Chapter Review
11-7hProblems: Series B
Liability Transactions
OBJ. 1, 5
The following items were selected from among the transactions completed by Aston Martin Inc. during the current year:
Apr. |
15. |
Borrowed $225,000 from Audi Company, issuing a 30-day, 6% note for that amount. |
May |
1. |
Purchased equipment by issuing a $320,000, 180-day note to Spyder Manufacturing Co., which discounted the note at the rate of 6%. |
15. |
Paid Audi Company the interest due on the note of April 15 and renewed the loan by issuing a new 60-day, 8% note for $225,000. (Record both the debit and credit to the notes payable account.) |
|
July |
14. |
Paid Audi Company the amount due on the note of May 15. |
Aug. |
16. |
Purchased merchandise on account from Exige Co., $90,000, terms, n/30. |
Sept. |
15. |
Issued a 45-day, 6% note for $90,000 to Exige Co., on account. |
Oct. |
28. |
Paid Spyder Manufacturing Co. the amount due on the note of May 1. |
30. |
Paid Exige Co. the amount owed on the note of September 15. |
|
Nov. |
16. |
Purchased store equipment from Gallardo Co. for $450,000, paying $50,000 and issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals. |
Dec. |
16. |
Paid the amount due Gallardo Co. on the first note in the series issued on November 16. |
28. |
Settled a personal injury lawsuit with a customer for $87,500, to be paid in January. Aston Martin Inc. accrued the loss in a litigation claims payable account. |
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, $26,800.
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Interest on the 19 remaining notes owed to Gallardo 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 Saine 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, $30,000 is subject to unemployment compensation taxes.
AnswerCheck Figure: 1. (b) Dr. Payroll Tax Expense, $90,675
-
-
Assuming that the payroll for the last week of the year is to be paid on January 4 of the following fiscal year, journalize the following entries:
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December 30, to record the payroll.
-
January 4, to record the employer’s payroll taxes on the payroll to be paid on January 4. Because it is a new fiscal year, all $1,185,000 in salaries is subject to unemployment compensation taxes.
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Wage and Tax Statement Data and Employer FICA Tax
OBJ. 2, 3
Jocame Inc. began business on January 2, 20Y7. 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 20Y8, 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% on salary. 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 |
Addai |
July 16 |
$ 8,160 |
$1,704 |
Kasay |
June 1 |
3,600 |
533 |
McGahee |
Feb. 16 |
6,420 |
1,238 |
Moss |
Jan. 1 |
4,600 |
783 |
Stewart |
Dec. 1 |
4,500 |
758 |
Tolbert |
Nov. 16 |
3,250 |
446 |
Wells |
May 1 |
10,500 |
2,359 |
Instructions
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Determine the amounts to be reported on each employee’s Wage and Tax Statement (Form W-2) for 20Y7, arranging the data in the following form:
Employee
Gross Earnings
Federal Income Tax Withheld
Social Security Tax Withheld
Medicare Tax Withheld
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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) $25,017.38
Payroll Register
OBJ. 2, 3
The following data for Flexco Inc. relate to the payroll for the week ended December 9, 20Y8:
Employee |
Hours Worked |
Hourly Rate |
Weekly Salary |
Federal Income Tax |
Retirement Savings |
Carlton |
52 |
$50.00 |
|
$667.00 |
$ 60 |
Grove |
|
$4,000 |
860.00 |
100 |
|
Johnson |
36 |
52.00 |
|
355.68 |
0 |
Koufax |
45 |
58.00 |
|
578.55 |
44 |
Maddux |
37 |
45.00 |
|
349.65 |
62 |
Seaver |
|
3,200 |
768.00 |
120 |
|
Spahn |
46 |
52.00 |
|
382.20 |
0 |
Winn |
48 |
50.00 |
|
572.00 |
75 |
Young |
43 |
54.00 |
|
480.60 |
80 |
Employees Grove and Seaver 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% of each employee’s annual earnings, and Medicare tax is 1.5% of each employee’s annual earnings. The next payroll check to be used is No. 328.
Instructions
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Prepare a payroll register for Flexco 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, $16,592.58
-
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 Codigo Co. on December 1 of the current year:
101 Salaries Payable |
— |
102 Social Security Tax Payable |
$2,913 |
103 Medicare Tax Payable |
728 |
104 Employees Federal Income Tax Payable |
4,490 |
105 Employees State Income Tax Payable |
4,078 |
106 State Unemployment Tax Payable |
1,260 |
107 Federal Unemployment Tax Payable |
360 |
108 Retirement Savings Deductions Payable |
$ 2,300 |
109 Medical Insurance Payable |
2,520 |
201 Sales Salaries Expense |
700,000 |
301 Officers Salaries Expense |
340,000 |
401 Office Salaries Expense |
125,000 |
408 Payroll Tax Expense |
59,491 |
The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:
Dec. |
1. |
Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy. |
1. |
Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees’ federal income tax due. |
|
2. |
Issued Check No. 817 for $2,300 to Alvarez Bank to invest in a retirement savings account for employees. |
|
12. |
Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: |
|
12. |
Issued Check No. 822 in payment of the net amount of the biweekly payroll to fund the payroll bank account. |
|
12. |
Journalized the entry to record payroll taxes on employees’ earnings of December 12: social security tax, $1,452; Medicare tax, $363; state unemployment tax, $315; federal unemployment tax, $90. |
|
15. |
Issued Check No. 830 to Alvarez Bank for $7,938, in payment of $2,904 of social security tax, $726 of Medicare tax, and $4,308 of employees’ federal income tax due. |
|
26. |
Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: |
|
26. |
Issued Check No. 840 for the net amount of the biweekly payroll to fund the payroll bank account. |
|
26. |
Journalized the entry to record payroll taxes on employees’ earnings of December 26: social security tax, $1,455; Medicare tax, $364; state unemployment tax, $150; federal unemployment tax, $40. |
|
30. |
Issued Check No. 851 for $6,258 to State Department of Revenue, in payment of employees’ state income tax due on December 31. |
|
30. |
Issued Check No. 852 to Alvarez Bank for $2,300 to invest in a retirement savings account for employees. |
|
31. |
Paid $55,400 to the employee pension plan. The annual pension cost is $65,500. (Record both the payment and the 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: sales salaries, $4,275; officers salaries, $2,175; office salaries, $825. The payroll taxes are immaterial and are not accrued.
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Vacation pay, $13,350.
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