HW Chapter 11 part 1 PDF

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Homework chapter 11 - Current Liabilities
Fundamental Accounting Principles 24th Ed....

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EXERCISE 11 - 1 The following items appear on the balance sheet of a company with a oneyear operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, L if it is a long-term liability, or N if it is not C current liability L Long-term liability N if it is not a liability 1

Notes payable (due in 13 to 24 months)

L It will due after 1 year

2

Notes payable (due in 6 to 11 months)

C It is due within 1 year

3

Notes payable (mature in five years)

L It will due after 1 year

4

Current portion of long-term debt

C

5

Notes payable (due in 120 days)

C It is due within 1 year

6

FUTA taxes payable

C It is generally due within 1 year

7

Accounts receivable

N It's an asset

8

Sales taxes payable

C It is generally due within 1 year

9

Salaries payable

C It is generally due within 1 year

10 Wages payable

The current portion of long-term debt is the amount of principal

C It is generally due within 1 year

EXERCISE 11 - 2

1

On July 15, Piper Co. sold $10,000 of merchandise (costing $5,000) for cash. The sales tax rate is 4%. On August 1, Piper sent the sales tax collected from the sale to the government. Record entries for the July 15 and August 1 transactions.

2

On November 3, the Milwaukee Bucks sold a six game pack of advance tickets for $300 cash. On November 20, the Bucks played the first game of the six game pack (this represented one-sixth of the advance ticket sales). Record the entries for the November 3 and November 20 transactions.

1

2

Account Titles Date Jul. 15 Cash Sales Revenue Sales Taxes Payable To record Sales and 4% Sales tax ($ 10,000 x 0.04)

$

Jul. 15 Cost of goods sold Merchandise Inventory To record cost of July 30 sales

$

Aug. 1 Sales Tax Payable Cash To record sales taxes sen to govt.

$

Nov. 03 Cash Unearned ticket revenue To record sales in advance

$

Nov. 20 Unearned ticket revenue Ticket revenue To record revenue earned (300*1/6)

$

Debit 10,400

Credit $ $

10,000 400

$

5,000

$

400

$

300

$

50

5,000

400

300

50

EXERCISE 11 - 3 Sylvestor Systems borrows $110,000 cash on May 15 by signing a 60-day, 12%, $110,000 note.

1

On what date does this note mature? May June July

2a

Note maturity date is July 14 31-15 16 30 30 14 14

60 days

Prepare the entry to record issuance of the note. Date Account Titles May. 15 Cash Notes Payable

Debit $ 110,000

Credit $ 110,000

To record the inssuance of notes payable

2b

First, complete the table below to calculate the interest expense at maturity. Use those calculated values to prepare your entry to record payment of the note at maturity. (Use 360 days a year. Round final answers to the nearest whole dollar.)

Principal Rate (%) Time Total Interest

Interest at Maturity $110,000 12 60/360 $2,200

Date Account Titles Jul. 15 Notes Payable Interest Expenses Cash To record the payment of notes payable with interest

Debit $ 110,000 $ 2,200

Credit

$ 112,200

EXERCISE 11 - 4 Keesha Co. borrows $200,000 cash on November 1 of the current year by signing a 90-day, 9%, $200,000 note. On what date does this note mature? Note maturity date is January 30 Nov. 30-1 29 2019 Dec. 31 31 2020 Jan. 30 30 1

2&3

What is the amount of interest expense in the current year and the following year from this note?

Total through maturity Principal Rate (%) Time Interest

4

90 days

$200,000 9% 90/360 $4,500

Interest Expense Current Year $200,000 9% 60/360 $3,000

Interest Expense Following Year $200,000 9% 30/360 $1,500

Prepare journal entries to record (a) issuance of the note, (b) accrual of interest on December 31, and (c) payment of the note at maturity. Date Account Titles Nov. 1 Cash Notes Payable

Debit $ 200,000

Credit $ 200,000

To record the inssuance of notes payable Dec. 31 Interest Expenses Interest Payable To record accrued interest

$

Dec. 31 Interest Expenses Interest Payable Notes Payable Cash to record payment of note plus interest

$ 1,500 $ 3,000 $ 200,000

3,000 $

3,000

$ 204,500

EXERCISE 11 - 5 BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $128,400 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to its employee.

a. b. c.

Gross Pay through August 31 $6,400 $2,000 $122,100

Gross Pay for September $800 $2,100 $8,000

Gross Pay Through 30-Sep $7,200 $4,100 $130,100

Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for September under each of three separate situations (a), (b), and (c). (Round your answers to 2 decimal places.) a)

Tax

September Earnings Subject to Tax

FICA - Social Security

$800

FICA - Medicare

$800

FUTA SUTA b)

Tax FICA - Social FICA - Medicare FUTA SUTA c)

Tax FICA - Social FICA - Medicare FUTA SUTA

a)

Tax Rate

Tax Amount $

49.60

1.45%

$

11.60

$600

0.60%

$

3.60

$600

5.40%

$

32.40

Tax Rate 6.20% 1.45% 0.60% 5.40%

$ $ $ $

Tax Amount 130.20 30.45 12.60 113.40

Tax Rate 6.20% 1.45% 0.60% 5.40%

$ $ $ $

Tax Amount 390.60 116.00 -

September Earnings $2,100 $2,100 $2,100 $2,100 September Earnings $6,300 $8,000 $0 $0

6.20%

Tax FICA - Social FICA - Medicare FUTA SUTA

September Earnings Subject to Tax $800 $800 $600 $600

7000-6400 7000-6400

b)

Tax FICA - Social FICA - Medicare FUTA SUTA

September Earnings Subject to Tax $2,100 $2,100 $2,100 $2,100

In the above calculation for unemployment tax (SUTA AND FUTA) the employee has not reached $7,000 in wages so the full amount earned in September is subject to unemployment tax.

c)

Tax FICA - Social FICA - Medicare FUTA SUTA

September Earnings Subject to Tax $6,300 $8,000 $0 $0

128,400-122,100 = 6,300 The maximum amount of wages subject to social security tax is $128,400.

EXERCISE 11 - 6 BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $128,400 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to its employee.

a. b. c.

Gross Pay through August 31 $6,400 $2,000 $122,100

Gross Pay for September $800 $2,100 $8,000

The employee’s federal income taxes withheld by the employer are $80 for this pay period. Compute the taxes to be withheld from gross pay for this employee. (Round your answers to 2 decimal places.)

Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)

Tax Federal Income Tax FICA - Social Security FICA - Medicare

September Earnings Subject to Tax

Tax Rate

Tax Amount $

80.00

$800

6.20%

$

49.60

$800

1.45%

$

11.60

The employee’s federal income taxes withheld by the employer are $80 for this pay period. Prepare the employer’s September 30 journal entries to record salary expense and its related payroll liabilities for this employee. (Round your answers to 2 decimal places.)

Account Titles Date Sep. 30 Salaries Expense FICA—Social security taxes payable FICA—Medicare taxes payable Employee federal income taxes payable Salaries Payable To record accrued of payroll

$

Debit 800

Credit $ $ $ $

49.60 11.60 80.00 658.79

EXERCISE 11 - 7 BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $128,400 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to its employee.

a. b. c.

a)

Gross Pay through August 31 $6,400 $2,000 $122,100

Compute the payroll taxes expense. (Round your answers to 2 decimal places.)

Tax

September Earnings Subject to Tax

FICA - Social Security

$800

FICA - Medicare

$800

FUTA SUTA

b)

Gross Pay for September $800 $2,100 $8,000

Tax Rate

Tax Amount $

49.60

1.45%

$

11.60

$600

0.60%

$

3.60

$600

5.40%

$

32.40

$

97.20

6.20%

Record the employer's September 30 payroll taxes expense and its related liabilities.

Account Titles Date Sep. 30 Payroll Taxes Expense FICA—Social security taxes payable FICA—Medicare taxes payable Federal unemployment taxes payable State unemployment taxes payable To record employer payroll taxes

$

Debit 97.20

Credit $ $ $ $

49.60 11.60 3.60 32.40

EXERCISE 11 - 8 The following monthly data are taken from Ramirez Company at July 31: Sales salaries, $200,000; Office salaries, $160,000; Federal income taxes withheld, $90,000; State income taxes withheld, $20,000; Social security taxes withheld, $22,320; Medicare taxes withheld, $5,220; Medical insurance premiums, $7,000; Life insurance premiums, $4,000; Union dues deducted, $1,000; and Salaries subject to unemployment taxes, $50,000. The employee pays 40% of medical and life insurance premiums. Assume that FICA taxes are identical to those on employees and that SUTA taxes are 5.4% and FUTA taxes are 0.6%.

1&2

Using the above information, complete the below table and prepare the journal entries to record accrued payroll and cash payment of the net payroll for July. calculation of the Amount of Premium Paid by the Employee & Employer Total Premium

Premium Paid by Employer

% Paid by Premium Paid Employees by Employees

Employee Medical Insurance Payable

$7,000

40%

$2,800

$4,200

Employee Life Insurance Payable

$4,000

40%

$1,600

$2,400

Journal entries to record accrued payroll Account Titles Date Jul. 31 Sales Salaries Expenses Office Salaries Expense FICA—Social security taxes payable FICA—Medicare taxes payable Employee Fed Income taxes payable Employee State Income taxes payable Employee Medical Insurance Payable Employee Life Insurance Payable Employee Union Dues Payable Salaries Payable To record accrued payroll including employee deductions for July

$ $

Debit 200,000 160,000

Credit

$ $ $ $ $ $ $ $

22,320 5,220 90,000 20,000 2,800 1,600 1,000 217,060

Journal entries for the cash payment of net payroll(salaries payable) for the month of July Date Jul. 31

3

Account Titles Salaries Payable Cash To record the cash payment of net salaries

$

Debit 217,060

Credit $

217,060

Using the above information, complete the below table. Tax

Salaries Subject to Unemployment Tax

Tax Rate

State Unemployment Taxes

$50,000

5.40%

$2,700

Federal Unemployment Taxes

$50,000

0.60%

$300

4)

Tax Amount

Record the accrued employer payroll taxes and all other employer-paid expenses and the cash payment of all liabilities for July-assume that FICA taxes are identical to those on employees and that SUTA taxes are 5.4% and FUTA taxes are 0.6%. Journal entries for acrrued employer payroll taxes

Account Titles Date Jul. 31 Payroll Taxes Expenses FICA—Social security taxes payable FICA—Medicare taxes payable State Unemployment taxes payable Federal Unemployment taxes payable

$

Debit 30,540

Credit $ $ $ $

22,320 5,220 2,700 300

To ecord all employer's payroll expenses and liabilities for the month of July.

Record the employer's benefit expense.

Account Titles Date Jul. 31 Employee benefit Expense Employee Medical Insurance Payable Employee Life Insurance Payable To ecord all employee benefit

Debit $ 6,600

Credit $ $

4,200 2,400

Date

Account Titles FICA—Social security taxes payable FICA—Medicare taxes payable State Unemployment taxes payable Federal Unemployment taxes payable Employee Fed Income taxes payable Employee State Income taxes payable Employee Medical Insurance Payable Employee Life Insurance Payable Employee Union Dues Payable Cash To record the cash payment of all liabilities related to the July payroll.

$ $ $ $ $ $ $ $ $

Debit 44,640 10,440 2,700 300 90,000 20,000 7,000 4,000 1,000

Credit

$

180,080

EXERCISE 11 - 9 Mest Company has nine employees. FICA Social Security taxes are 6.2% of the first $128,400 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee. Cumulative pay for the current year for each of its employees follows.

Employee Ken S. Tim V. Steve S.

a)

Cumulative Employee Pay $ 6,000 Michelle W. $ 40,400 Michael M. $ 87,000 Zach R.

Cumulative Employee Pay $ 143,500 Lori K. $ 106,900 Kitty O. $ 128,400 John W.

Cumulative Pay $ 130,900 $ 36,900 $ 4,000

Compute the amounts in this table for each employee.

Employee Ken S. Tim V. Steve S. Michelle W. Michael M. Zach R. Lori K. Kitty O. John W. Totals

Cumulative Pay $ $ $ $ $ $ $ $ $ $

6,000 40,400 87,000 143,500 106,900 128,400 130,900 36,900 4,000 684,000

Pay Subject to FICA Social Security $ 6,000 $ 40,400 $ 87,000 $ 128,400 $ 106,900 $ 128,400 $ 128,400 $ 36,900 $ 4,000 $ 666,400

Pay Subject to FICA Medicare $ $ $ $ $ $ $ $ $ $

6,000 40,400 87,000 143,500 106,900 128,400 130,900 36,900 4,000 684,000

Pay Subject to FUTA Taxes $ $ $ $ $ $ $ $ $ $

6,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 4,000 59,000

Pay Subject to SUTA Taxes $ $ $ $ $ $ $ $ $ $

6,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 4,000 59,000

b) For the company, compute each total for FICA Social Security taxes, FICA Medicare taxes, FU

FICA Sociel Security Taxes FICA Medicare Taxes FUTA Taxes SUTA Taxes

Tax Paid by Tax Paid by Employer Employee $ 41,316.80 $ 41,316.80 $ 9,918.00 $ 9,918.00 $ $ 354.00 $ $ 3,186.00

Total Tax $ 82,633.60 $ 19,836.00 $ 354.00 $ 3,186.00...