ACC 205 WEEK 4 EXERCISE ASSIGNMENT LIABILITY(NEW)/Uoptutorial
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<strong>ACC</strong> <strong>205</strong> <strong>WEEK</strong> 4 <strong>EXERCISE</strong> <strong>ASSIGNMENT</strong> <strong>LIABILITY</strong>(<strong>NEW</strong>)<br />
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Week Four Exercise Assignment Liability<br />
1. Partner investments; journal entries. The LP partnership was formed on January 1,<br />
19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash<br />
and $80,000 of land. Parcells contributed cash of $50,000 and equipment with a value of<br />
$20,000.<br />
a. Prepare the journal entries needed to record the investments of Levy and Parcells.<br />
2. Payroll accounting. Assume that the following tax rates and payroll information pertain<br />
to Brookhaven Publishing:<br />
• Social Security taxes: 6% on the first $55,000 earned<br />
• Medicare taxes: 1.5% on the first $130,000 earned<br />
• Federal income taxes withheld from wages: $7,500<br />
• State income taxes: 5% of gross earnings<br />
• Insurance withholdings: 1% of gross earnings<br />
• State unemployment taxes: 5.4% on the first $7,000 earned<br />
• Federal unemployment taxes: 0.8% on the first $7,000 earned<br />
The company incurred a salary expense of $50,000 during February. All employees had<br />
earned less than $5,000 by month-end.
a. Prepare the necessary entry to record Brookhaven’s February payroll. The entry will<br />
include deductions for the following:<br />
• Social Security taxes<br />
• Medicare taxes<br />
• Federal income taxes withheld<br />
• State income taxes<br />
• Insurance withholdings<br />
b. Prepare the journal entry to record Brookhaven’s payroll tax expense. The entry will<br />
include the following:<br />
• Matching Social Security taxes<br />
• Matching Medicare taxes<br />
• State unemployment taxes<br />
• Federal unemployment taxes<br />
3. Current liabilities: entries and disclosure. A review of selected financial activities of<br />
Visconti’s during 20XX disclosed the following:<br />
12/1<br />
Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable.<br />
Interest and principal are due at maturity.<br />
2/10<br />
Established a warranty liability for the XY-80, a new product. Sales are expected to total<br />
1,000 units during the month. Past experience with similar products indicates that 2% of<br />
the units will require repair, with warranty costs averaging $27 per unit.<br />
12/22<br />
Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.<br />
12/26<br />
Borrowed $5,000 from First City Bank; signed a note payable due in 60 days.<br />
12/31
Repaired six XY-80s during the month at a total cost of $162.<br />
12/31<br />
Accrued 3 days of salaries at a total cost of $1,400.<br />
Instructions<br />
a. Prepare journal entries to record the transactions.<br />
b. Prepare adjusting entries on October 31 to record accrued interest.<br />
c. Prepare the Current Liability section of Red Bank’s balance sheet as of October 31.<br />
Assume that the Accounts Payable account totals $203,600 on this date.<br />
4. Issuance of stock: organization costs. Snowbound Corporation was incorporated in<br />
July. The firm’s charter authorized the sale of 200,000 shares of $10 par-value common<br />
stock. The following transactions occurred during the year:<br />
7/1:<br />
Sold 45,000 shares of common stock to investors for $18 per share. Cash was collected<br />
and the shares were issued.<br />
8/11<br />
Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were<br />
issued.<br />
9/1 Declared a cash dividend on 9/1 for $1.00 a share for shareholders on record 10/1<br />
with payment being made on 11/1.<br />
Instructions<br />
a. Prepare journal entries for the two stock issues.<br />
b. Prepare journal entries for the cash dividend declaration and payment.<br />
5. Notes payable. Red Bank Enterprises was involved in the following transactions during<br />
the fiscal year ending October 31:<br />
8/2:<br />
Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note.<br />
8/20:
Issued a $40,000 note to Harris Motors for the purchase of a $40,000 de¬livery truck.<br />
The note is due in 180 days and carries a 12% interest rate.<br />
9/10:<br />
Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day,<br />
12% note in settlement of the balance owed.<br />
9/11:<br />
Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable<br />
of the same amount. The note is due in 30 days and car¬ries a 14% interest rate.<br />
10/10:<br />
The note to Pans Enterprises was paid in full.<br />
10/31: The note to Datatex Equipment was paid in full.<br />
11/30: Paid note to Bank of Kingville<br />
Instructions<br />
a. Prepare journal entries to record the transactions.<br />
b. Prepare adjusting entries on October 31 to record accrued interest.<br />
c. Prepare the Current Liability section of Red Bank’s balance sheet as of October 31.<br />
Assume that the Accounts Payable account totals $203,600 on this date.