ACC 205 Week Four Exercise Assignment Liability
Week Four Exercise Assignment
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- 1.Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed cash of $50,000 and equipment with a value of $20,000.
- a. Prepare the journal entries needed to record the investments of Levy and Parcells.
- Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing:
- Social Security taxes: 6% on the first $55,000 earned
- Medicare taxes: 1.5% on the first $130,000 earned
- Federal income taxes withheld from wages: $7,500
- State income taxes: 5% of gross earnings
- Insurance withholdings: 1% of gross earnings
- State unemployment taxes: 5.4% on the first $7,000 earned
- Federal unemployment taxes: 0.8% on the first $7,000 earned
The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end.
- Prepare the necessary entry to record Brookhaven’s February payroll. The entry will include deductions for the following:
- Social Security taxes
- Medicare taxes
- Federal income taxes withheld
- State income taxes
- Insurance withholdings
- Prepare the journal entry to record Brookhaven’s payroll tax expense. The entry will include the following:
- Matching Social Security taxes
- Matching Medicare taxes
- State unemployment taxes
- Federal unemployment taxes
- Current liabilities: entries and disclosure. A review of selected financial activities of Visconti’s during 20XX disclosed the following:
12/1 | Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable. Interest and principal are due at maturity. |
2/10 | 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 2% of the units will require repair, with warranty costs averaging $27 per unit. |
12/22 | Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30. |
12/26 | Borrowed $5,000 from First City Bank; signed a note payable due in 60 days. |
12/31 | Repaired six XY-80s during the month at a total cost of $162. |
12/31 | Accrued 3 days of salaries at a total cost of $1,400. |
Instructions
- Prepare journal entries to record the transactions.
- Prepare adjusting entries on October 31 to record accrued interest.
- Prepare the Current Liability section of Red Bank’s balance sheet as of October 31. Assume that the Accounts Payable account totals $203,600 on this date.
- Issuance of stock: organization costs. Snowbound Corporation was incorporated in July. The firm’s charter authorized the sale of 200,000 shares of $10 par-value common stock. The following transactions occurred during the year:
7/1: | Sold 45,000 shares of common stock to investors for $18 per share. Cash was collected and the shares were issued. |
8/11 | Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were issued. |
9/1 Declared a cash dividend on 9/1 for $1.00 a share for shareholders on record 10/1 with payment being made on 11/1.
Instructions
- a.Prepare journal entries for the two stock issues.
- b.Prepare journal entries for the cash dividend declaration and payment.
- Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31:
8/2: | Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note. |
8/20: | Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and carries a 12% interest rate. |
9/10: | Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed. |
9/11: | 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. |
10/10: | The note to Pans Enterprises was paid in full. |
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