Gonzalez Equipment Company sold 600 Rollomatics during 2014 at $4,000 each. During 2014, Gonzalez spent $30,000 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis. Instructions (a) Prepare 2014 entries for Gonzalez using the expense warranty approach. Assume that Gonzalez estimates the total cost of servicing the warranties will be $150,000 for 2 years. (b) Prepare 2014 entries for Gonzalez assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $200,000 relates to sales of warranty contracts. Gonzalez estimates the total cost of servicing the warranties will be $150,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs. (Tips: warranty sold separately is treated as unearned revenue) 2. (Payroll Tax Entries) The payroll of Grich Company for September 2014 is as follows. Total payroll was $960,000, of which $220,000 is exempt from Social Security tax because it represented amounts paid in excess of $102,000 to certain employees. The amount paid to employees in excess of $7,000 was $800,000. Income taxes in the amount of $180,000 were withheld, as was $18,000 in union dues. The state unemployment tax is 3.5%, but Grich Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current F.I.C.A. tax is 7.65% on an employees wages to $102,000 and 1.45% in excess of $102,000. No employee for Grich makes more than $250,000. The federal unemployment tax rate is 0.8% after state credit. Instructions Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately. FUTA (unemployment) tax rate: The tax applies to the first $7,000 you paid to each employee as wages during the year. You may receive a credit for paying state unemployment tax. If the rate is 6% and you are entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.6% on federal level. (from IRS) These are the only two questions that I seem not to understand