Chapter 11 – Current Liabilities and Payroll Accounting
Exercise 11-9 (30 minutes)
a.
Employee
Cumulative
Pay
Pay Subject to
FICA Social
Security
Pay Subject
to FICA
Medicare
Pay Subject
to FUTA
Taxes
Pay Subject
to SUTA
Taxes
Ken S………..........$ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000
Tim V…………….….60,200 60,200 60,200 7,000 7,000
Steve S................87,000 87,000 87,000 7,000 7,000
Ann T………..........146,500 117,000 146,500 7,000 7,000
b. FICA Social Security taxes
$80,848.00 = $652,000 x 6.2% x 2 (for employer and employee)
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Chapter 11 – Current Liabilities and Payroll Accounting
Exercise 11-10 (25 minutes)
1. Warranty Expense = 4% of dollar sales = 4% x $6,000 = $240
4. The December 31, 2016, balance of the Estimated Warranty Liability
account equals the 2016 beginning balance minus the costs incurred in
2016 to repair the copier:
5. Journal entries
2015 (a)
Aug. 16 Cash………………………………………………………………… 6,000
Sales………………………………………………………….. 6,000
2016 (c)
Nov. 22 Estimated Warranty Liability…………….………………. 209
Repair Parts Inventory………………………………… 209
To record cost of warranty repairs.
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Chapter 11 – Current Liabilities and Payroll Accounting
Exercise 11-11 (15 minutes)
1. B = 0.03 ($500,000 – B)
B = $15,000 – 0.03B
1.03B= $15,000
B = $14,563 (rounded to nearest dollar)
2.
Exercise 11-12 (10 minutes)
[Note: All entries dated December 31, 2015.]
1. Vacation Benefits Expense……………..…………..………… 3,200
Vacation Benefits Payable….……………………………. 3,200
Exercise 11-13 (10 minutes)
[Note: All entries dated December 31, 2015.]
1. No adjusting entry is required since it is not probable that the supplier will
2. No adjusting entry can be made since the loss cannot be reasonably
11-627
Education.
Chapter 11 – Current Liabilities and Payroll Accounting
Exercise 11-14 (15 minutes)
(a) (b) (c) (d) (e) (f)
Numerator
Income before
interest & taxes.....$194,000 $176,000 $182,000 $379,000 $103,000 $ 5,000
Denominator
Analysis: Company (d) has the strongest ability to pay interest expense as it
Exercise 11-15B (25 minutes)
1. Income Taxes Payable (target balance)……………….……………………….$28,300
Total accrued [($28,600 + $19,100 + $34,600) x .30]………..…………….. 24,690
Adjustment (additional expense)…………………………………………..……..$ 3,610
2.
2015 (a)
Exercise 11-16A (15 minutes)
Regular pay (40 hours @ $14)…………………………………………………………………………. $560.00
Overtime premium pay (8 hours @ [$14 x 150%])……………………………………..……. 168 .00
Gross pay……………………………………………………………………………………………………… 728.00
11-628
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Chapter 11 – Current Liabilities and Payroll Accounting
Exercise 11-17 (30 minutes)
(a)
Employe
e
Cumulative
Pay (Excludes
Current Period)
Current Period Gross Pay FIT
Withholding FUTA FICA S.S.
Employee
FICA
Medicare
Employee
Employee—
Benefits Plan
Withholding Employee
Net Pay
Pay
Type
Pay
Hours Gross Pay SIT
Withholding SUTA FICA S.S.
Employer
FICA
Medicare
Employer
Employer—
Benefits Plan
Expense
Kathleen 115,200.00 Salary — 7,000.00
2,000.00 0.00 111.60 101.50 350.00
4,136.90
300.00 0.00 111.60 101.50 700.00
80.00 1.20 31.00 7.25 25.00
920.00
Zoey 6,500.00
629.21
Overtime 4 60.00
860.00
22.00 27.00 53.32 12.47 86.00
Gracie 5,000.00
Regular 74 740.00 90.00 4.44 45.88 10.73 37.00
535.39
Overtime 0 0.00
740.00
21.00 39.96 45.88 10.73 74.00
Totals 148,500.00 10,020.00
2,380.00 8.64 298.84 145.29 501.00
6,306.87
388.00 77.76 298.84 145.29 1,002.00
11-630
Education.
Chapter 11 – Current Liabilities and Payroll Accounting
Exercise 11-17 (concluded)
(b)
Aug 31 Salaries (or Wages) Expense……………………………………………….……………..10,020.00
FICA—Social Sec. Taxes Payable…………………………………………………. 298.84
FICA—Medicare Taxes Payable…………………………………..……………… 145.29
(c)
Aug 31 Salaries (or Wages) Payable………………………………………………………..……..6,306.87
Cash……………………………………………………………………………………………. 6,306.87
To record payment of payroll.
(d)
Aug 31 Payroll Taxes Expense………………………………………………………..…………….. 530.53
FICASocial Sec. Taxes Payable………………………………………………….. 298.84
Aug 31 Employee Benefits Expense………………………………………………………………..1,002.00
(e)
Aug 31 FICASocial Security Taxes Payable……………………………………………..….. 597.68
FICAMedicare Taxes Payable…………………………………………………..…….. 290.58
Employee Fed. Income Taxes Payable……………………………….……………….2,380.00
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Chapter 11 – Current Liabilities and Payroll Accounting
Exercise 11-18 (25 minutes)
(in SEK millions)
1. Warranty Expense………………………………………….... 7,706
Estimated Warranty Liability………..……………… 7,706
To record warranty expense and liability.
2. Volvo would report warranty expense of SEK 7,706 million for 2013.
PROBLEM SET A
Problem 11-1A (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
3. Accrued interest on Fargo note at the end of 2014
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Chapter 11 – Current Liabilities and Payroll Accounting
4. Interest on Fargo note in 2015
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Chapter 11 – Current Liabilities and Payroll Accounting
Problem 11-1A (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
10% note to extend due date on account.
July 8 Cash……………………………………………………………..…. 80,000
Notes Payable—National…………………………..… 80,000
Borrowed cash with a 120-day, 9% note.
28 Cash………………………………………………………………… 42,000
Notes Payable—Fargo Bank..……………..………. 42,000
Borrowed cash with 60-day, 8% note.
2015
Jan. 27 Interest Expense…………………………………………….... 252
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