PR 11-5B Payroll accounts and year-end entries

The following accounts, with the balances indicated, appear in the ledger of Codigo Co. on December 1 of the current year:


101 Salaries Payable — 108 Bond Deductions Payable $ 2,300
102 Social Security Tax Payable $2,913 109 Medical Insurance Payable 2,520
103 Medicare Tax Payable 728 201 Sales Salaries Expense 700,000
104 Employees Federal Income Tax Payable 4,490 301 Officers Salaries Expense 340,000
105 Employees State Income Tax Payable 4,078 401 Office Salaries Expense 125,000
106 State Unemployment Tax Payable 1,260 408 Payroll Tax Expense 59,491
107 Federal Unemployment Tax Payable 360


The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 1. Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy.
1. Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees’ federal income tax due.
2. Issued Check No. 817 for $2,300 to Alvarez Bank to purchase U.S. savings bonds for employees.
12. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:


Salary distribution:
Sales $14,500
Officers 7,100
Office 2,600 $24,200
Deductions:
Social security tax $ 1,452
Medicare tax 363
Federal income tax withheld 4,308
State income tax withheld 1,089
Savings bond deductions 1,150
Medical insurance deductions 420 8,782
Net amount $15,418








12. Issued Check No. 822 in payment of the net amount of the biweekly payroll.
12. Journalized the entry to record payroll taxes on employees’ earnings of December
12: social security tax, $1,452; Medicare tax, $363; state unemployment tax, $315; federal unemployment tax, $90.
15. Issued Check No. 830 to Alvarez Bank for $7,938, in payment of $2,904 of social security tax, $726 of Medicare tax, and $4,308 of employees’ federal income tax due.
26. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:


Salary distribution:
Sales $14,250
Officers 7,250
Office 2,750 $24,250
Deductions:
Social security tax $ 1,455
Medicare tax 364
Federal income tax withheld 4,317
State income tax withheld 1,091
Savings bond deductions 1,150 8,377
Net amount $15,873








26. Issued Check No. 840 for the net amount of the biweekly payroll.
Dec. 26. Journalized the entry to record payroll taxes on employees’ earnings of December
26: social security tax, $1,455; Medicare tax, $364; state unemployment tax, $150; federal unemployment tax, $40.
30. Issued Check No. 851 for $6,258 to State Department of Revenue, in payment of employees’ state income tax due on December 31.
30. Issued Check No. 852 to Alvarez Bank for $2,300 to purchase U.S. savings bonds for employees.
31. Paid $55,400 to the employee pension plan. The annual pension cost is $65,500. (Record both the payment and the unfunded pension liability.)


Instructions
1. Journalize the transactions.
2. Journalize the following adjusting entries on December 31:
a. Salaries accrued: sales salaries, $4,275; officers salaries, $2,175; office salaries, $825. The payroll taxes are immaterial and are not accrued.
b. Vacation pay, $13,350.


Answer:



1. Dec. 1 Medical Insurance Payable 2,520
Cash 2,520
1 Social Security Tax Payable 2,913
Medicare Tax Payable 728
Employees Federal Income Tax Payable 4,490
Cash 8,131
2 Bond Deductions Payable 2,300
Cash 2,300
12 Sales Salaries Expense 14,500
Officers Salaries Expense 7,100
Office Salaries Expense 2,600
Social Security Tax Payable 1,452
Medicare Tax Payable 363
Employees Federal Income Tax Payable 4,308
Employees State Income Tax Payable 1,089
Bond Deductions Payable 1,150
Medical Insurance Payable 420
Salaries Payable 15,418
12 Salaries Payable 15,418
Cash 15,418
12 Payroll Tax Expense 2,220
Social Security Tax Payable 1,452
Medicare Tax Payable 363
State Unemployment Tax Payable 315
Federal Unemployment Tax Payable 90
15 Social Security Tax Payable 2,904
Medicare Tax Payable 726
Employees Federal Income Tax Payable 4,308
Cash 7,938

Dec. 26 Sales Salaries Expense 14,250
Officers Salaries Expense 7,250
Office Salaries Expense 2,750
Social Security Tax Payable 1,455
Medicare Tax Payable 364
Employees Federal Income Tax Payable 4,317
Employees State Income Tax Payable 1,091
Bond Deductions Payable 1,150
Salaries Payable 15,873
26 Salaries Payable 15,873
Cash 15,873
26 Payroll Tax Expense 2,009
Social Security Tax Payable 1,455
Medicare Tax Payable 364
State Unemployment Tax Payable 150
Federal Unemployment Tax Payable 40
30 Employees State Income Tax Payable 6,258
Cash 6,258
30 Bond Deductions Payable 2,300
Cash 2,300
31 Pension Expense 65,500
Cash 55,400
Unfunded Pension Liability 10,100
To record pension cost and unfunded
liability.
2. Dec. 31 Sales Salaries Expense 4,275
Officers Salaries Expense 2,175
Office Salaries Expense 825
Salaries Payable 7,275
Accrued wages for the period.
31 Vacation Pay Expense 13,350
Vacation Pay Payable 13,350
Vacation pay accrued for the period.

PR 11-4B Payroll register

The following data for Flexco Inc. relate to the payroll for the week ended December 7, 2014:


Employee
Hours
Worked
Hourly
Rate
Weekly
Salary
Federal
Income Tax
U.S. Savings
Bonds
Carlton 52 $50.00 $667.00 $ 60
Grove $4,000 860.00 100
Johnson 36 52.00 355.68 0
Koufax 45 58.00 578.55 44
Maddux 37 45.00 349.65 62
Seaver 3,200 768.00 120
Spahn 46 52.00 382.20 0
Winn 48 50.00 572.00 75
Young 43 54.00 480.60 80



Employees Grove and Seaver are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1½ times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0% of each employee’s annual earnings, and Medicare tax is 1.5% of each employee’s annual earnings. The next payroll check to be used is No. 328.

Instructions
1. Prepare a payroll register for Flexco Inc. for the week ended December 7, 2014. Use the following columns for the payroll register: Employee, Total Hours, Regular Earnings, Overtime Earnings, Total Earnings, Social Security Tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No., Sales Salaries Expense, and Office Salaries Expense.

2. Journalize the entry to record the payroll for the week.


Answer:

1. PAYROLL FOR WEEK ENDING December 7, 2014
Employee
Total
Hours
EARNINGS DEDUCTIONS PAID ACCOUNT DEBITED
Regular Overtime Total
Social
Security
Tax
Medicare
Tax
Federal
Income
Tax
U.S.
Savings
Bonds Total
Net
Pay
Ck.
No.
Sales
Salaries
Expense
Office
Salaries
Expense
Carlton 52 2,000.00 900.00 2,900.00 174.00 43.50 667.00 60.00 944.50 1,955.50 328 2,900.00
Grove 4,000.00 240.00 60.00 860.00 100.00 1,260.00 2,740.00 329 4,000.00
Johnson 36 1,872.00 1,872.00 112.32 28.08 355.68 496.08 1,375.92 330 1,872.00
Koufax 45 2,320.00 435.00 2,755.00 165.30 41.33 578.55 44.00 829.18 1,925.82 331 2,755.00
Maddux 37 1,665.00 1,665.00 99.90 24.98 349.65 62.00 536.53 1,128.47 332 1,665.00
Seaver 3,200.00 192.00 48.00 768.00 120.00 1,128.00 2,072.00 333 3,200.00
Spahn 46 2,080.00 468.00 2,548.00 152.88 38.22 382.20 573.30 1,974.70 334 2,548.00
Winn 48 2,000.00 600.00 2,600.00 156.00 39.00 572.00 75.00 842.00 1,758.00 335 2,600.00
Young 43 2,160.00 243.00 2,403.00 144.18 36.05 480.60 80.00 740.83 1,662.17 336 2,403.00
14,097.00 2,646.00 23,943.00 1,436.58 359.16 5,013.68 541.00 7,350.42 16,592.58 16,743.00 7,200.00
2. Sales Salaries Expense 16,743.00
Office Salaries Expense 7,200.00
Social Security Tax Payable 1,436.58
Medicare Tax Payable 359.16
Employees Federal Income Tax Payable 5,013.68
Bond Deductions Payable 541.00
Salaries Payable 16,592.58

PR 11-3B Wage and tax statement data and employer FICA tax

Jocame Inc. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 2014, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5% on salary. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:


Employee
Date First
Employed
Monthly
Salary
Monthly
Income Tax
Withheld
Addai July 16 $ 8,160 $1,704
Kasay June 1 3,600 533
McGahee Feb. 16 6,420 1,238
Moss Jan. 1 4,600 783
Stewart Dec. 1 4,500 758
Tolbert Nov. 16 3,250 446
Wells May 1 10,500 2,359


Instructions
1. Calculate the amounts to be reported on each employee’s Wage and Tax Statement (Form W-2) for 2013, arranging the data in the following form:


Employee
Gross
Earnings
Federal Income
Tax Withheld
Social Security
Tax Withheld
Medicare
Tax Withheld

2. Calculate the following employer payroll taxes for the year: (a) social security; (b)  Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.8% on the first $10,000 of each employee’s earnings; (e) total.


Answer:

1. Gross Federal Income Social Security Medicare
Employee Earnings* Tax Withheld Tax Withheld Tax Withheld
Addai…………………… $44,880 $ 9,372 $ 2,692.80 $ 673.20
Kasay………………… 25,200 3,731 1,512.00 378.00
McGahee……………… 67,410 12,999 4,044.60 1,011.15
Moss…………………… 55,200 9,396 3,312.00 828.00
Stewart……………… 4,500 758 270.00 67.50
Tolbert………………… 4,875 669 292.50 73.13
Wells………………… 84,000 18,872 5,040.00 1,260.00
$17,163.90 $4,290.98
* The gross earnings are determined by multiplying the monthly earnings by the
number of months of employment based on the date of hire.
2. a. Social security tax paid by employer……………………………………… $17,163.90
b. Medicare tax paid by employer……………………………………………… 4,290.98
c. Earnings subject to unemployment compensation tax,
$10,000 for all employees except Stewart and Tolbert.
Thus, total earnings subject to SUTA and FUTA are
$59,375 [(5 × $10,000) + $4,500 + $4,875].
State unemployment compensation tax: $59,375 × 5.4%……………… 3,206.25
d. Federal unemployment compensation tax: $59,375 × 0.8%…………… 475.00
e. Total payroll tax expense…………………………………………………… $25,136.13

PR 11-2B Entries for payroll and payroll taxes

The following information about the payroll for the week ended December 30 was obtained from the records of Saine Co.:


Salaries: Deductions:
Sales salaries $ 625,000 Income tax withheld $232,260
Warehouse salaries 240,000 Social security tax withheld 71,100
Office salaries 320,000 Medicare tax withheld 17,775
$1,185,000 U.S. savings bonds 35,500
Group insurance 53,325
$409,960
Tax rates assumed:
Social security, 6%
Medicare, 1.5%
State unemployment (employer only), 5.4%
Federal unemployment (employer only), 0.8%




Instructions
1. Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries:
a. December 30, to record the payroll.
b. December 30, to record the employer’s payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $30,000 is subject to unemployment compensation taxes.
2. Assuming that the payroll for the last week of the year is to be paid on January 4 of the following fiscal year, journalize the following entries:
a. December 30, to record the payroll.
b. January 4, to record the employer’s payroll taxes on the payroll to be paid on January
4. Since it is a new fiscal year, all $1,185,000 in salaries is subject to unemployment compensation taxes.


Answer:

1. a. Dec. 30 Sales Salaries Expense 625,000
Warehouse Salaries Expense 240,000
Office Salaries Expense 320,000
Employees Income Tax Payable 232,260
Social Security Tax Payable 71,100
Medicare Tax Payable 17,775
Bond Deductions Payable 35,500
Group Insurance Payable 53,325
Salaries Payable 775,040
b. Dec. 30 Payroll Tax Expense 90,735
Social Security Tax Payable 71,100
Medicare Tax Payable 17,775
State Unemployment Tax Payable1 1,620
Federal Unemployment Tax Payable2 240

1 $30,000 × 5.4%
2 $30,000 × 0.8%
2. a. Dec. 30 Sales Salaries Expense 625,000
Warehouse Salaries Expense 240,000
Office Salaries Expense 320,000
Employees Income Tax Payable 232,260
Social Security Tax Payable1 71,100
Medicare Tax Payable2 17,775
Bond Deductions Payable 35,500
Group Insurance Payable 53,325
Salaries Payable 775,040
1 $1,185,000 × 6%
2 $1,185,000 × 1.5%
b. Jan. 4 Payroll Tax Expense 162,345
Social Security Tax Payable 71,100
Medicare Tax Payable 17,775
State Unemployment Tax Payable3 63,990
Federal Unemployment Tax Payable4 9,480

3 $1,185,000 × 5.4%
4 $1,185,000 × 0.8%

PR 11-1B Liability transactions

The following items were selected from among the transactions completed by Aston Martin Inc. during the current year:

Apr. 15. Borrowed $225,000 from Audi Company, issuing a 30-day, 6% note for that amount.
May 1. Purchased equipment by issuing a $320,000, 180-day note to Spyder Manufacturing Co., which discounted the note at the rate of 6%.
15. Paid Audi Company the interest due on the note of April 15 and renewed the loan by issuing a new 60-day, 8% note for $225,000. (Record both the debit and credit to the notes payable account.)
July 14. Paid Audi Company the amount due on the note of May 15.
Aug. 16. Purchased merchandise on account from Exige Co., $90,000, terms, n/30.
Sept.15. Issued a 45-day, 6% note for $90,000 to Exige Co., on account.
Oct. 28. Paid Spyder Manufacturing Co. the amount due on the note of May 1.
30. Paid Exige Co. the amount owed on the note of September 15.
Nov. 16. Purchased store equipment from Gallardo Co. for $450,000, paying $50,000 and issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals.
Dec. 16. Paid the amount due Gallardo Co. on the first note in the series issued on November 16.
28. Settled a personal injury lawsuit with a customer for $87,500, to be paid in January. Aston Martin Inc. accrued the loss in a litigation claims payable account.

Instructions
1. Journalize the transactions.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
a. Product warranty cost, $26,800.
b. Interest on the 19 remaining notes owed to Gallardo Co.


Answer:


1. Apr. 15 Cash 225,000
Notes Payable 225,000
May 1 Equipment 310,400
Interest Expense ($320,000 × 180/360 × 6%) 9,600
Notes Payable 320,000
15 Notes Payable 225,000
Interest Expense ($225,000 × 30/360 × 6%) 1,125
Notes Payable 225,000
Cash 1,125
July 14 Notes Payable 225,000
Interest Expense ($225,000 × 60/360 × 8%) 3,000
Cash 228,000
Aug. 16 Merchandise Inventory 90,000
Accounts Payable—Exige Co. 90,000
Sept. 15 Accounts Payable—Exige Co. 90,000
Notes Payable 90,000
Oct. 28 Notes Payable 320,000
Cash 320,000
30 Notes Payable 90,000
Interest Expense ($90,000 × 45/360 × 6%) 675
Cash 90,675
Nov. 16 Store Equipment 450,000
Notes Payable 400,000
Cash 50,000
Dec. 16 Notes Payable 20,000
Interest Expense ($20,000 × 30/360 × 9%) 150
Cash 20,150
28 Litigation Loss 87,500
Litigation Claims Payable 87,500

2. a. Product Warranty Expense 26,800
Product Warranty Payable 26,800
Warranty expense for the current year.
b. Interest Expense 4,275
Interest Payable 4,275
Interest on notes, $20,000 × 9% × 45/360 × 19.

PR 11-5A Payroll accounts and year-end entries

The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:


211 Salaries Payable — 218 Bond Deductions Payable $ 3,400
212 Social Security Tax Payable $ 9,273 219 Medical Insurance Payable 27,000
213 Medicare Tax Payable 2,318 411 Operations Salaries Expense 950,000
214 Employees Federal Income Tax Payable 15,455 511 Officers Salaries Expense 600,000
215 Employees State Income Tax Payable 13,909 512 Office Salaries Expense 150,000
216 State Unemployment Tax Payable 1,400 519 Payroll Tax Expense 137,951
217 Federal Unemployment Tax Payable 500



The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 2. Issued Check No. 410 for $3,400 to Jay Bank to purchase U.S. savings bonds for employees.
2. Issued Check No. 411 to Jay Bank for $27,046 in payment of $9,273 of social security tax, $2,318 of Medicare tax, and $15,455 of employees’ federal income tax due.
13. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:


Salary distribution:
Operations $43,200
Officers 27,200
Office 6,800 $77,200
Deductions:
Social security tax $ 4,632
Medicare tax 1,158
Federal income tax withheld 15,440
State income tax withheld 3,474
Savings bond deductions 1,700
Medical insurance deductions 4,500 30,904
Net amount $46,296






Dec. 13. Issued Check No. 420 in payment of the net amount of the biweekly payroll.
13. Journalized the entry to record payroll taxes on employees’ earnings of December
13: social security tax, $4,632; Medicare tax, $1,158; state unemployment tax, $350; federal unemployment tax, $125.
16. Issued Check No. 424 to Jay Bank for $27,020, in payment of $9,264 of social security tax, $2,316 of Medicare tax, and $15,440 of employees’ federal income tax due.
19. Issued Check No. 429 to Sims-Walker Insurance Company for $31,500 in payment of the semiannual premium on the group medical insurance policy.
27. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:



Salary distribution:
Operations $42,800
Officers 28,000
Office 7,000 $77,800
Deductions:
Social security tax $ 4,668
Medicare tax 1,167
Federal income tax withheld 15,404
State income tax withheld 3,501
Savings bond deductions 1,700 26,440
Net amount $51,360








27. Issued Check No. 541 in payment of the net amount of the biweekly payroll.
27. Journalized the entry to record payroll taxes on employees’ earnings of December
27: social security tax, $4,668; Medicare tax, $1,167; state unemployment tax, $225; federal unemployment tax, $75.
27. Issued Check No. 543 for $20,884 to State Department of Revenue in payment of employees’ state income tax due on December 31.
31. Issued Check No. 545 to Jay Bank for $3,400 to purchase U.S. savings bonds for employees.
31. Paid $45,000 to the employee pension plan. The annual pension cost is $60,000. (Record both the payment and unfunded pension liability.)


Instructions
1. Journalize the transactions.
2. Journalize the following adjusting entries on December 31:
a. Salaries accrued: operations salaries, $8,560; officers salaries, $5,600; office salaries, $1,400. The payroll taxes are immaterial and are not accrued.
b. Vacation pay, $15,000.


Answer:


1. Dec. 2 Bond Deductions Payable 3,400
Cash 3,400
2 Social Security Tax Payable 9,273
Medicare Tax Payable 2,318
Employees Federal Income Tax Payable 15,455
Cash 27,046
13 Operations Salaries Expense 43,200
Officers Salaries Expense 27,200
Office Salaries Expense 6,800
Social Security Tax Payable 4,632
Medicare Tax Payable 1,158
Employees Federal Income Tax Payable 15,440
Employees State Income Tax Payable 3,474
Bond Deductions Payable 1,700
Medical Insurance Payable 4,500
Salaries Payable 46,296
13 Salaries Payable 46,296
Cash 46,296
13 Payroll Tax Expense 6,265
Social Security Tax Payable 4,632
Medicare Tax Payable 1,158
State Unemployment Tax Payable 350
Federal Unemployment Tax Payable 125
16 Social Security Tax Payable 9,264
Medicare Tax Payable 2,316
Employees Federal Income Tax Payable 15,440
Cash 27,020
19 Medical Insurance Payable 31,500
Cash 31,500

Dec. 27 Operations Salaries Expense 42,800
Officers Salaries Expense 28,000
Office Salaries Expense 7,000
Social Security Tax Payable 4,668
Medicare Tax Payable 1,167
Employees Federal Income Tax Payable 15,404
Employees State Income Tax Payable 3,501
Bond Deductions Payable 1,700
Salaries Payable 51,360
27 Salaries Payable 51,360
Cash 51,360
27 Payroll Tax Expense 6,135
Social Security Tax Payable 4,668
Medicare Tax Payable 1,167
State Unemployment Tax Payable 225
Federal Unemployment Tax Payable 75
27 Employees State Income Tax Payable 20,884
Cash 20,884
31 Bond Deductions Payable 3,400
Cash 3,400
31 Pension Expense 60,000
Cash 45,000
Unfunded Pension Liability 15,000
To record pension cost and unfunded
liability.
2. a. Dec. 31 Operations Salaries Expense 8,560
Officers Salaries Expense 5,600
Office Salaries Expense 1,400
Salaries Payable 15,560
Accrued wages for the period.
b. 31 Vacation Pay Expense 15,000
Vacation Pay Payable 15,000
Vacation pay accrued for the period.

PR 11-4A Payroll register

The following data for Throwback Industries Inc. relate to the payroll for the week ended December 7, 2014:


Employee
Hours
Worked
Hourly
Rate
Weekly
Salary
Federal
Income Tax
U.S. Savings
Bonds
Aaron 46 $68.00 $766.36 $100
Cobb 41 62.00 553.20 110
Clemente 48 70.00 691.60 120
DiMaggio 35 56.00 411.60 0
Griffey, Jr. 45 62.00 618.45 130
Mantle $1,800 432.00 120
Robinson 36 54.00 291.60 130
Williams 2,000 440.00 125
Vaughn 42 62.00 533.20 50



Employees Mantle and Williams are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1½ times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0%, and Medicare tax is 1.5% of each employee’s annual earnings. The next payroll check to be used is No. 901.



Instructions
1. Prepare a payroll register for Throwback Industries Inc. for the week ended December 7, 2014. Use the following columns for the payroll register: Employee, Total Hours, Regular Earnings, Overtime Earnings, Total Earnings, Social Security Tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No., Sales Salaries Expense, and Office Salaries Expense.

2. Journalize the entry to record the payroll for the week.


Answer:

1. PAYROLL FOR WEEK ENDING December 7, 2014
Employee
Total
Hours
EARNINGS DEDUCTIONS PAID ACCOUNT DEBITED
Regular Overtime Total
Social
Security
Tax
Medicare
Tax
Federal
Income
Tax
U.S.
Savings
Bonds Total
Net
Pay
Ck.
No.
Sales
Salaries
Expense
Office
Salaries
Expense
Aaron 46 2,720.00 612.00 3,332.00 199.92 49.98 766.36 100.00 1,116.26 2,215.74 901 3,332.00
Cobb 41 2,480.00 93.00 2,573.00 154.38 38.60 553.20 110.00 856.18 1,716.82 902 2,573.00
Clemente 48 2,800.00 840.00 3,640.00 218.40 54.60 691.60 120.00 1,084.60 2,555.40 903 3,640.00
DiMaggio 35 1,960.00 1,960.00 117.60 29.40 411.60 558.60 1,401.40 904 1,960.00
Griffey, Jr. 45 2,480.00 465.00 2,945.00 176.70 44.18 618.45 130.00 969.33 1,975.67 905 2,945.00
Mantle 1,800.00 108.00 27.00 432.00 120.00 687.00 1,113.00 906 1,800.00
Robinson 36 1,944.00 1,944.00 116.64 29.16 291.60 130.00 567.40 1,376.60 907 1,944.00
Williams 2,000.00 120.00 30.00 440.00 125.00 715.00 1,285.00 908 2,000.00
Vaughn 42 2,480.00 186.00 2,666.00 159.96 39.99 533.20 50.00 783.15 1,882.85 909 2,666.00
16,864.00 2,196.00 22,860.00 1,371.60 342.91 4,738.01 885.00 7,337.52 15,522.48 19,060.00 3,800.00
2. Sales Salaries Expense 19,060.00
Office Salaries Expense 3,800.00
Social Security Tax Payable 1,371.60
Medicare Tax Payable 342.91
Employees Federal Income Tax Payable 4,738.01
Bond Deductions Payable 885.00
Salaries Payable 15,522.48

PR 11-3A Wage and tax statement data on employer FICA tax

Ehrlich Co. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 2014, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:


Employee
Date First
Employed
Monthly
Salary
Monthly
Income Tax
Withheld
Arnett Nov. 16 $ 5,500 $1,008
Cruz Jan. 2 4,800 833
Edwards Oct. 1 8,000 1,659
Harvin Dec. 1 6,000 1,133
Nicks Feb. 1 10,000 2,219
Shiancoe Mar. 1 11,600 2,667
Ward Nov. 16 5,220 938




Instructions
1. Calculate the amounts to be reported on each employee’s Wage and Tax Statement (Form W-2) for 2013, arranging the data in the following form:



Employee
Gross
Earnings
Federal Income
Tax Withheld
Social Security
Tax Withheld
Medicare
Tax Withheld

2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.8% on the first $10,000 of each employee’s earnings; (e) total.


Answer:


1. Gross Federal Income Social Security Medicare
Employee Earnings Tax Withheld Tax Withheld Tax Withheld
Arnett………………… $ 8,250.00 $ 1,512.00 $ 495.00 $ 123.75
Cruz…………………… 57,600.00 9,996.00 3,456.00 864.00
Edwards……………… 24,000.00 4,977.00 1,440.00 360.00
Harvin………………… 6,000.00 1,133.00 360.00 90.00
Nicks………………… 110,000.00 24,409.00 6,600.00 1,650.00
Shiancoe……………… 116,000.00 26,670.00 6,960.00 1,740.00
Ward………………… 7,830.00 1,407.00 469.80 117.45
$19,780.80 $4,945.20
2. a. Social security tax paid by employer......................................................... $19,780.80
b. Medicare tax paid by employer................................................................... 4,945.20
c. Earnings subject to unemployment compensation tax,
$10,000 for all employees except Arnett, Harvin, and Ward.
Thus, total earnings subject to SUTA and FUTA are
$62,080 [(4 × $10,000) + $8,250 + $6,000 + $7,830].
State unemployment compensation tax: $62,080 × 5.4% ........................ 3,352.32
d. Federal unemployment compensation tax: $62,080 × 0.8%………………… 496.64
e. Total payroll tax expense ............................................................................ $28,574.96

PR 11-2A Entries for payroll and payroll taxes

The following information about the payroll for the week ended December 30 was obtained from the records of Qualitech Co.:



Salaries: Deductions:
Sales salaries $350,000 Income tax withheld $118,800
Warehouse salaries 180,000 Social security tax withheld 40,500
Office salaries 145,000 Medicare tax withheld 10,125
$675,000 U.S. savings bonds 14,850
Group insurance 12,150
$196,425
Tax rates assumed:
Social security, 6%
Medicare, 1.5%
State unemployment (employer only), 5.4%
Federal unemployment (employer only), 0.8%




Instructions
1. Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries:
a. December 30, to record the payroll.
b. December 30, to record the employer’s payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $35,000 is subject to unemployment compensation taxes.
2. Assuming that the payroll for the last week of the year is to be paid on January 5 of the following fiscal year, journalize the following entries:
a. December 30, to record the payroll.
b. January 5, to record the employer’s payroll taxes on the payroll to be paid on January
5. Since it is a new fiscal year, all $675,000 in salaries is subject to unemployment compensation taxes.


Answer:


1. a. Dec. 30 Sales Salaries Expense 350,000
Warehouse Salaries Expense 180,000
Office Salaries Expense 145,000
Employees Income Tax Payable 118,800
Social Security Tax Payable 40,500
Medicare Tax Payable 10,125
Bond Deductions Payable 14,850
Group Insurance Payable 12,150
Salaries Payable 478,575
b. Dec. 30 Payroll Tax Expense 52,795
Social Security Tax Payable 40,500
Medicare Tax Payable 10,125
State Unemployment Tax Payable1 1,890
Federal Unemployment Tax Payable2 280

1 $35,000 × 5.4%
2 $35,000 × 0.8%
2. a. Dec. 30 Sales Salaries Expense 350,000
Warehouse Salaries Expense 180,000
Office Salaries Expense 145,000
Employees Income Tax Payable 118,800
Social Security Tax Payable1 40,500
Medicare Tax Payable2 10,125
Bond Deductions Payable 14,850
Group Insurance Payable 12,150
Salaries Payable 478,575
1 $675,000 × 6%
2 $675,000 × 1.5%
b. Jan. 5 Payroll Tax Expense 92,475
Social Security Tax Payable 40,500
Medicare Tax Payable 10,125
State Unemployment Tax Payable3 36,450
Federal Unemployment Tax Payable4 5,400

3 $675,000 × 5.4%
4 $675,000 × 0.8%

PR 11-1A Liability transactions

The following items were selected from among the transactions completed by Warwick Co. during the current year:

Feb. 3. Purchased merchandise on account from Onifade Co., $410,000, terms n/30.
Mar. 3. Issued a 45-day, 6% note for $410,000 to Onifade Co., on account.
Apr. 17. Paid Onifade Co. the amount owed on the note of March 3.
June 1. Borrowed $250,000 from Aldhiezer Bank, issuing a 60-day, 7.5% note.
July 21. Purchased tools by issuing a $300,000, 60-day note to Nash Co., which discounted the note at the rate of 8%.
31. Paid Aldhiezer Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 9% note for $250,000. (Journalize both the debit and credit to the notes payable account.)
Aug. 30. Paid Aldhiezer Bank the amount due on the note of July 31.
Sept.19. Paid Nash Co. the amount due on the note of July 21.
Dec. 1. Purchased office equipment from Oso Co. for $340,000, paying $40,000 and issuing a series of ten 8% notes for $30,000 each, coming due at 30-day intervals.
12. Settled a product liability lawsuit with a customer for $165,000, payable in January. Warwick accrued the loss in a litigation claims payable account.
31. Paid the amount due Oso Co. on the first note in the series issued on December 1.

Instructions
1. Journalize the transactions.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
a. Product warranty cost, $32,500.
b. Interest on the nine remaining notes owed to Oso Co.


Answer:


1. Feb. 3 Merchandise Inventory 410,000
Accounts Payable—Onifade Co. 410,000
Mar. 3 Accounts Payable—Onifade Co. 410,000
Notes Payable 410,000
Apr. 17 Notes Payable 410,000
Interest Expense ($410,000 × 45/360 × 6%) 3,075
Cash 413,075
June 1 Cash 250,000
Notes Payable 250,000
July 21 Tools 296,000
Interest Expense ($300,000 × 60/360 × 8%) 4,000
Notes Payable 300,000
31 Notes Payable 250,000
Interest Expense ($250,000 × 60/360 × 7.5%) 3,125
Notes Payable 250,000
Cash 3,125
Aug. 30 Notes Payable 250,000
Interest Expense ($250,000 × 30/360 × 9%) 1,875
Cash 251,875
Sept. 19 Notes Payable 300,000

Cash 300,000
Dec. 1 Office Equipment 340,000
Notes Payable 300,000
Cash 40,000
12 Litigation Loss 165,000
Litigation Claims Payable 165,000
31 Notes Payable 30,000
Interest Expense ($30,000 × 30/360 × 8%) 200
Cash 30,200

2. a. Product Warranty Expense 32,500
Product Warranty Payable 32,500
Warranty expense for the current year.
b. Interest Expense 1,800
Interest Payable 1,800
Interest on notes, $30,000 × 8.0% × 30/360 × 9.

PR 10-5B Transactions for fixed assets, including sale

The following transactions, adjusting entries, and closing entries were completed by Robinson Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.

2012
Jan. 8. Purchased a used delivery truck for $24,000, paying cash.
Mar. 7. Paid garage $900 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.
Dec. 31. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is four years, with a residual value of $4,000 for the truck.

2013
Jan. 9. Purchased a new truck for $50,000, paying cash.
Feb. 28. Paid garage $250 to tune the engine and make other minor repairs on the used truck.
Apr. 30. Sold the used truck for $9,500. (Record depreciation to date in 2013 for the truck.)
Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $12,000 and an estimated life of eight years.

2014
Sept. 1. Purchased a new truck for $58,500, paying cash.
4. Sold the truck purchased January 9, 2013, for $36,000. (Record depreciation to date for 2014 for the truck.)
Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $16,000 and an estimated useful life of 10 years.

Instructions
Journalize the transactions and the adjusting entries.


Answer:



2012
Jan. 8 Delivery Truck 24,000
Cash 24,000
Mar. 7 Truck Repair Expense 900
Cash 900
Dec. 31 Depreciation Expense—Delivery Truck 12,000
Accum. Depreciation—Delivery Truck 12,000
Delivery truck depreciation.
[$24,000 × (1/4 × 2)]
2013
Jan. 9 Delivery Truck 50,000
Cash 50,000
Feb. 28 Truck Repair Expense 250
Cash 250
Apr. 30 Depreciation Expense—Delivery Truck 2,000
Accum. Depreciation—Delivery Truck 2,000
Delivery truck depreciation.
[($24,000 – $12,000) × (1/4 × 2) × 4/12]
30 Accum. Depreciation—Delivery Truck 14,000
Cash 9,500
Loss on Sale of Delivery Truck 500
Delivery Truck 24,000
Dec. 31 Depreciation Expense—Delivery Truck 12,500
Accum. Depreciation—Delivery Truck 12,500
Delivery truck depreciation.
[$50,000 × (1/8 × 2)]
2014
Sept. 1 Delivery Truck 58,500
Cash 58,500
4 Depreciation Expense—Delivery Truck 6,250
Accum. Depreciation—Delivery Truck 6,250
Delivery truck depreciation.
[($50,000 – $12,500) × (1/8 × 2) × 8/12]
4 Cash 36,000
Accum. Depreciation—Delivery Truck 18,750
Delivery Truck 50,000
Gain on Sale of Delivery Truck 4,750
Dec. 31 Depreciation Expense—Delivery Truck 3,900
Accum. Depreciation—Delivery Truck 3,900
Delivery truck depreciation.
[$58,500 × (1/10 × 2) × 4/12]

PR 10-6B Amortization and depletion entries

Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:

a. On December 31, the company determined that $3,400,000 of goodwill was impaired.

b. Governmental and legal costs of $4,800,000 were incurred on September 30 in obtaining a patent with an estimated economic life of eight years. Amortization is to be for one-fourth year.

c. Timber rights on a tract of land were purchased for $2,975,000 on February 4. The stand of timber is estimated at 12,500,000 board feet. During the current year, 4,150,000 board feet of timber were cut and sold.



Instructions

1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items.

2. Journalize the adjusting entries to record the amortization, depletion, or impairment for each item.


Answer:

1. a.
b.
Loss from impaired goodwill, $3,400,000
$4,800,000 ÷ 8 years = $600,000;
1/4 of $600,000 = $150,000
c. $2,975,000 ÷ 12,500,000 board feet = $0.238 per board foot;
4,150,000 board feet × $0.238 per board foot = $987,700
2. a. Loss from Impaired Goodwill 3,400,000
Goodwill 3,400,000
Impaired goodwill.
b.
 Amortization Expense—Patents 150,000
Patents 150,000
Patent amortization.
c.
 Depletion Expense 987,700
Accumulated Depletion 987,700
Depletion of timber rights.

PR 10-4B Depreciation by two methods; sale of fixed asset

New tire retreading equipment, acquired at a cost of $110,000 at the beginning of a fiscal year, has an estimated useful life of four years and an estimated residual value of $7,500. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected.

In the first week of the fourth year, the equipment was sold for $18,000.


Instructions
1. Determine the annual depreciation expense for each of the estimated four years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (a) the straight-line method and (b) the double-declining-balance method. The following columnar headings are suggested for each schedule:



Year
Depreciation
Expense
Accumulated
Depreciation,
End of Year
Book Value,
End of Year



2. Journalize the entry to record the sale.

3. Journalize the entry to record the sale, assuming that the equipment sold for $10,500 instead of $18,000.


Answer:


1.
Depreciation
Accumulated
Depreciation, Book Value,
Year Expense End of Year End of Year
a. 1………………………………………………… $25,625* $ 25,625 $84,375
2………………………………………………… 25,625 51,250 58,750
3………………………………………………… 25,625 76,875 33,125
4………………………………………………… 25,625 102,500 7,500
* [($110,000 – $7,500) ÷ 4]
b. 1 [$110,000 × (1/4) × 2]……………………… $55,000 $ 55,000 $55,000
2 [$55,000 × (1/4) × 2]……………………… 27,500 82,500 27,500
3 [$27,500 × (1/4) × 2]……………………… 13,750 96,250 13,750
4 ($110,000 – $96,250 – $7,500)………… 6,250* 102,500 7,500
* Book value should not be reduced below $7,500, the residual value.
2.
 Cash 18,000
Accumulated Depreciation—Equipment 96,250
Equipment 110,000
Gain on Sale of Equipment* 4,250
* $18,000 – $13,750
3. Cash 10,500
Accumulated Depreciation—Equipment 96,250
Loss on Sale of Equipment* 3,250
Equipment 110,000

* $13,750 – $10,500