1. On August 31, 2010, Gordon, Co., purchased $7,000 of inventory on a one-year, 12% note payable.

Requirements R1. Journalize the companys accrual of interest expense on February 28, 2011, their fiscal yearend. R2. Journalize the companys payment of the note plus interest on August 31, 2011.

2. Catskills Corporation guarantees its snowmobiles for three years. Company experience indicates that warranty costs will add up to 5% of sales. Assume that the Catskills dealer in Colorado Springs made sales totaling $519,000 during 2011. The company received cash for 20% of the sales and notes receivable for the remainder. Warranty payments totaled $19,000 during 2011.

Requirements R1. Record the sales, warranty expense, and warranty payments for the company. R2. Post to the Estimated warranty payable T-account. At the end of 2011, how much in Estimated warranty payable does the company owe?

3. Farley Motors, Inc., a motorcycle manufacturer, included the following note (adapted) in its annual report:

Requirements R1. Why are these contingent (versus real) liabilities? R2. How can a contingent liability become a real liability for Farley Motors? What are the limits to the companys product liabilities in the United States?

4. Gina Tarver is paid $720 for a 40-hour workweek and time-and-a-half for hours above 40.

Requirements R1. Compute Tarvers gross pay for working 52 hours during the first week of February. R2. Tarver is single, and her income tax withholding is 20% of total pay. Tarvers only payroll deductions are payroll taxes. Compute Tarvers net (take-home) pay for the week. Use an 8% FICA tax rate, and carry amounts to the nearest cent.

5. Return to the Gina Tarver payroll situation in Short Exercise 10-4. Tarvers employer, College of St. Mary, pays all the standard payroll taxes plus benefits for employee retirement plan (4% of total pay), health insurance ($105 per employee per month), and disability insurance ($11 per employee per month).

Requirement R1. Compute College of St. Marys total expense of employing Gina Tarver for the 52 hours that she worked during the first week of February. Carry amounts to the nearest cent.

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6. Suppose you work for DePetro-Carr, the accounting firm, all year and earn a monthly salary of $6,800. There is no overtime pay. Your withheld income taxes consume 25% of gross pay. In addition to payroll taxes, you elect to contribute 6% monthly to your retirement plan. DePetro-Carr also deducts $110 monthly for your co-pay of the health insurance premium.

Requirement R1. Compute your net pay for November. Use an 8% FICA tax rate.

7. Consult your solutions for problems #4 and #5.

Requirements R1. Journalize salary expense for College of St. Mary related to the employment of Gina Tarver. R2. Journalize benefits expense for College of St. Mary related to the employment of Gina Tarver. R3. Journalize employer payroll taxes for College of St. Mary related to the employment of Gina Tarver.

8. Consider the following note payable transactions of Crandell Video Productions.

Requirement R1. Journalize the transactions for the company.

9. The accounting records of Earthtone Ceramics included the following at December 31, 2011:

In the past, Earthtones warranty expense has been 5% of sales. During 2012, Earthtone made sales of $115,000 and paid $4,000 to satisfy warranty claims.

Requirements R1. Journalize Earthtones warranty expense and warranty payments during 2012. Explanations are not required. R2. What balance of Estimated warranty payable will Earthtone report on its balance sheet at December 31, 2012?

10. Juans Mexican Restaurants incurred salary expense of $62,000 for 2009. The payroll expense includes employer FICA tax of 8%, in addition to state unemployment tax of 5.4% and federal unemployment tax of 0.8%. Of the total salaries, $19,000 is subject to unemployment tax. Also, the company provides the following benefits for employees: health insurance (cost to the company, $2,040), life insurance (cost to the company, $380), and retirement benefits (cost to the company, 5% of salary expense).

Requirement R1. Record Juans expenses for employee benefits and for payroll taxes. Explanations are not required.

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11. The following transactions of Brewton Pharmacies occurred during 2010 and 2011:

Requirement R1. Journalize the transactions in Brewtons general journal. Explanations are not required.

12. Logan White is general manager of Moonwalk Tanning Salons. During 2010, White worked for the company all year at a $6,100 monthly salary. He also earned a year end bonus equal to 5% of his salary. Whites federal income tax withheld during 2010 was $810 per month, plus $932 on his bonus check. State income tax withheld came to $80 per month, plus $70 on the bonus. The FICA tax withheld was 8% of the first $90,000 in annual earnings. White authorized the following payroll deductions: United Fund contribution of 1% of total earnings and life insurance of $20 per month. Moonwalk incurred payroll tax expense on White for FICA tax of 8% of the first $90,000 in annual earnings. The company also paid state unemployment tax of 5.4% and federal unemployment tax of 0.8% on the first $7,000 in annual earnings. In addition, Moonwalk provides White with health insurance at a cost of $110 per month. During 2010, Moonwalk paid $2,000 into Whites retirement plan.

Requirements R1. Compute Whites gross pay, payroll deductions, and net pay for the full year 2010. Round all amounts to the nearest dollar. R2. Compute Moonwalks total 2010 payroll expense for White. R3. Make the journal entry to record Moonwalks expense for Whites total earnings for the year, his payroll deductions, and net pay. Debit Salary expense and Bonus expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.

13. The accounting records of Path Leader Wireless include the following:

Requirement R1. Report these liabilities on the Path Leader Wireless balance sheet, including headings and totals for current liabilities and long-term liabilities.