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.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Oct. 15	Sales Salaries Expense		85,500.00
2		Officers Salaries Expense		307,800.00
3		Office Salaries Expense		57,000.00
4		Factory Wages Expense		119,700.00
5		Social Security Tax Payable			34,200.00
6		Medicare Tax Payable			8,550.00
7		Employees Federal Income Tax Payable			102,600.00
8		Medical Insurance Payable			62,700.00
9		Retirement Contributions Payable			85,500.00
10		Salaries Payable			276,450.00
11	15	Payroll Tax Expense		44,176.00
12		Social Security Tax Payable			34,200.00
13		Medicare Tax Payable			8,550.00
14		Federal Unemployment Tax Payable			184.00
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 clerks 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 Companys share of FICA taxes in this payroll?

4. How much has Copperfield and Company contributed to employee 401k plans in this payroll?

Short-Term Note Payable

Copperfield and Company issued a 90-day, 6.00% note for $200,000 to a creditor on account. The previous clerk entered the following journal entries to record the note on July 10, and the payment of the note at maturity.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Jul. 10	Accounts Payable		200,000.00
2		Notes Payable			200,000.00
3		Notes Payable		212,000.00
4		Accounts Payable			200,000.00
5		Interest Expense			12,000.00

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. Dont forget to include the date. Assume a 360-day year.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3

Installment Note

The following journal entry was made by your predecessor to record the annual payment on a 5%, 10-year installment note.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Oct. 1	Interest Expense	710	95,663.00
2		Notes Payable	215	606,899.00
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 years payment will be interest? (Round the amount to the nearest dollar.)

Warranty

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 clerks notes and evaluate the decision. After refreshing your memory on the treatment of contingent liabilities, what action will you take?

A. Make no entry, but disclose the possible warranty liability amount in the notes to the company financial statements.

B. Since theres no way to accurately determine the amount of breakage that might occur, no entry or disclosure is required.

C. 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.

D. Make no entry; the previous clerk is correct that there is a remote chance of any breakage.