Financial Accounting

This assignment is focused on three areas - short-term notes payable (Part A), payroll liabilities (Part B), and warranty liabilities (Part C).

Part A - Question 1 to 3: K Company borrows $200,000 cash on November 1 of Year 1 by signing a 90-day, 9%, $200,000 note. The note matures on January 30 of Year 2. Note: 9% is the annual interest rate.

Question 1

Part A - What is the amount of interest expense recorded in Year 1?

Question 2

Part A - What is the amount of interest expense recorded in Year 2?

Question 3

Part A - What is the payment of the note at maturity?

Part B - Question 4 to 7: 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%.

Question 4

Part B - What is the FICA Social Security Taxes Payable amount for Employee payroll recording? (Round the answer to 2 decimals.)

Question 5

Part B - What is the Salaries Payable amount to Employee payroll recording? (Round the answer to 2 decimals.)

Question 6

Part B - What is the Federal Unemployment Taxes Payable (FUTA) amount for Employer payroll recording? (Round the answer to 2 decimals.)

Question 7

Part B - What is the Payroll Tax Expense amount to Employer payroll recording? (Round the answer to 2 decimals.)

Part C - Question 8 to 10: H Company sold a copier (that costs $4,800) for $6,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. H Company expects warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $209 for materials taken from the parts inventory. These are the only repairs required in Year 2 for this copier.

Question 8

Part C - How much warranty expense does the company report for this copier in Year 1?

Question 9

Part C - What is the estimated warranty liability as of December 31 of Year 2?

Question 10

Part C - What is the impact on the income statement on December 31 of Year 1 after the sale and the estimation of warranty costs?

If the impact on the income statement is positive, enter a positive number. If the impact on the income statement is negative, place a negative sign in front of the number. If there is no impact, enter a zero.