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Chapter 11 - Current Liabilities and Payroll Accounting
Problem 11-1B (Concluded)
5.
2014
Apr. 22 Merchandise Inventory............................................ 5,000
Accounts PayableFox Products. . 5,000
Purchased merchandise on credit.
Paid note with interest.
Nov. 12 Interest Expense....................................................... 400
Notes PayableSpring Bank................................... 12,000
Cash..................................................................... 12,400
Paid note with interest.
Dec. 6 Cash........................................................................... 8,000
Notes PayableCity Bank.................................. 8,000
Borrowed cash with a 45-day, 9% note.
11-625
Chapter 11 - Current Liabilities and Payroll Accounting
Problem 11-2B (25 minutes)
Part 1
Jan. 8 Sales Salaries Expense..................................................................................34,745.00
Office Salaries Expense................................................................................21,225.00
Delivery Salaries Expense............................................................................ 1,030.00
** $57,000 x 1.45% = $826.50
Part 2
Jan. 8 Payroll Taxes Expense.................................................................................. 6,640.50
FICA—Social Security Taxes Payable.................................................. 3,534.00
Problem 11-3B (60 minutes)
1. Each employee’s FICA withholdings for Social Security
Ahmed Carlos June Marie Total
Maximum base................$117,000 $
117,000
$117,000 $
117,000
Earned through 9/23....... 115,400 115,485 6,650 22,200
11-626
Chapter 11 - Current Liabilities and Payroll Accounting
2. Each employee’s FICA withholdings for Medicare (no limits)
Ahmed Carlos June Marie Total
Earned this week............ $ 2,500 $ 1,515 $ 475 $ 1,000
3. Employer’s FICA taxes for Social Security
Ahmed Carlos June Marie Total
Amount from part 1........ $ 99.20 $ 93.93 $ 29.45 $ 62.00 $284.58
4. Employer’s FICA taxes for Medicare
Ahmed Carlos June Marie Total
11-627
Chapter 11 - Current Liabilities and Payroll Accounting
Problem 11-3B (Concluded)
5. Employer’s FUTA taxes
Ahmed Carlos June Marie Total
Maximum base............ $ 7,000 $ 7,000 $ 7,000 $ 7,000
Earned through 9/23... 115,400 115,485 6,650 22,200
Yet under maximum..... $ 0 $ 0 $ 350 $ 0
6. Employer’s SUTA taxes
Ahmed Carlos June Marie Total
Subject to tax (from 5). $ 0 $ 0 $ 350 $ 0
7. Each employee’s net (take-home pay)
Ahmed Carlos June Marie Total
Gross earnings............ $2,500.00 $1,515.00 $475.00 $1,000.00 $5,490.00
Less
FICA Social Sec. tax.... (99.20) (93.93) (29.45) (62.00) (284.58)
FICA Medicare taxes.... (36.25) (21.97) (6.89) (14.50) (79.61)
8. Employer’s total payroll-related expense for each employee
Ahmed Carlos June Marie Total
Gross earnings............ $2,500.00 $1,515.00 $475.00 $1,000.00 $5,490.00
Plus
FICA Social Sec. tax.... 99.20 93.93 29.45 62.00 284.58
FICA Medicare taxes.... 36.25 21.97 6.89 14.50 79.61
Chapter 11 - Current Liabilities and Payroll Accounting
Problem 11-4B (40 minutes)
1.
2015
Nov. 16 Cash........................................................................... 2,500
Sales.................................................................... 2,500
Sold coffee grinders to customers.
Dec. 12 Estimated Warranty Liability................................... 144
Merchandise Inventory...................................... 144
To record cost of coffee grinder
warranty replacements (6 x $24).
18 Cash........................................................................... 10,000
Sales.................................................................... 10,000
Sold coffee grinders to customers.
31 Warranty Expense.................................................... 1,000
Estimated Warranty Liability............................. 1,000
To record coffee grinder warranty expense
and liability at 10% of selling price.
11-629
Chapter 11 - Current Liabilities and Payroll Accounting
Problem 11-4B (Concluded)
2016
Jan. 7 Cash........................................................................... 2,000
Sales.................................................................... 2,000
Sold coffee grinders to customers.
31 Warranty Expense.................................................... 200
Estimated Warranty Liability............................. 200
To record coffee grinder warranty expense
and liability at 10% of selling price.
2. Warranty expense for November 2015 and December 2015
Sales Percent Warranty Expense
November......................... $ 2,500 10% $ 250
3. Warranty expense for January 2016
Sales in January............................. $2,000
Warranty percent............................ 10%
Warranty expense........................... $ 200
4. Balance of the estimated liability as of December 31, 2015
Warranty expense for November.................................... $ 250 credit
5. Balance of the estimated liability as of January 31, 2016
Beginning balance............................................................ $ 698 credit
11-630
1. Ellis Company
= = 1.33
2. Seidel Company
3. Sales increase by 10% (multiply prior sales by 1.10)
Ellis Co. Seidel Co.
Sales........................................ $264,000 $264,000
Variable expenses.................. 132,000 198,000
4. Sales increase by 40% (multiply prior sales by 1.40)
Ellis Co. Seidel Co.
5. Sales increase by 90% (multiply prior sales by 1.90)
Ellis Co. Seidel Co.
Sales........................................ $456,000 $456,000
Variable expenses.................. 228,000 342,000
11-631
Income before interest & taxes
Interest expense
$120,000
$90,000
Chapter 11 - Current Liabilities and Payroll Accounting
Problem 11-5B (Concluded)
6. Sales decrease by 20% (multiply prior sales by 0.80)
Ellis Co. Seidel Co.
Sales........................................ $192,000 $192,000
Variable expenses.................. 96,000 144,000
7. Sales decrease by 50% (multiply prior sales by 0.50)
Ellis Co. Seidel Co.
8. Sales decrease by 80% (multiply prior sales by 0.20)
Ellis Co. Seidel Co.
Sales........................................ $ 48,000 $ 48,000
Variable expenses.................. 24,000 36,000
Net income decreases by...... -320% -160%
9. The higher fixed cost strategy (having more fixed interest expense) of
Ellis Co. accentuates the effects of increases and decreases in sales.
That is, increases in sales produce greater increases in net income and
11-632
Chapter 11 - Current Liabilities and Payroll Accounting
Problem 11-6BA (50 minutes)
June 15 FICA—Social Security Taxes Payable.................... 992
FICA—Medicare Taxes Payable................................................................. 232
30 Office Salaries Expense................................................................................ 3,800
Shop Salaries Expense.................................................................................. 4,200
30 Salaries Payable............................................................................................ 6,338
30 Payroll Taxes Expense*................................................................................. 612
FICASocial Security Taxes Payable.................................................... 496
FICAMedicare Taxes Payable............................................................. 116
FICAMedicare Taxes = $116 (same as employees)
Problem 11-6BA (Concluded)
July 15 FICASocial Security Taxes Payable.......................................................... 992
FICAMedicare Taxes Payable................................................................... 232
11-633
Chapter 11 - Current Liabilities and Payroll Accounting
31 Federal Unemployment Taxes Payable....................................................... 66
Cash.......................................................................................................... 66
To record payment of FUTA taxes.
31 No entry required upon mailing Form 941.
11-634
