Mastery Problem: Liabilities: Current, Installment Notes, and Contingencies Copperfield and Company Chart of Accounts Payroll Short-Term Note Payable Installment Note Warranty E Copperfield and Company X You've just started your first accounting job, as the accounts payable and payroll clerk for Copperfield and Company, a provider of delicate wine glasses to restaurants. Your predecessor left the job suddenly, and was not able to complete all the tasks before leaving. You need to get up to speed and complete the unfinished tasks as soon as possible. Your tasks on your first day are the following: 1. Review the Payroll Journal entries made by your predecessor. 2. Compute the relevant amounts for the company's short-term note payable and determine whether your predecessor's journal entries are correct. 3. Confirm the journal entry for this year's payment on an installment note. . Make a recommendation as to whether the company should journalize any warranty expense for the month. You decide to get started - the sooner the better!Mastery Problem: Liabilities: Current, Installment Notes, and Contingencies Copperfield and Company Chart of Accounts Payroll Short-Term Note Payable Installment Note Warranty Payroll X The following Payroll Journal entries for Oct. 15 were made by your predecessor. For FICA tax, assume that the social security rate is 6.0% and the Medicare rate is 1.5%. The state and federal unemployment tax rates are 5.4% and 0.8%, respectively. The company offers 401k plans to employees. Review the journal entries, then answer the questions that follow. PAGE 32 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY Oct. 15 Sales Salaries Expense 85,500.00 N H Officers Salaries Expense 307,800.00 Office Salaries Expense 57,000.00 Factory Wages Expense 119,700.00 1 Social Security Tax Payable 34,200.00 T Medicare Tax Payable 8,550.00 Employees Federal Income Tax Payable 102,600.00 Medical Insurance Payable 62,700.00 Retirement Contributions Payable 85,500.00 Salaries Payable 276,450.00 Payroll Tax Expense 44,176.00 12 Social Security Tax Payable 34,200.00 Medicare Tax Payable 8.550.00Mastery Problem: Liabilities: Current, Installment Notes, and Contingencies Copperfield and Company Chart of Accounts Payroll Short-Term Note Payable Installment Note Warranty Payroll X 14 Federal Unemployment Tax Payable 184.00 4 15 State Unemployment Tax Payable 1,242.00 16 15 Pension Expense 39,900.00 17 Cash 39,900.00 In order to confirm the previous clerk's payroll calculations, you have been asked to supply the following amounts based on your review of the payroll entries. These amounts will be checked against the company records and investigated further if necessary. 1. Determine the payroll amount subject to federal and state unemployment taxes in this payroll. $ 2. What is the total payroll for Copperfield and Company shown in these journal entries? $ 3. What is Copperfield and Company's share of FICA taxes in this payroll? $ 4. How much has Copperfield and Company contributed to employee 401k plans in this payroll? $Mastery Problem: Liabilities: Current, Installment Notes, and Contingencies Copperfield and Company Chart of Accounts Payroll Short-Term Note Payable Installment Note Warranty Short-Term Note Payable X JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 Jul. 10 Accounts Payable 180,000.00 2 Notes Payable 180,000.00 T Notes Payable 189,000.00 Accounts Payable 180,000.00 T 5 Interest Expense 9,000.00 T You notice that the journal entry for recording the note on July 10 is correct, but the entry for the payment of the note at maturity (including interest) did not have a date and was not correct. Journalize the payment of the note at maturity as it should have been journalized. Don't forget to include the date. Assume a 360-day year. PAGE 25 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY\fMastery Problem: Liabilities: Current, Installment Notes, and Contingencies Copperfield and Company Chart of Accounts Payroll Short-Term Note Payable Installment Note Warranty E Installment Note The following journal entry was made by your predecessor to record the annual payment on a 5%, 10-year installment note. PAGE 22 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 Oct. 1 Interest Expense 710 152,086.00 2 Notes Payable 215 550,476.00 3 Cash 110 702,562.00 Using the information provided, compute the following amounts. 1. What was the carrying amount (book value) of the installment note before the payment on October 1? $ 2. What portion of next year's payment will be interest? (Round the amount to the nearest dollar.) $Mastery Problem: Liabilities: Current, Installment Notes, and Contingencies Copperfield and Company Chart of Accounts Payroll Short-Term Note Payable Installment Note Warranty Warranty X Copperfield and Company has decided to provide a warranty on its products. The previous clerk left a note with the files on this new warranty on glass breakage, deciding that an entry for warranty expense was not necessary, with the following reasoning: Our product is the finest in the world, and thus the contingency of a warranty replacement for breakage is remote. Under accounting standards, the proper treatment for a remote likelihood of occurrence is to take no action. Accordingly, in my professional judgment, no journal entry should be made for warranty expense." You should review the previous clerk's notes and evaluate the decision. After refreshing your memory on the treatment of contingent liabilities, what action will you take? Journalize an adjusting entry debiting Product Warranty Expense and crediting Product Warranty Payable. Assume that a reasonable estimate of the warranty cost can be determined by an examination of prior breakage and replacement data. Make no entry, but disclose the possible warranty liability amount in the notes to the company financial statements. Since there's no way to accurately determine the amount of breakage that might occur, no entry or disclosure is required. Make no entry; the previous clerk is correct that there is a remote chance of any breakage