04 Jun PREPARE ADJUSTING ENTRIES ON OCTOBER 31 TO RECORD ACCRUED INTEREST
investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and
$80,000 of land. Parcells contributed cash of $50,000 and equipment with a
value of $20,000.
a. Prepare the journal entries needed to record the
investments of Levy and Parcells.
2. 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
·
Medicare taxes: 1.5% on the
first $130,000 earned
·
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
·
Federal unemployment taxes:
0.8% on the first $7,000 earned
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
3.
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- month, 15% note payable.
Interest and principal are due at maturity.
12/10 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 2% of the units will require repair, with warranty costs averaging $27 per
unit
12/22 Purchased
$16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.
12/26 Borrowed
$5,000 from First City Bank; signed a note payable due in 60 days.
12/31 Repaired six
XY-80s during the month at a total cost of $162
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 October 31 to record accrued interest.
c.
Prepare the Current Liability section of Red Bank’s balance sheet as of October
31. Assume that the Accounts Payable account totals $203,600 on this date.
4. Issuance of stock: organization costs.Snowbound
Corporation was incorporated in July. The firm’s charter authorized the sale of
200,000 shares of $10 par-value common stock. The following transactions
occurred during the year:
7/1: Sold 45,000 shares of common stock to investors for $18 per
share. Cash was collected and the shares were issued.
8/11 Sold 20,000 shares to investors for $22 per share. Cash was
collected and the shares were issued.
9/1 Declared a cash dividend on 9/1 for $1.00 a share for
shareholders on record 10/1 with payment being made on 11/1.
Instructions
a.
Prepare journal entries for the two stock issues.
b.
Prepare journal entries for the cash dividend
declaration and payment.
c.
5. 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 Kingsville by signing a 120-day note.
8/20: Issued a $40,000
note to Harris Motors for the purchase of a $40,000 delivery truck. The note
is due in 180 days and carries a 12% interest rate.
9/10: Purchased
merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day,
12% note in settlement of the balance owed.
9/11: 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.
10/10: The note to Pans
Enterprises was paid in full.
Instructions
a. Prepare
journal entries to record the transactions.
b. Prepare
adjusting entries on October 31 to record accrued interest.
c.
Prepare the Current Liability section of Red Bank’s balance sheet as of October
31. Assume that the Accounts Payable account totals $203,600 on this date.
d.
10/31: The note to Datatex
Equipment was paid in full.
e.
11/30: Paid note to Bank of Kingville
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