Accounting: Assignment 11
Please complete all requirements for each question.Also answer this question:
17. Maynard Printers (MP) manufactures printers. Assume that MP recently paid $400,000 for a
patent on a new laser printer. Although it gives legal protection for 20 years, the patent is
expected to provide a competitive advantage for only 10 years.
Requirements
R1. Assuming the straight-line method of amortization, make journal entries to record (a) the
purchase of the patent and (b) amortization for year 1.
R2. After using the patent for five years, MP learns at an industry trade show that another
company is designing a more efficient printer. On the basis of this new information, MP decides,
starting with year 6, to amortize the remaining cost of the patent over two remaining years, giving
the patent a total useful life of seven years. Record amortization for year
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Assignment 11.1 Handout |
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1. On August 31, 2010, Gordon, Co., purchased $7,000 of inventory on a one-year, 12% note payable. |
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Requirements R1. Journalize the company’s accrual of interest expense on February 28, 2011, their fiscal year- end. R2. Journalize the company’s payment of the note plus interest on August 31, 2011. |
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2. Catskills Corporation guarantees its snowmobiles for three years. Company experience indicates that warranty costs will add up to 5% of sales. Assume that the Catskills dealer in Colorado Springs made sales totaling $519,000 during 2011. The company received cash for 20% of the sales and notes receivable for the remainder. Warranty payments totaled $19,000 during 2011. |
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Requirements R1. Record the sales, warranty expense, and warranty payments for the company. R2. Post to the Estimated warranty payable T-account. At the end of 2011, how much in Estimated warranty payable does the company owe? |
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3. Farley Motors, Inc., a motorcycle manufacturer, included the following note (adapted) in its annual report: |
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Requirements R1. Why are these contingent (versus real) liabilities? R2. How can a contingent liability become a real liability for Farley Motors? What are the limits to the company’s product liabilities in the United States? |
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4. Gina Tarver is paid $720 for a 40-hour workweek and time-and-a-half for hours above 40. |
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Requirements R1. Compute Tarver’s gross pay for working 52 hours during the first week of February. R2. Tarver is single, and her income tax withholding is 20% of total pay. Tarver’s only payroll deductions are payroll taxes. Compute Tarver’s net (take-home) pay for the week. Use an 8% FICA tax rate, and carry amounts to the nearest cent. |
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5. Return to the Gina Tarver payroll situation in Short Exercise 10-4. Tarver’s employer, College of St. Mary, pays all the standard payroll taxes plus benefits for employee retirement plan (4% of total pay), health insurance ($105 per employee per month), and disability insurance ($11 per employee per month). |
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Requirement R1. Compute College of St. Mary’s total expense of employing Gina Tarver for the 52 hours that she worked during the first week of February. Carry amounts to the nearest cent. |
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1 |
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6. Suppose you work for DePetro-Carr, the accounting firm, all year and earn a monthly salary of $6,800. There is no overtime pay. Your withheld income taxes consume 25% of gross pay. In addition to payroll taxes, you elect to contribute 6% monthly to your retirement plan. DePetro-Carr also deducts $110 monthly for your co-pay of the health insurance premium. |
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Requirement R1. Compute your net pay for November. Use an 8% FICA tax rate. |
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7. Consult your solutions for problems #4 and #5. |
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Requirements R1. Journalize salary expense for College of St. Mary related to the employment of Gina Tarver. R2. Journalize benefits expense for College of St. Mary related to the employment of Gina Tarver. R3. Journalize employer payroll taxes for College of St. Mary related to the employment of Gina Tarver. |
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8. Consider the following note payable transactions of Crandell Video Productions. |
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Requirement R1. Journalize the transactions for the company. |
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9. The accounting records of Earthtone Ceramics included the following at December 31, 2011: |
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In the past, Earthtone’s warranty expense has been 5% of sales. During 2012, Earthtone made sales of $115,000 and paid $4,000 to satisfy warranty claims. |
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Requirements R1. Journalize Earthtone’s warranty expense and warranty payments during 2012. Explanations are not required. R2. What balance of Estimated warranty payable will Earthtone report on its balance sheet at December 31, 2012? |
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10. Juan’s Mexican Restaurants incurred salary expense of $62,000 for 2009. The payroll expense includes employer FICA tax of 8%, in addition to state unemployment tax of 5.4% and federal unemployment tax of 0.8%. Of the total salaries, $19,000 is subject to unemployment tax. Also, the company provides the following benefits for employees: health insurance (cost to the company, $2,040), life insurance (cost to the company, $380), and retirement benefits (cost to the company, 5% of salary expense). |
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Requirement R1. Record Juan’s expenses for employee benefits and for payroll taxes. Explanations are not required. |
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2 |
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11. The following transactions of Brewton Pharmacies occurred during 2010 and 2011: |
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Requirement R1. Journalize the transactions in Brewton’s general journal. Explanations are not required. |
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12. Logan White is general manager of Moonwalk Tanning Salons. During 2010, White worked for the company all year at a $6,100 monthly salary. He also earned a year end bonus equal to 5% of his salary. White’s federal income tax withheld during 2010 was $810 per month, plus $932 on his bonus check. State income tax withheld came to $80 per month, plus $70 on the bonus. The FICA tax withheld was 8% of the first $90,000 in annual earnings. White authorized the following payroll deductions: United Fund contribution of 1% of total earnings and life insurance of $20 per month. Moonwalk incurred payroll tax expense on White for FICA tax of 8% of the first $90,000 in annual earnings. The company also paid state unemployment tax of 5.4% and federal unemployment tax of 0.8% on the first $7,000 in annual earnings. In addition, Moonwalk provides White with health insurance at a cost of $110 per month. During 2010, Moonwalk paid $2,000 into White’s retirement plan. |
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Requirements R1. Compute White’s gross pay, payroll deductions, and net pay for the full year 2010. Round all amounts to the nearest dollar. R2. Compute Moonwalk’s total 2010 payroll expense for White. R3. Make the journal entry to record Moonwalk’s expense for White’s total earnings for the year, his payroll deductions, and net pay. Debit Salary expense and Bonus expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required. |
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13. The accounting records of Path Leader Wireless include the following: |
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Requirement R1. Report these liabilities on the Path Leader Wireless balance sheet, including headings and |
totals for current liabilities and long-term liabilities.
Accounting: Assignment 11
Name
Course
Instructor
Date
Questions 1
R1:
Feb 28- year end accrual of interestDebitCreditInterest expense(7,000*12%*6/12)420 Interest payable420
R2:
August 31- Repayment of note and interestDebitCreditNotes payable7,000Interest payable420Interest expense420 Cash7,840
Question 2:
R1
DebitCreditCash103,800Notes receivable415,200 Sales519,000Being sale of snowmobilesDebitCreditWarranty Expense25,950 Warranty Payable25,950Being record of warranty expenseDebitCreditWarranty payable19,000Cash19,000Being record of warranty payments
R2: Warranty liability account
Warranty payableCash19,000Warranty expense25,950Balance6,95025,95025,950
R1: The Company officials know that there are events that may give rise to liability, and these are the contingent liabilities rather than real liabilities, where Farley Motors can reasonably estimate the liability.
R2: The contingent liabilities can become liabilities upon realization of liability losses, where there is an increase in claims. Farley Motors is liable for any defective products or negligence on its part and this defines limits to the company’s product liabilities.
Question 4
R1: Tarver gross pay
Total HoursRegular
Overtime
Total
40.00
+
12.00
=
52.00
Total Gross Pay for Regular Rate = $18.00 / hour Overtime Rate = $27.00 / hour Regular
Overtime
Gross Pay
$720.00
+
$324.00
=
$1,044.00
R2: Net income
Total Gross pay $1,044 Less:Withholding income tax$208.80 FICA tax$83.52 $292.32 Net pay$751.68 Question 5
Straight-time pay for 40 hours$720 Overtime pay for 12 hours324 Total pay to employee$1,044 Employer payroll taxes FICA83.52 State Unemployment Taxes56.37 Federal Unemployment Taxes8.35Benefit Cost: Retirement Plan$41.76 Health insurance(105/4)26.25 Disability insurance(11/4)2.75Total payroll taxes and benefit cost219Total expense of employer$1,263
Question 6
Total Gross pay 6,800Less:Withholding income tax1700FICA tax544Payments to retirement plan 408Payment to health insurance110$2,762.00 Net pay $4,038.00
Question 7
R1: Journalizing salary expenses
Salary expense1,044 Salary payable1,044Being record of salary expenseSalary payable1,044 Withholding income tax$208.80 FICA tax payable83.52 Cash/ take home pay$751.68 Being record of salaries payment
R2: Journalizing Benefit expense
Retirement Plan41.76Health insurance26.25Disability insurance2.75 Employee benefits payable70.76Being record of employee benefits
R3: Journalizing employer payroll taxes
DetailsDebitCreditPayroll tax expense148.24 FICA tax payable83.52 SUTA56.37 FUTA8.35
Question 8: Jou...