195) Cardinal Company sells merchandise for $24,000 cash on March 31. The sales tax law
requires Cardinal to collect 8.5% sales tax on every dollar of merchandise sold. Record the entry
for the sale and its applicable sales tax.
196) Star Recreation receives $48,000 cash in advance ticket sales for 12 home games. Record
the advance ticket sales on April 30. Record the revenue earned for the first home game played
on August 14.
96
197) On January 31, Ransom Company’s payroll register showed that its employers earned
$30,320 of office salaries and $82,750 of sales salaries. Withholdings from the employees’
salaries include FICA Social Security taxes as the rate of 6.2%, FICA Medicare taxes at the rate
of 1.45%, $16,960 of federal income taxes, $3,350 of medical insurance deductions (which
represents 50% of the total cost of the employee medical insurance), and $4,210 of 401(k)
retirement contribution deductions. Ransom Company pays the other 50% of the employee
insurance cost and matches the employee 401(k) contributions. Several employees earned more
than $7,000 for the period which reduced salaries subject to unemployment to $104,000. No
employees exceeded the FICA-Social Security taxable wage base.
1. Prepare the journal entry to record Ransom Company’s January 31 payroll expenses and
liabilities.
2. Prepare the journal entry to record Ransom Company’s employer payroll taxes resulting from
the January 31 payroll. Ransom’s merit rating reduces its state unemployment (SUTA) to 5.4%
of the first $7,000 paid each employee. The federal unemployment tax (FUTA) rate is 0.6%.
3. Prepare the journal entry to record Ransom’s additional employee expenses.
198) General Co. entered into the following transactions involving short-term notes payable.
On May 14, General purchased $40,000 merchandise from Steller Co., terms are n/30. General
uses the perpetual inventory system. On May 29, General replaced the May 14 account payable
with a 60-day, $36,000 note bearing 8% annual along with paying $4,000 in cash. On July 28,
General paid the amount due on the note at maturity.
Prepare journal entries for all the preceding transactions and events.
199) Logitech Company pays its employees for two weeks of vacation each year. The company
estimated and must expense $9,160 of accrued vacation benefits for the year. Prepare the year-
end adjusting entry to record accrued vacation benefits.
200) Hollow Company provides you with following information for two of its employees. The
company is subject to the following taxes.
Tax
Rate
Applied To
FICA–Social Security
6.20%
First $128,400
FICA–Medicare
1.45%
All gross pay
FUTA
0.60%
First $7,000
SUTA
5.40%
First $7,000
Compute amounts for each of these four taxes as applied to each employee’s gross earnings for
November.
Gross Pay through October
Gross Pay for November
a. $6,400
$2,000
b. $112,000
$9,400
a.
FICA–Social Security
FICA–Medicare
FUTA
SUTA
FICA–Social Security
FICA–Medicare
FUTA
SUTA
100
201) Deacon Company provides you with following information related to payroll transactions
for the month of May. Prepare journal entries to record the transactions for May.
Office
Salaries
Sales Salaries
Social Security
Taxes
Medicare Taxes
Federal Income
Taxes
$38,000
$26,000
$3,968
$928
$5,600
a. Recorded the May payroll using the payroll register information given above.
b. Recorded the employer’s payroll taxes resulting from the May payroll. The state
unemployment tax rate is 5.4% of the first $7,000 paid each employee. Only $42,000 of the
current month’s salaries are subject to unemployment taxes. The federal rate is 0.6%.
c. Issued a check to Reliant Bank in payment of the May FICA and employee taxes.
d. Issued a check to the state for the payment of the SUTA taxes for the month of May.
e. Issued a check to Reliant Bank in payment of the employer’s quarterly FUTA taxes for the first
quarter in the amount of $1,020.
202) Sparks Company entered into the following transactions involving short-term notes
payable. On June 18, Sparks purchased $25,000 merchandise from EquipCo., terms 2/10, n/30.
Sparks uses the perpetual inventory system. On July 19, Sparks replaced the June 18 account
payable with a 60-day, $12,000 note bearing 4% annual interest in addition to paying $13,000 in
cash. Sparks paid the amount due on the note at maturity.
1. Determine the maturity date for the note.
2. Prepare journal entries for all the preceding transactions and events.
203) Richardson Fields receives $31,680 cash in advance ticket sales for 11 home soccer games.
Record the advance ticket sales on March 31. Record the revenue earned for the first game
played on August 17.
204) Obligations due within one year or the company’s operating cycle, whichever is longer, are
________.
205) ________ are probable future payments of assets or services that a company is presently
obligated to make as a result of past transactions or events.
206) ________ are amounts received in advance from customers for future products or services.
207) ________ are amounts owed to suppliers for products or services purchased on credit.
208) A ________ is a potential obligation that depends on a future event arising from a past
transaction or event.
209) Contingent liabilities are recorded in the accounts if the future event is ________ and the
amount owed can be ________.
210) Banks authorized to accept deposits of amounts payable to the federal government,
including amounts due for payroll taxes are ________.
211) A ________ shows the pay period dates, hours worked, gross pay, deductions, and net pay
of each employee for every pay period.
212) Times interest earned is computed by dividing income before interest expense and income
taxes by ________.
213) The difference between the amount borrowed and the amount repaid is referred to as
________.
214) A ________ is a written promise to pay a specified amount on a definite future date within
one year or the company’s operating cycle, whichever is longer.
215) The total compensation an employee earns including wages, salaries, commissions,
bonuses, and any compensation earned before deductions such as taxes is called ________.
216) Gross pay less all deductions is called ________.
217) The more ________ allowances an employee claims, the less federal income tax the
employer will deduct from pay.
218) Employer payroll taxes are an added employee ________ beyond the wages and salaries
earned by the employees.
219) A ________ is a seller’s obligation to replace or correct a product or service that fails to
perform as expected within a specified period.
220) Vacation benefits are a type of ________ liability.
221) To compute the amount of tax withheld from an employee’s pay, employers can use a
________ table.
222) Companies with many employees often use a special ________ account to pay employees.