Question
The following transactions apply to Park Co. for 2016: 1. Received $50,000 cash from the issue of common stock. 2. Purchased inventory on account for
The following transactions apply to Park Co. for 2016:
1. Received $50,000 cash from the issue of common stock.
2. Purchased inventory on account for $180,000. 3
. Sold inventory for $250,000 cash that had cost $140,000. Sales tax was collected at the rate of 5 percent on the inventory sold.
4. Borrowed $50,000 from First State Bank on March 1, 2016. The note had a 7 percent interest rate and a one-year term to maturity.
5. Paid the accounts payable (see transaction 2).
6. Paid the sales tax due on $190,000 of sales. Sales tax on the other $60,000 is not due until after the end of the year.
7. Salaries for the year for the one employee amounted to $46,000. Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income tax withheld was $5,300.
8. Paid $5,800 for warranty repairs during the year.
9. Paid $36,000 of other operating expenses during the year.
10. Paid a dividend of $2,000 to the shareholders.
Adjustments: |
11. | The products sold in transaction 3 were warranted. Park estimated that the warranty cost would be 3 percent of sales. | ||||
12. | Record the accrued interest at December 31, 2016. | ||||
13. | Record the accrued payroll tax at December 31, 2016. Assume no payroll taxes have been paid for the year and that the unemployment tax rate is 6 percent (federal unemployment tax rate is .6 percent and the state unemployment tax rate is 5.4 percent on the first $7,000 of earnings per employee).
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