Week Four Exercise Assignment Liability 1 Payroll accounting Assume that the following tax rates and payroll information pertain to Brookhaven Publishing Social Security taxes 4 on the first $55,000 earned per employee Medicare taxes 1 5 on the first $130,000 earned per employee Federal income taxes withheld from wages $7,500 State income taxes 4 of gross earnings Insurance withholdings 1 of gross earnings State unemployment taxes 5 4 on the first $7,000 earned per employee Federal unemployment taxes 0 8 on the first $7,000 earned per employee The company incurred a salary expense of $50,000 during February All employees had earned less than $5,000 by month end and no wages have been paid during the month a Prepare the necessary entry to record Brookhavens February payroll The entry will include deductions for the following Social Security taxes Medicare taxes Federal income taxes withheld State income taxes Insurance withholdings b Prepare the journal entry to record Brookhavens payroll tax expense The entry will include the following Matching Social Security taxes Matching Medicare taxes State unemployment taxes Federal unemployment taxes 2 Current liabilities entries and disclosure A review of selected financial activities of Viscontis during 20XX disclosed the following 1 Dec Borrowed $10,000 from the First City Bank by signing a 3 month, 15 note payable Interest and principal are due at maturity 10 Dec Established a warranty liability for the XY 80, a new product Sales are expected to total 1,000 units during the month Past experience with similar products indicates that 3 of the units will require repair, with warranty costs averaging $27 per unit (parts only) 22 Dec Purchased $16,000 of merchandise on account from Oregon Company, terms 2 10, n 30 26 Dec Borrowed $5,000 from First City Bank signed a 15 note payable due in 60 days (Assume 360 day year for interest) 31 Dec Repaired six XY 80s during the month at a total cost of $162 31 Dec Accrued three days of salaries at a total cost of $1,400 Instructions a Prepare journal entries to record the transactions b Prepare adjusting entries on December 31 to record accrued interest for each of the notes payable 3 Notes payable Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31 2 Aug Borrowed $55,000 from the Bank of Kingsville by signing a 90 day, 12 note 20 Aug Issued a $50,000 note to Harris Motors for the purchase of a $50,000 delivery truck The note is due in 180 days and carries a 12 interest r ate 10 Sep Purchased merchandise from Pans Enterprises in the amount of $15,000 Issued a 30 day, 12 note in settlement of the balance owed 11 Sep Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount The note is due in 30 days and carries a 14 interest rate 10 Oct The note to Pans Enterprises was paid in full 11 Oct The note to Datatex Equipment was paid in full 30 Oct Paid note to Bank of Kingsville Instructions a Prepare journal entries to record the transactions b Prepare adjusting entries on December 31 to record accrued interest (Daily interest is calculated utilizing the 360 day method) c Prepare the Current Liability section of Red Banks balance sheet as of December 31 Assume that the Accounts Payable account totals $203,600 on this date

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Week Four Exercise Assignment Liability 1. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing: Social Security taxes: 4%

Week Four Exercise Assignment

Liability

1. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing:

Social Security taxes: 4% on the first $55,000 earned per employee
Medicare taxes: 1.5% on the first $130,000 earned per employee
Federal income taxes withheld from wages: $7,500
State income taxes: 4% of gross earnings
Insurance withholdings: 1% of gross earnings
State unemployment taxes: 5.4% on the first $7,000 earned per employee
Federal unemployment taxes: 0.8% on the first $7,000 earned per employee

The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end and no wages have been paid during the month.

a. Prepare the necessary entry to record Brookhavens February payroll. The entry will include deductions for the following:

Social Security taxes
Medicare taxes
Federal income taxes withheld
State income taxes
Insurance withholdings

b. Prepare the journal entry to record Brookhavens payroll tax expense. The entry will include the following:

Matching Social Security taxes
Matching Medicare taxes
State unemployment taxes
Federal unemployment taxes

2. Current liabilities: entries and disclosure. A review of selected financial activities of Viscontis during 20XX disclosed the following:


	1-Dec: Borrowed $10,000 from the First City Bank by signing a 3-month, 15% note payable.
	Interest and principal are due at maturity.
	10-Dec: Established a warranty liability for the XY-80, a new product. Sales are expected to
	total 1,000 units during the month. Past experience with similar products indicates
	that 3% of the units will require repair, with warranty costs averaging $27 per unit (parts only).
	22-Dec: Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.
	26-Dec: Borrowed $5,000 from First City Bank; signed a 15% note payable due in 60 days. (Assume 360 day year for interest)
	31-Dec: Repaired six XY-80s during the month at a total cost of $162
	31-Dec: Accrued three days of salaries at a total cost of $1,400.

Instructions

a. Prepare journal entries to record the transactions.

b. Prepare adjusting entries on December 31 to record accrued interest for each of the notes payable.

3. Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31:

2-Aug: Borrowed $55,000 from the Bank of Kingsville by signing a 90-day, 12% note.

20-Aug: Issued a $50,000 note to Harris Motors for the purchase of a $50,000 delivery truck. The note is due in 180 days and carries a 12% interest r ate.

10-Sep: Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued

a 30-day, 12% note in settlement of the balance owed.

11-Sep: Issued a $60,000 note to Datatex Equipment in settlement of an overdue account

payable of the same amount. The note is due in 30 days and carries a 14% interest rate.

10-Oct: The note to Pans Enterprises was paid in full.

11-Oct: The note to Datatex Equipment was paid in full.

30-Oct: Paid note to Bank of Kingsville.

Instructions

a. Prepare journal entries to record the transactions.

b. Prepare adjusting entries on December 31 to record accrued interest. (Daily interest is calculated utilizing the 360 day method).

c. Prepare the Current Liability section of Red Banks balance sheet as of December 31. Assume that the Accounts Payable account totals $203,600 on this date.