,909 |
216 State Unemployment Tax Payable |
1,400 |
217 Federal Unemployment Tax Payable |
500 |
218 Retirement Savings Deductions Payable |
$ 3,400 |
219 Medical Insurance Payable |
27,000 |
411 Operations Salaries Expense |
950,000 |
511 Officers Salaries Expense |
600,000 |
512 Office Salaries Expense |
150,000 |
519 Payroll Tax Expense |
137,951 |
The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:
Dec. |
2. |
Issued Check No. 410 for $3,400 to Jay Bank to invest in a retirement savings account for employees. |
2. |
Issued Check No. 411 to Jay Bank for $27,046, in payment of $9,273 of social security tax, $2,318 of Medicare tax, and $15,455 of employees’ federal income tax due. |
|
13. |
Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: |
|
13. |
Issued Check No. 420 in payment of the net amount of the biweekly payroll to fund the payroll bank account. |
|
13. |
Journalized the entry to record payroll taxes on employees’ earnings of December 13: social security tax, $4,632; Medicare tax, $1,158; state unemployment tax, $350; federal unemployment tax, $125. |
|
16. |
Issued Check No. 424 to Jay Bank for $27,020, in payment of $9,264 of social security tax, $2,316 of Medicare tax, and $15,440 of employees’ federal income tax due. |
|
19. |
Issued Check No. 429 to Sims-Walker Insurance Company for $31,500, in payment of the semiannual premium on the group medical insurance policy. |
|
27. |
Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: |
|
27. |
Issued Check No. 541 in payment of the net amount of the biweekly payroll to fund the payroll bank account. |
|
27. |
Journalized the entry to record payroll taxes on employees’ earnings of December 27: social security tax, $4,668; Medicare tax, $1,167; state unemployment tax, $225; federal unemployment tax, $75. |
|
27. |
Issued Check No. 543 for $20,884 to State Department of Revenue in payment of employees’ state income tax due on December 31. |
|
31. |
Issued Check No. 545 to Jay Bank for $3,400 to invest in a retirement savings account for employees. |
|
31. |
Paid $45,000 to the employee pension plan. The annual pension cost is $60,000. (Record both the payment and unfunded pension liability.) |
Instructions
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Journalize the transactions.
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Journalize the following adjusting entries on December 31:
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Salaries accrued: operations salaries, $8,560; officers salaries, $5,600; office salaries, $1,400. The payroll taxes are immaterial and are not accrued.
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Vacation pay, $15,000.
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