1.

1. Calculate Payroll

Breakin Away Company has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee:

	Consultant		Computer Programmer		Administrator
Regular earnings rate	$2,910 per week		$28 per hour		$48 per hour
Overtime earnings rate	Not applicable		1.5 times hourly rate		2 times hourly rate
Number of withholding allowances	3		2		1

For the current pay period, the computer programmer worked 60 hours and the administrator worked 50 hours. The federal income tax withheld for all three employees, who are single, can be determined by adding $356.90 to 28% of the difference between the employee's amount subject to withholding and $1,796.00. Assume further that the social security tax rate was 6%, the Medicare tax rate was 1.5%, and one withholding allowance is $70.

Determine the gross pay and the net pay for each of the three employees for the current pay period. Assume the normal working hours in a week are 40 hours. If required, round your answers to two decimal places.

	Consultant	Computer Programmer	Administrator
Gross pay	$	$	$
Net pay	$	$	$

2. Summary Payroll Data

In the following summary of data for a payroll period, some amounts have been intentionally omitted:

Earnings:
	1. At regular rate	?
	2. At overtime rate	$65,400
	3. Total earnings	?
Deductions:
	4. Social security tax	26,220
	5. Medicare tax	6,555
	6. Income tax withheld	111,200
	7. Medical insurance	15,000
	8. Union dues	?
	9. Total deductions	162,000
	10. Net amount paid	275,000
Accounts debited:
	11. Factory Wages	231,600
	12. Sales Salaries	?
	13. Office Salaries	87,400

a. Calculate the amounts omitted in lines (1), (3), (8), and (12).

(1)	$
(3)	$
(8)	$
(12)	$

b. Journalize the entry to record the payroll accrual. If an amount box does not require an entry, leave it blank.

c. Journalize the entry to record the payment of the payroll.

3. A business issued a 45-day, 4% note for $265,000 to a creditor on account.

Journalize the entries to record (a) the issuance of the note on January 1 and (b) the payment of the note at maturity, including interest. Assume a 360-day year. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
111	Accounts Receivable
112	Interest Receivable
113	Notes Receivable
115	Merchandise Inventory
116	Supplies
118	Prepaid Insurance
120	Land
123	Building
124	Accumulated Depreciation-Building
125	Office Equipment
126	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
213	Interest Payable
214	Notes Payable
215	Salaries Payable
216	Social Security Tax Payable
217	Medicare Tax Payable
218	Employees Federal Income Tax Payable
219	Employees State Income Tax Payable
221	Retirement Savings Deductions Payable
224	Federal Unemployment Tax Payable
225	State Unemployment Tax Payable
226	Vacation Pay Payable
227	Unfunded Pension Liability
228	Product Warranty Payable
229	EPA Fines Payable
230	Litigation Claims Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Salaries Expense
524	Depreciation Expense-Building
525	Delivery Expense
526	Repairs Expense
529	Selling Expenses
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Supplies Expense
535	Payroll Tax Expense
536	Vacation Pay Expense
537	Pension Expense
538	Cash Short and Over
539	Product Warranty Expense
540	Damage Awards and Fines
541	Miscellaneous Expense
710	Interest Expense

a. Journalize the entries to record the issuance of the note on January 1. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

b. Journalize the entries to record the payment of the note at maturity, including interest. Assume a 360-day year and round amounts to the nearest whole dollar. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 2

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3

4. The payroll register for Gamble Company for the week ended April 29 indicated the following:

Salaries	$1,560,000
Social security tax withheld	93,600
Medicare tax withheld	23,400
Federal income tax withheld	312,000

In addition, state and federal unemployment taxes were calculated at the rate of 5.4% and 0.6%, respectively, on $254,000 of salaries.

Required:

A.

Journalize the entry to record the payroll for the week of April 29.*

B.

Journalize the entry to record the payroll tax expense incurred for the week of April 29.*

* Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTSGamble CompanyGeneral Ledger

	ASSETS
110	Cash
111	Accounts Receivable
112	Interest Receivable
113	Notes Receivable
115	Merchandise Inventory
116	Supplies
118	Prepaid Insurance
120	Land
123	Building
124	Accumulated Depreciation-Building
125	Office Equipment
126	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
213	Interest Payable
214	Notes Payable
215	Salaries Payable
216	Social Security Tax Payable
217	Medicare Tax Payable
218	Employees Federal Income Tax Payable
219	Employees State Income Tax Payable
221	Retirement Savings Deductions Payable
224	Federal Unemployment Tax Payable
225	State Unemployment Tax Payable
226	Vacation Pay Payable
227	Unfunded Pension Liability
228	Product Warranty Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

EXPENSES

510

Cost of Merchandise Sold

520

Salaries Expense

524

Depreciation Expense-Building

525

Delivery Expense

526

Repairs Expense

529

Selling Expenses

531

Rent Expense

532

Depreciation Expense-Office Equipment

533

Insurance Expense

534

Supplies Expense

535

Payroll Tax Expense

536

Vacation Pay Expense

537

Pension Expense

538

Cash Short and Over

539

Product Warranty Expense

540

Miscellaneous Expense

710

Interest Expense

A.

Journalize the entry to record the payroll for the week of April 29.*

B.

Journalize the entry to record the payroll tax expense incurred for the week of April 29.*

* Refer to the Chart of Accounts for exact wording of account titles.

PAGE 11

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10

Accrued Product Warranty

Parker Manufacturing Co. warrants its products for one year. The estimated product warranty is 3% of sales. Assume that sales were $329,000 for January. In February, a customer received warranty repairs requiring $235 of parts and $80 of labor.

For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Journalize the adjusting entry required at January 31, the end of the first month of the current fiscal year, to record the accrued product warranty.

b. Journalize the entry to record the warranty work provided in February.

6. Quick Ratio

Gmeiner Co. had the following current assets and liabilities on December 31 of two recent years:

				Current Year		Previous Year
Current assets:
	Cash			$501,000		$522,000
	Accounts receivable			444,000		245,000
	Inventory			274,000		207,000
		Total current assets		$1,219,000		$974,000
Current liabilities:
	Current portion of long-term debt			$101,000		$89,000
	Accounts payable			202,000		177,000
	Accrued and other current liabilities			327,000		324,000
		Total current liabilities		$630,000		$590,000

a. Determine the quick ratio for December 31 of both years. If required, round your answers to one decimal place.

	Quick Ratio
Previous year:
Current year:

b. How did the quick ratio change between the two balance sheet dates?