7. The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. Earnings

subject to 6.0% social security tax were $60,000; earnings subject to 1.5% Medicare tax were $80,000; and

earnings of $3,000 were subject to 4.3% state and 0.8% federal unemployment compensation tax.

Journalize the entry to record the accrual of payroll taxes.

8. Martinez Co. borrowed $50,000 on March 1 of the current year by signing a 60-day, 9%, interest-

bearing note. Assuming a 360-day year, journalize the transaction when the note is paid on April 30.

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9. Benson and Orton are partners who share income in the ratio of 1:3 and have capital balances of

$70,000 and $30,000, respectively. Ramsey is admitted to the partnership and is given a 40% interest by

investing $20,000. What is Orton's capital balance after admitting Ramsey?

10. The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership's

liquidation: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan, capital, $60,000; Rockwell,

capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses

in a 2:1 ratio. As a final cash distribution from the liquidation, how much cash will Morgan receive?

11. A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of

four years or 18,000 hours. What is the amount of depreciation for the second full year, using the double-

declining-balance method?

12. Hannah Johnson contributed equipment, inventory, and $53,000 cash to a partnership. The

equipment had a book value of $25,000 and a market value of $28,000. The inventory had a book value

of $50,000 but only had a market value of $15,000 due to obsolescence. The partnership also assumed a

$12,000 note payable owed by Hannah that was originally used to purchase the equipment.