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Name: Problem: P13-2, Current Liability Entries and Adjustments, File 13p-2 Course: Date: Listed below are selected transactions of Schultz Department Store for the current year ending December 31. 1. On December 5, the store received $500 from the Jackson Players as a deposit to be returned after a certain furniture to be used in stage production was returned on January 15. 2. During December, cash sales totaled $798,000 which includes the 5% sales tax that must be remitted to the state by the fifteenth day of the following month. 3. On December 10, the store purchased for cash three delivery trucks for $120,000 The trucks were purchased in a state that applies a 5% sales tax. 4. The store determined it will cost $100,000 to restore the area surrounding one of its store parking lots, when the store is closed in 2 years. Bryant estimates the fair value of the obligation at December 31 is $84,000 Instructions: Prepare all the journal entries necessary to record the transactions noted above as they occurred and any adjusting entries relative to the transactions that would be required to present fair financial statements at December 31. Date each entry. For simplicity, assume that adjusting journal entries are recorded only once a year on December 31. 1 2 3 4 Dec 5 Dec 31 Dec 10 Dec 31 Cash Account Title 500 Amount Account Title Account Title Sales Taxes Payable Amount Account Title Account Title Amount Account Title Account Title Amount Amount Formula Amount Problem 13-2, Page 1 of 4, 08/03/2012, 22:41:58 Amount Name: Problem: Course: Date: 0 P13-4, Payroll Tax Entries, File 13p-4 Below is a payroll sheet for Otis Import Company for the month of September 2010. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000 Assume a 10% federal income tax rate for all employees and a 7.65% F.I.C.A. tax on employee and employer on a maximum of $90,000 In addition, 1.45% is charged both employer and employee for an employee's wage in excess of $90,000 per employee. Name B.D. Williams D. Prowse K. Baker F. Oz A. Daniels P. Mayhew Earnings to Aug 31 $6,800.00 6,300.00 7,600.00 13,600.00 105,000.00 112,000.00 September Income Tax Earnings Withholding $800.00 700.00 1,100.00 1,900.00 13,000.00 16,000.00 F.I.C.A. State U.C. Federal U.C. Instructions: (a) Complete the payroll sheet and make the necessary entry to record the payment of the payroll. Name B. D. Williams D. Prowse K. Baker F. Oz A. Daniels P. Mayhew Total a b c Earnings to Aug. 31 6,800 6,300 7,600 13,600 105,000 112,000 251,300 September Income Tax Earnings Withholding 800 80 700 Formula 1,100 Formula 1,900 Formula 13,000 Formula 16,000 Formula 33,500 Formula FICA Formula Formula Formula Formula 188.50 a Formula b Formula Ref State U.C. c Formula Formula - - - - Formula Federal U.C. Formula Formula - - - - Formula $13,000 X 1.45% = $188.50 Enter detail as desired. Enter detail as desired. Enter detail as desired. Wages and Salaries Expense Account Title Account Title Account Title Formula Amount Amount Amount (b) Make the entry to record the payroll tax expenses of Jedi Import Company. Payroll Tax Expense Formula Account Title Account Title Account Title Amount Amount Amount (c) Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month. Dec 31 Withholding Taxes Payable Account Title Account Title Account Title Account Title Amount Amount Amount Amount Formula Name: Problem: Course: Date: 0 P14-2, Issuance and Retirement of Bonds, File 14p-2 Venzuela Co. is building a new hockey arena at a cost of $2,500,000 It received a down payment of $500,000 from local businesses to support the project, and now needs to borrow $2,000,000 to complete the project. It therefore decides to issue $2,000,000 of 10.50% 10 -year bonds. These bonds were issued on January 1, 2009, and pay interest annually on each January 1. The bonds yield 10.00% Venzuela paid $50,000 in bond issue costs related to the bond sale. Note: Use of tables or financial calculators may result is slightly different values due to rounding and significant digits. Instructions: (a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2009. Jan 1, 09 Present value of the principal = $2,000,000 X 0.38554 = (PV of $1 for 10 periods at 10%) = $771,086.58 Present value of principal formula = $771,086.58 Present value of the interest = $210,000 X 6.14457 = (PV of a $1 anuity for 10 periods at 10%) = $1,290,359.09 Present value of interest formula = Present selling value of the bonds = Jan 1, 09 Cash Unamortized Bond Issue Costs Bonds Payable Premium Bonds Payable (b) Prepare a bond amortization schedule up to and including January 1, 2013, using the effective interest method. Bond Interest Interest Premium Date Carrying Paid Expense Amortization Value $0.00 Jan 1, 09 Jan 1, 10 $210,000.00 Jan 1, 11 Jan 1, 12 Jan 1, 13 (c) Assume that on July 1, 2012, Venzuela Co. retires half of the bonds at a cost of plus accrued interest. Prepare the journal entry to record this retirement. Carrying amount as of 1/1/12 Less: Amortization of bond premium Carrying amount as of 7/1/12 Reacquisition price Carrying amount as of 7/1/12 Loss Entry for accrued interest Interest Expense Premium on Bonds Payable Cash Entry for reacquisition Bonds Payable Account Title Account Title Account Title $1,065,000 Name: Problem: Course: Date: 0 P14-5, Comprehensive Bond Problem, File 14p-5 Instructions: (Round to the nearest dollar.) (Note: Calculations with financial calculators or tables might result in slightly different values due to rounding.) For the two (independent) cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.) In each of the following independent cases the company closes its books on December 31. 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2010. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2013. The bonds yield 12% Give the entries through December 31, 2011. Mar 1, 10 Cash Account Title Bonds Payable 500,000 Maturity value of bonds payable Present value of $250,000 due in 7 periods at 6% Present value of interest payable semiannually Proceeds from sale of bonds Discount on bonds payable $500,000 Sep 1, 10 Account Title Account Title Cash 25,000 Dec 31, 10 Account Title Account Title Interest Payable 16,667 Mar 1, 11 Account Title Interest Payable Account Title Cash 16,667 25,000 Sep 1, 11 Account Title Account Title Cash 25,000 Dec 31, 11 Account Title Account Title Interest Payable 16,667 Schedule of Bond Discount Amortization Effective Interest Method 10% Bonds Sold to Yield 12% Date Cash Mar 1, 10 Sep 1, 10 Mar 1, 11 Sep 1, 11 Mar 1, 12 Sep 1, 12 Mar 1, 13 Sep 1, 13 Interest Expense Bond Discount Carrying Value of Bonds 25,000 2. Titania Co. sells $400,000 of 12% bonds on June 1, 2010. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds yield 10% On October 1, 2011, Dougherty buys back $120,000 worth of the bonds for $126,000 (includes accrued interest). Give the entries through December 31, 2012. Jun 1, 10 Cash Bonds Payable Premium on Bonds Payable 400,000 Maturity value of bonds payable Present value of $250,000 due in 7 periods at 6% Present value of interest payable semiannually Proceeds from sale of bonds Premium on bonds payable Dec 1, 10 Interest Expense Account Title Account Title Dec 31, 10 $400,000 Interest Expense Account Title Account Title Jun 1, 11 Interest Expense Account Title Account Title Interest Payable Oct 1, 11 Interest Expense Account Title Cash Oct 1, 11 Bonds Payable Premium on Bonds Payable Gain on Redemption of Bonds Payable Cash 120,000 Net carrying amount of bonds redeemed - Par value Unamortized premium Reacquisition price Gain on redemption Dec 1, 11 Interest Expense Account Title Account Title Jun 1, 12 Interest Expense Account Title Account Title Account Title Dec 1, 12 $122,800 Interest Expense Account Title Account Title Dec 31, 11 120,000 Account Title Account Title Account Title 16,800 Schedule of Bond Discount Amortization Effective Interest Method 12% Bonds Sold to Yield 10% Date Jun 1, 10 Dec 1, 10 Jun 1, 11 Dec 1, 11 Jun 1, 12 Dec 1, 12 Jun 1, 13 Dec 1, 13 Jun 1, 14 Cash Interest Expense Bond Premium Carrying Value of Bonds
