Type
Solution Manual
Book Title
Financial Accounting Fundamentals 5th Edition
ISBN 13
978-0078025754

978-0078025754 Chapter 9 Solution Manual Part 1

March 26, 2020
Chapter 9
Accounting for Current Liabilities
QUESTIONS
1. A current liability is expected to be paid within one year or the company’s operating
cycle, whichever is longer. Any liability that is not current is considered to be long
term.
5. The combined Social Security tax rate (assuming the maximum wage amount is not
6. The Medicare tax rate is 1.45%. This rate is applied to all wages earned by an
employeeno maximum limit exists.
7. The employee is responsible for federal income taxes, state income taxes, local
8. An employee’s gross earnings along with the number of withholding allowances that
9. An unemployment merit rating is based on an evaluation of an employer’s
experience in creating or avoiding unemployment with its employees. The merit
10. The obligation to correct or replace defective products (or services) is created when
the products are sold with the warranties. Even though the seller does not know
11. There are no conditions in which a probable loss tied to a future event can create a
12.A A wage bracket withholding table shows for a pay period of a given length (weekly,
13.A Single employee earning $725 with two allowances has $76 taxes withheld.
Single employee earning $625 with no allowances has $81 taxes withheld.
15. At December 31, 2013, Google reports the following accrued expenses:
16. At December 31, 2013, Samsung reports nine current liabilities: Trade and other
17. Samsung’s current liabilities include one income-tax-related liability titled: Income
tax payable. This account reflects taxes that must be paid to the government in the
QUICK STUDIES
Quick Study 9-1 (5 minutes)
Items 1, 4, 5 and 6 are current liabilities for this company.
Quick Study 9-2 (10 minutes)
Sept. 30
Cash ..........................................................................
6,300
Sales ................................................................
6,000
Quick Study 9-3 (10 minutes)
Oct. 31
Cash ..........................................................................
5,000,000
Quick Study 9-4 (15 minutes)
1. Computation of interest payable at December 31, 2015:
2. 2015
Dec.31
Interest Expense ......................................................
1,920
3. 2016
Feb. 5
Interest Expense ......................................................
1,280
Interest Payable .......................................................
1,920
Quick Study 9-5 (15 minutes)
Jan. 15
Sales Salaries Expense ...........................................
35,000.00
FICASocial Sec. Taxes Payable* ..................
Quick Study 9-6 (15 minutes)
[Note: Two months (January and February) of earnings have
already been recorded for each of the 10 employees.]
Mar. 31
Payroll Taxes Expense ............................................
2,730.00
Quick Study 9-7 (5 minutes)
Quick Study 9-8 (5 minutes)
Vacation Benefits Expense* ...................................
500
Quick Study 9-9 (10 minutes)
2014
Sep 11
Cash ..........................................................................
500
Sales ....................................................................
500
Quick Study 9-10 (10 minutes)
1. (b); reasonis reasonably estimated but not a probable loss.
2. (b); reasonprobable loss but cannot be reasonably estimated.
3. (a); reasoncan be reasonably estimated and loss is probable.
Quick Study 9-11 (10 minutes)
Quick Study 9-12A (15 minutes)
Gross Pay ............................................................................
$740.00
Quick Study 9-13B (10 minutes)
Dec. 31
Income Taxes Expense ...........................................
40,000
Quick Study 9-14 (10 minutes)
a. The definitions and characteristics of current liabilities are broadly
$1,885,000
EXERCISES
Exercise 9-1 (10 minutes)
Exercise 9-2 (10 minutes)
[Note: All entries dated December 31, 2015]
1.
Cash ..........................................................................
10,400
Sales ....................................................................
2.
Unearned Services Revenue ...................................
50,000
Exercise 9-3 (30 minutes)
1. Maturity date = May 15 + 60 days = July 14, 2015
2a.
May 15
Cash ..........................................................................
110,000
Notes Payable ....................................................
110,000
Exercise 9-4 (30 minutes)
1. Maturity date = November 1 + 90 days = January 30, 2016.
2.
Principal .....................................................
$200,000
3.
Principal .....................................................
$200,000
x Interest rate .............................................
9%
x Fraction of year (Jan. 1 Jan. 30).........
30/360
Total interest in 2016 ................................
$ 1,500
4a.
Exercise 9-5 (20 minutes)
Subject
to Tax
Rate
Tax
Explanation
a.
Exercise 9-6 (10 minutes)
Sept. 30
Salaries Expense .....................................................
800.00
Exercise 9-7 (10 minutes)
Sept. 30
Payroll Taxes Expense ............................................
82.20
Exercise 9-8 (30 minutes)
1. July 31
Sales Salaries Expense ...........................................
200,000
Office Salaries Expense ..........................................
160,000
FICASocial Sec. Taxes Payable ....................
22,320
FICAMedicare Taxes Payable ........................
5,220
Cash ................................................................
217,060
FICASocial Sec. Taxes Payable ....................
22,320
FICAMedicare Taxes Payable ........................
5,220
State Unemployment Taxes Payable................
2,700
4. July 31
FICASocial Security Taxes Payable....................
44,640
FICAMedicare Taxes Payable ..............................
10,440
Employee Fed. Income Taxes Payable. .................
90,000
Employee State Income Taxes Payable. ................
20,000
Exercise 9-9 (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
b. FICA Social Security taxes
$80,848.00 = $652,000 x 6.2% x 2 (for employer and employee)
Exercise 9-10 (25 minutes)
1. Warranty Expense = 4% of dollar sales = 4% x $6,000 = $240
2. The December 31, 2015, balance of the liability equals the expense
3. The company should report no additional warranty expense in 2016 for
this copier.
4. The December 31, 2016, balance of the Estimated Warranty Liability
account equals the 2016 beginning balance minus the costs incurred in
5. Journal entries
2015
(a)
Aug. 16
Cash ..........................................................................
6,000
Sales ...................................................................
6,000
Exercise 9-11 (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.
3.
2016
Exercise 9-12 (10 minutes)
[Note: All entries dated December 31, 2015.]
1.
Vacation Benefits Expense ...........................................
3,200
2.
Warranty Expense..........................................................
18,000
Exercise 9-13 (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
Exercise 9-14 (15 minutes)
(a)
(b)
(c)
(d)
(e)
(f)
Numerator
Exercise 9-15B (25 minutes)
1.
Income Taxes Payable (target balance) ...............................................
$28,300
2.
2015
(a)
Dec. 31
Income Tax Expense ................................................
3,610
Income Taxes Payable .......................................
3,610
Exercise 9-16A (15 minutes)
Regular pay (40 hours @ $14) ...........................................
$560.00
Overtime premium pay (8 hours @ [$14 x 150%]) ...........
168.00
Exercise 9-17 (30 minutes)
(a)
Employee
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

Subscribe Now

Sign up to view full document

View Document