The general ledger of Seal-N-Ship at June 30, 2018, the end of the company’s fiscal year, includes the following account balances before payroll and adjusting entries.
Accounts Payable $ 114,000
Interest Payable 0
Salaries Payable 0
Employee Income Taxes Payable 0
FICA—OASDI Taxes Payable 0
FICA—Medicare Taxes Payable 0
Federal Unemployment Taxes Payable 0
State Unemployment Taxes Payable 0
Unearned Rent Revenue 7,200
Long-term Notes Payable 210,000
The additional data needed to develop the payroll and adjusting entries at June 30 are as follows:
a. The long-term debt is payable in annual installments of $42,000, with the next installment due on July 31. On that date, Seal-N-Ship will also pay one year’s interest at 9%. Interest was paid on July 31 of the preceding year. Make the adjusting entry to accrue interest expense at year-end.
b. Gross unpaid salaries for the last payroll of the fiscal year were $4,700. Assume that employee income taxes withheld are $910 and that all earnings are subject to OASDI.
c. Record the associated employer taxes payable for the last payroll of the fiscal year, $4,700. Assume that the earnings are not subject to unemployment compensation taxes
d. On February 1, the company collected one year’s rent of $7,200 in advance.
1. Using T-accounts, open the listed accounts and insert the unadjusted June 30 balances.
2. Journalize and post the June 30 payroll and adjusting entries to the accounts that you opened. Identify each adjusting entry by letter. Round to the nearest dollar.
3. Prepare the current liabilities section of the balance sheet at June 30, 2018.
Total Adjusted current liability: $ 127,046
Partial Balance Sheet
Employee Income Tax Payable
FICA – OASDI Taxes Payable
FICA – Medicare Taxes Payable
Unearned Rent Revenue
Total Current Liabilities
Long Term Assets
Long-term Notes Payable
This problem continues the Canyon Canoe Company situation from Chapter 10. Amber and Zack Wilson are continuing their analysis of the company’s position and believe the company will need to borrow $15,000 in order to expand operations. They consult Rivers Nation Bank and secure a 6%, one-year note on September 1, 2019, with interest due at maturity. Additionally, the company hires an employee, John Vance, on September 1. John will receive a salary of $3,000 per month. Payroll deductions include federal income tax at 25%, OASDI at 6.2%, Medicare at 1.45%, and monthly health insurance premium of $250. The company will incur matching FICA taxes, FUTA tax at 0.6%, and SUTA tax at 5.4%. Round calculations to two decimals. Omit explanations on journal entries.
Record the entry Canyon Canoe Company would make to record the payment to the bank on September 1, 2020.
The following transactions of Plymouth Pharmacies occurred during 2017 and 2018:
Jan. 9 Purchased computer equipment at a cost of $12,000, signing a six-month, 9% note payable for that amount.
29 Recorded the week’s sales of $63,000, three-fourths on credit and onefourth for cash. Sales amounts are subject to a 6% state sales tax. Ignore cost of goods sold.
Feb. 5 Sent the last week’s sales tax to the state.
Jul. 9 Paid the six-month, 9% note, plus interest, at maturity.
Aug. 31 Purchased merchandise inventory for $9,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system.
Dec. 31 Accrued warranty expense, which is estimated at 4% of sales of $609,000.
31 Accrued interest on all outstanding notes payable.
Feb. 28 Paid the six-month 10% note, plus interest, at maturity.
Journalize the transactions in Plymouth’s general journal. Explanations are not required. Round to the nearest dollar.
Logan White is general manager of Valuepoint Salons. During 2018, White worked for the company all year at a $13,600 monthly salary. He also earned a year-end bonus equal to 15% of his annual salary.
White’s federal income tax withheld during 2018 was $1,360 per month, plus $4,876 on his bonus check. State income tax withheld came to $150 per month, plus $60 on the bonus. FICA tax was withheld on the annual earnings. White authorized the following payroll deductions: Charity Fund contribution of 1% of total earnings and life insurance of $40 per month.
Valuepoint incurred payroll tax expense on White for FICA tax. The company also paid state unemployment tax and federal unemployment tax.
1. Compute White’s gross pay, payroll deductions, and net pay for the full year 2018. Round all amounts to the nearest dollar.
2. Compute Valuepoint’s total 2018 payroll tax expense for White.
3. Make the journal entry to record Valuepoint’s expense for White’s total earnings for the year, his payroll deductions, and net pay. Debit Salaries Expense and Bonus Expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.
4. Make the journal entry to record the accrual of Valuepoint’s payroll tax expense for White’s total earnings.
5. Make the journal entry for the payment of the payroll withholdings and taxes.
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