147. Agro Depot’s income before interest expense and income taxes was $5,909 million, and
interest expense was $37 million. Calculate Agro Depot’s times interest earned.
148. Calco had income before interest expense and income taxes of $5,698 million and
interest expense of $399 million. Calculate Calco’s times interest earned.
149. ZMart had income before interest expense and income taxes of $12,581 million and
interest expense of $1,063 million. XMart had income before interest expense and income
taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest
earned for each company and comment on the results.
150. On November 1, Bob’s Skateboards signed a $12,000, 90-day, 5% note payable to cover
a past due account payable.
a. What amount of interest expense on this note should Bob’s Skateboards report on year-end
December 31?
b. Prepare Bob’s journal entry to record the issuance of the note payable.
c. Prepare Bob’s journal entry to record the payment of the note on February 1 of the
following year.
151. On June 1, Martin Company signed a $25,000, 120-day, 6% note payable to cover a past
due account payable.
a. What is the total amount of interest to be paid on this note?
b. Prepare Martin Company’s general journal entry to record the issuance of the note payable.
c. Prepare Martin Company’s general journal entry to record the payment of the note on
September 29.
152. On September 15, SportsWorld borrowed $75,000 cash from FirstBank by signing a
12%, 60-day note payable.
a. Prepare SportsWorld’s journal entry to record the issuance of the note payable.
b. Prepare SportsWorld’s journal entry to record the payment of the note at maturity.
153. On December 1, Gates Company borrowed $45,000 cash from FirstBank by signing a
90-day, 9% note payable.
a. Prepare Gate’s journal entry to record the issuance of the note payable.
b. Prepare Gate’s journal entry to record the accrued interest due at December 31.
c. Prepare Gate’s journal entry to record the payment of the note on March 1 of the next year.
154. A company borrowed $60,000 by signing a 60-day, 10% note payable from its bank.
Compute the total cash payment due on the note’s maturity date.
155. The tax rate for FICA–social security is 6.2% and the tax rate for FICA–Medicare is
1.45%. Calculate the total amount of FICA withholding for an employee whose pay is $2,400
and is entirely subject to these FICA taxes.
156. An employee earned $3,450 for the current period. Calculate the total and individual
amounts to be withheld for social security (6.2%), Medicare (1.45%) and federal income tax
(15%) assuming the entire employee’s pay is subject to FICA taxes.
157. A company has 2 employees. The company’s total salaries for the month of January were
$8,000. The federal income tax rate for both employees is 15%. The FICA–social security tax
rate is 6.2% and the FICA–Medicare tax rate is 1.45%. Calculate the amount of employee
taxes withheld and prepare the company’s journal entry to record the January payroll
assuming these were the only deductions.
158. A company has 90 employees and a weekly payroll of $117,000. The FICA–social
security tax rate is 6.2% and the FICA–Medicare tax rate is 1.45%. The total withholding for
federal income tax is $16,500 for the current week. Calculate the amount of FICA taxes owed
(assuming no employee’s salary is over the FICA limit) and prepare the journal entry to
accrue this week’s salaries expense and withholdings.
159. Metro Express has 5 sales employees, each of whom earns $4,000 per month and is paid
on the last working day of the month. Each employee’s wages are subject to FICA social
security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each
employee also includes federal income tax of 16% and monthly medical insurance premiums
of $110 for each employee.
a. Prepare the general journal entry to accrue the monthly sales salaries expense at January 31.
b. The employer payroll taxes for Metro Express include FICA taxes, federal unemployment
taxes of 0.8% of the first $7,000 paid each employee, and state unemployment taxes of 4.0%
of the first $7,000 paid to each employee. Prepare the journal entry to record the employer’s
payroll taxes at January 31 for Metro Express. (Assume that none of the employees has
reached the unemployment limit of $7,000.)
160. The payroll records of a company provided the following data for the weekly pay period
ended December 7:
Earnings
to End of
Federal
Medical
Previous
Gross
Income
Insurance
Union
United
Employee
Week
Pay
Taxes
Deduction
Dues
Way
Ronald Arthur
$ 54,000
$1,200
$216
$125
$15
$15
John Baines
40,500
900
162
125
15
30
Ted Carter
45,000
1,000
180
150
-0–
20
The FICA social security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of
this week’s wages paid to each employee. The federal and state unemployment tax rates are
0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Prepare the journal
entries to (a) accrue the payroll and (b) record payroll taxes expense.
Dec. 7
Salaries and Wages Expense
Federal Income Taxes Payable
Medical Insurance Payable
Union Dues Payable
United Way Payable
FICA–Social Security Taxes Payable
FICA–Medicare Taxes Payable
Salaries Payable
b.
Dec. 7
Payroll Taxes Expense
FICA–Social Security Taxes Payable
FICA–Medicare Taxes Payable
161. A company’s payroll for the week ended May 15 included earned salaries of $20,000. All
of that week’s pay is subject to FICA social security taxes of 6.2% and Medicare taxes of
1.45%. In addition, the company withholds the following amounts for this weekly pay period:
$900 for medical insurance, $3,400 for federal income taxes, and $180 for union dues.
a. Prepare the general journal entry to accrue the payroll.
b. The company is subject to state unemployment taxes at the rate of 2% and federal
unemployment taxes at the rate of 0.8%. By May 15, some employees had earned over
$7,000, so only $9,000 of the $20,000 weekly gross pay was subject to unemployment tax.
Prepare the general journal entry to accrue the employer’s payroll tax expense.
162. A company’s employees had the following earnings records at the close of the current
payroll period:
Employees
Earning
through
Prior Pay
Period
Earning this
Pay Period
D. Adams....
$11,300
$3,900
J. Hess…….
6,100
2,500
R. Lui……….
9,500
3,100
T. Morales…
4,800
1,400
L. Vang…….
10,000
3,000
The company’s payroll taxes expense on each employee’s earnings includes: FICA Social
Security taxes of 6.2% on the first $106,800 of earnings plus 1.45% FICA Medicare on all
wages; 0.8% federal unemployment taxes on the first $7,000; and 2.5% state unemployment
taxes on the first $7,000. Compute the employer’s total payroll taxes expense for the current
pay period.
Current earnings subject to:
SUTA and
FICA
FUTA
D. Adams
$ 3,900
J. Hess
2,500
$ 900
R. Lui
3,100
T. Morales
1,400
1,400
L. Vang
3,000
_____
$13,900
$2,300
11-71
163. An employer has an employee benefit package that includes employer-paid health
insurance and an employer-paid retirement program. During January, the employer paid
$7,500 for health insurance, and contributed to the employee retirement program 10% of the
employees’ $150,000 gross salaries. Prepare the journal entry to record these employee
benefits.
164. A company sells its product subject to a warranty that covers the cost of parts for repairs
during the six months after the date of sale. Warranty costs are estimated to be 6% of sales.
During the month of June, the company performed warranty work and used $12,000 of parts
to perform the warranty work. Sales for June were $450,000.
1. Record the warranty expense for the month of June.
2. Record the costs of the warranty work completed in June.
3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31,
what is the account balance at June 30?
165. A company sells personal computers for $2,300 each. The price includes a two-year
warranty. During the current year, the company sells 400 computers. On the basis of past
experience, the warranty costs are estimated to be $250 per computer. The actual warranty
costs (paid in cash) by the company during the current year were $65,000. Prepare general
journal entries to record the (a) estimated warranty expense and (b) warranty repair costs
during current year.
166. A company sells computers with a 6-month warranty. In January, the company sold
100,000 computers at $1,750 each; and 1,500 computers were turned in for repairs during that
same month. The total repairs amounted to $185,000 costs from the computer parts
inventory. It is estimated that 2% of all units sold will need repairs under warranty at an
estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty
expense for January and (b) warranty repair costs for January.
167. Pastimes Co. offers its employees a bonus equal to 2% of the company’s net income. The
estimated net income for the year is expected to be $850,000. Prepare the general journal
entry to record the employee bonus plan expense.
168. A company’s employer payroll tax rates are 0.8% for federal unemployment taxes, 5.4%
for state unemployment taxes, 6.2% for FICA social security taxes on earnings up to
$106,800, and 1.45% for FICA Medicare taxes on all earnings. Compute the W-2 Wage and
Tax Statement information required below for the following employees:
Employee Gross Earnings Federal Income Taxes Withheld
A. Baker $114,000 $17,600
C. Dirkson 52,000 8,200
A. Baker C. Dirkson
W-2 Information: ________ ________
Federal Income Tax Withheld………….. ________ ________
Wages, Tips, Other Compensation……… ________ ________
Social Security Tax Withheld…………… ________ ________
Social Security Wages………………….. ________ ________
Medicare Tax Withheld………………… ________ ________
Medicare Wages………………………… ________ ________
169. The payroll records of a company provided the following data for the current weekly pay
period ended March 7.
Earnings
to End of
Federal
Health
Previous
Gross
Income
Insurance
Union United
Employees
Week
Pay
Taxes
Deduction
Dues Way
A. Poe…….
$ 5,800
$800
$120
$25
$10 $10
B. Rye…….
6,850
1,100
180
30
10 15
C. Sims……
12,900
1,440
404
40
0 40
Assume that the Social Security portion of the FICA taxes is 6.2% on the first $106,800 and
the Medicare portion is 1.45% of all wages paid to each employee for this pay period. The
federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000
paid to each employee. Calculate the net pay for each employee.
Federal
Medical
Union
United
Gross
Income
Insurance
Dues
Total
Net
$800.00
$120.00
$10.00
$61.20
$226.20