978-0077633059 Chapter 9 Solution Manual Part 3

subject Type Homework Help
subject Pages 9
subject Words 1283
subject Authors John Wild, Ken Shaw

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Exercise 9-18 (25 minutes)
(in SEK millions)
1. Warranty Expense.................................................... 7,706
2. Estimated Warranty Liability................................... 6,677
3. Volvo would report warranty expense of SEK 7,706 million for 2013.
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PROBLEM SET A
Problem 9-1A (45 minutes)
Locust Natl. Bank Fargo
1. Maturity dates
Date of the note..............................May 19 July 8 Nov. 28
Term of the note (in days)............. 90 120 60
Maturity date...................................Aug. 17 Nov. 5 Jan. 27
2. Interest due at maturity
Principal of the note.......................$35,000 $80,000 $42,000
Annual interest rate....................... 10% 9% 8%
Interest expense.............................$ 875 $ 2,400 $ 560
3. Accrued interest on Fargo note at the end of 2014
Total interest for note.................................................... $ 560
......................................................................................... $ 308
4. Interest on Fargo note in 2015
Total interest for note.................................................... $ 560
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Problem 9-1A (Concluded)
5.
2014
Apr. 20 Merchandise Inventory............................................ 40,250
Accounts Payable—Locust............................... 40,250
Purchased merchandise on credit.
May 19 Accounts Payable—Locust..................................... 40,250
Cash..................................................................... 5,250
Notes Payable—Locust..................................... 35,000
Paid $5,250 cash and gave a 90-day,
10% note to extend due date on account.
28 Cash........................................................................... 42,000
Notes Payable—Fargo Bank............................. 42,000
Borrowed cash with 60-day, 8% note.
Dec. 31 Interest Expense....................................................... 308
Interest Payable.................................................. 308
Accrued interest on note payable.
2015
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Problem 9-2A (25 minutes)
Part 1
Jan. 8 Office Salaries Expense...........................................22,760.00
Sales Salaries Expense...........................................65,840.00
FICA—Social Sec. Taxes Payable*................... 5,493.20
FICA—Medicare Taxes Payable**..................... 1,284.70
Employee Fed. Inc. Taxes Payable................... 12,860.00
Part 2
Jan. 8 Payroll Taxes Expense.............................................10,853.50
FICA—Social Sec. Taxes Payable..................... 5,493.20
FICA—Medicare Taxes Payable........................ 1,284.70
State Unemployment Taxes Payable*............... 3,544.00
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Problem 9-3A (60 minutes)
1. Each employee’s FICA withholdings for Social Security
Dahlia Trey Kiesha Chee Total
Maximum base............... $117,000 $117,000 $117,000 $117,000
Earned through 8/18...... 115,900 116,100 7,100 1,050
Yet under maximum...... $ 1,100 $ 900 $109,900 $115,950
Earned this week........... $ 2,000 $ 900 $ 450 $ 400
2. Each employee’s FICA withholdings for Medicare (no limits)
Dahlia Trey Kiesha Chee Total
Earned this week.......... $ 2,000 $ 900 $ 450 $ 400
3. Employers FICA taxes for Social Security
Dahlia Trey Kiesha Chee Total
Amount from part 1...... $ 68.20 $ 55.80 $ 27.90 $ 24.80 $176.70
4. Employers FICA taxes for Medicare
Dahlia Trey Kiesha Chee Total
Amount from part 2...... $ 29.00 $ 13.05 $ 6.53 $ 5.80 $ 54.38
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Problem 9-3A (Concluded)
5. Employers FUTA taxes
Dahlia Trey Kiesha Chee Total
Maximum base................. $ 7,000 $ 7,000 $ 7,000 $ 7,000
Earned through 8/18........ 115,900 116,100 7,100 1,050
Yet under maximum......... 0 0 0 5,950
6. Employers SUTA taxes
Dahlia Trey Kiesha Chee Total
Subject to tax (from 5).... $ 0 $ 0 $ 0 $ 400
Tax rate............................ 2.15% 2.15% 2.15% 2.15%
SUTA tax.......................... $ 0.00 $ 0.00 $ 0.00
$ 8.60
10.60
$ 8.60
7. Each employee’s net (take-home) pay
Dahlia Trey Kiesha Chee Total
Gross earnings.............. $2,000.00 $ 900.00 $450.00 $400.00 $3,750.00
Less
FICA Social Sec. tax...... (68.20) (55.80) (27.90) (24.80) (176.70)
FICA Medicare taxes..... (29.00) (13.05) (6.53) (5.80) (54.38)
Take-home pay.............. $1,588.80
$ 656.15
$346.57
$309.40
$2,900.92
8. Employers total payroll-related expense for each employee
Dahlia Trey Kiesha Chee Total
Gross earnings............... $2,000.00 $ 900.00 $450.00 $400.00 $3,750.00
Plus
FICA Social Sec. tax....... 68.20 55.80 27.90 24.80 176.70
FICA Medicare taxes....... 29.00 13.05 6.53 5.80 54.38
FUTA tax.......................... 0.00 0.00 0.00 2.40 2.40
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Problem 9-4A (40 minutes)
1.
2014
Nov. 11 Cash........................................................................... 7,875
Sales.................................................................... 7,875
Sold razors to customers.
11 Cost of Goods Sold.................................................. 2,100
Merchandise Inventory...................................... 2,100
To record cost of November 11 sale (105 x $20).
30 Warranty Expense.................................................... 630
Estimated Warranty Liability............................. 630
To record razor warranty expense
replacements (15 x $20).
16 Cash........................................................................... 16,500
Sales.................................................................... 16,500
Sold razors to customers.
16 Cost of Goods Sold.................................................. 4,400
Merchandise Inventory...................................... 4,400
To record cost of December 16 sale (220 x $20).
29 Estimated Warranty Liability................................... 600
31 Warranty Expense.................................................... 1,320
Financial and Managerial Accounting, 6th Edition
530
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Problem 9-4A (Concluded)
2015
Jan. 5 Cash........................................................................... 11,250
Sales.................................................................... 11,250
Sold razors to customers.
31 Warranty Expense.................................................... 900
Estimated Warranty Liability............................. 900
To record razor warranty expense
and liability at 8% of selling price.
2. Warranty expense for November 2014 and December 2014
Sales Percent Warranty Expense
3. Warranty expense for January 2015
Sales in January...............................$11,250
Warranty percent.............................. 8%
Warranty expense............................$ 900
4. Balance of the estimated liability as of December 31, 2014
Warranty expense for November.................................... $ 630 credit
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Problem 9-5A (60 minutes)
1. Miller Company
2. Weaver Company
3. Sales increase by 30% (multiply prior sales by 1.3)
Miller Co. Weaver Co.
Sales............................................. $1,300,000 $1,300,000
Variable expenses....................... 1,040,000 780,000
Income before interest................ 260,000 520,000
* Computed as the increase in net income divided by prior net income.
4. Sales increase by 50% (multiply prior sales by 1.5)
Miller Co. Weaver Co.
Sales............................................. $1,500,000 $1,500,000
Variable expenses....................... 1,200,000 900,000
Income before interest................ 300,000 600,000
5. Sales increase by 80% (multiply prior sales by 1.8)
Miller Co. Weaver Co.
Sales............................................. $1,800,000 $1,800,000
Variable expenses....................... 1,440,000 1,080,000
Income before interest................ 360,000 720,000
Income before interest & taxes
Income before interest & taxes
$200,000
$400,000
$260,000

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