9–90
EXERCISE 9-6B (cont.)
c.
Owens Computers
Financial Statements
Income Statement
Sales Revenue
$280,000
Cost of Goods Sold
(150,000)
Gross Margin
130,000
Warranty Expense
(14,000)
Net Income
$ 116,000
Statement of Cash Flows
Cash Flows From Operating Activities:
Inflow from Customers
$280,000
Outflow to Purchase Inventory
(150,000)
Outflow for Warranty Expense
(1,545)
Net Cash Flow from Operating Activities
$128,455
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities
-0-
Net Change in Cash
128,455
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$128,455
9–91
EXERCISE 9-7B
a.
Assets
=
Liab.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
NA
+
−
NA
+
−
NA
−
−
NA
NA
NA
NA
− OA
Event
Account Titles
Debit
Credit
b.
Est.
Warranty Expense
2,450
Warranties Payable
2,450
c.
Payment
Warranties Payable
1,950
Cash
1,950
9–92
EXERCISE 9-8B
a.
Event
Assets
=
Liab.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash
Flow
1.
+
NA
+
NA
NA
NA
+ FA
2.
+
+
NA
NA
NA
NA
NA
3a.
+
+
+
+
NA
+
+ OA
3b.
−
NA
−
NA
+
−
NA
4.
NA
+
−
NA
+
−
NA
5.
−
−
NA
NA
NA
NA
− OA
6.
+
+
NA
NA
NA
NA
+ FA
7.
−
−
NA
NA
NA
NA
− OA
8.
−
NA
−
NA
+
−
− OA
9.
−
−
NA
NA
NA
NA
− OA
10.
NA
+
−
NA
+
−
NA
9–93
EXERCISE 9-8B (cont.)
b.
Farmer’s Equipment Sales Corp.
General Journal for 2016
Event
Account Title
Debit
Credit
1.
Cash
60,000
Common Stock
60,000
2.
Merchandise Inventory
160,000
Accounts Payable
160,000
3a.
Cash ($220,000 x 1.08)
237,600
Sales Revenue
220,000
Sales Tax Payable
17,600
3b.
Cost of Goods Sold
140,000
Merchandise Inventory
140,000
4.
Warranty Expense ($220,000 x 4%)
8,800
Warranties Payable
8,800
5.
Sales Tax Payable ($180,000 x 8%)
14,400
Cash
14,400
6.
Cash
40,000
Notes Payable
40,000
7.
Warranties Payable
6,600
Cash
6,600
8.
Operating Expense
61,000
Cash
61,000
9.
Accounts Payable
145,000
Cash
145,000
10.
Interest Expense1
800
Interest Payable
800
1$40,000 x 6% x 4/12 = $800.
9–94
EXERCISE 9-8B b. (cont.)
Farmer’s Equipment Sales Corp.
T-Accounts for 2016
Assets
=
Liabilities
+
Stockholder’s Equity
Cash
Accounts Payable
Common Stock
1. 60,000
5. 14,400
9. 145,000
2. 160,000
1. 60,000
3a. 237,600
7. 6,600
Bal. 15,000
Bal. 60,000
6. 40,000
8. 61,000
9. 145,000
Sales Tax Payable
Sales Revenue
Bal. 110,600
5. 14,400
3a. 17,600
3a. 220,000
Bal. 3,200
Bal.220,000
Merchandise Inventory
2. 160,000
3b.140,000
Warranties Payable
Cost of Goods Sold
Bal. 20,000
7. 6,600
4. 8,800
3b. 140,000
Bal. 2,200
Bal. 140,000
Interest Payable
Operating Expenses
10. 800
8. 61,000
Bal. 800
Bal. 61,000
Notes Payable
Warranty Expense
6. 40,000
4. 8,800
Bal. 40,000
Bal. 8,800
Interest Expense
10. 800
Bal. 800
9–95
EXERCISE 9-8B (cont.)
c.
Farmer’s Equipment Sales Corp.
Income Statement
For the Year Ended December 31, 2016
Sales Revenue
$220,000
Cost of Goods Sold
(140,000)
Gross Margin
80,000
Expenses
Operating Expenses
$61,000
Warranty Expense
8,800
Total Operating Expenses
(69,800)
Operating Income
10,200
Interest Expense
(800)
Net Income
$ 9,400
9–96
EXERCISE 9-8B c. (cont.)
Farmer’s Equipment Sales Corp.
Balance Sheet
As of December 31, 2016
Assets
Cash
$110,600
Merchandise Inventory
20,000
Total Assets
$130,600
Liabilities
Accounts Payable
$ 15,000
Sales Tax Payable
3,200
Warranties Payable
2,200
Interest Payable
800
Notes Payable
40,000
Total Liabilities
61,200
Stockholders’ Equity
Common Stock
$60,000
Retained Earnings
9,400
Total Stockholders’ Equity
69,400
Total Liabilities and Stockholders’ Equity
$130,600
9–97
EXERCISE 9-8B c. (cont.)
Farmer’s Equipment Sales Corp.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Inflow from Customers
$220,000
Inflow from Sales Tax
17,600
Outflow for Inventory
(145,000)
Outflow for Expenses1
(67,600)
Outflow for Sales Tax
(14,400)
Net Cash Flow from Operating Activities
$10,600
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Inflow from Stock Issue
60,000
Inflow from Loan
40,000
Net Cash Flow from Financing Activities
100,000
Net Change in Cash
110,600
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$110,600
1. $61,000 + $6,600 = $67,600
d. Current Liabilities:
9–98
EXERCISE 9-9B
a.
Computation of Gross Earnings
Employee
Hours Worked
x
Wage Rate
per Hour
=
Gross Pay
Marcia
Reg. 40
25.00
$ 1,000.00
OT 14
37.50
525.00
Total
54
$1,525.00
Clark
Reg. 40
35.00
$1,400.00
OT 8
52.50
420.00
Total
48
$1,820.00
Marcia
Gross Earnings
$1,525.00
Deductions:
Federal Income Tax
$280.00
FICA Tax – SS ($1,525 x 6%)
91.50
FICA Tax – Medicare ($1,525 x 1.5%)
22.88
Total Deductions
(394.38)
Net Pay
1,130.62
Clark
Gross Earnings
$1,820.00
Deductions:
Federal Income Tax
$250.00
FICA Tax – SS ($1,820.00 x 6%)
109.20
FICA Tax – Medicare ($1,820.00 x 1.5%)
27.30
Total Deductions
(386.50)
Net Pay
1,433.50
9–99
EXERCISE 9-9B (cont.)
c.
Wilkins Enterprises
General Journal Entries for 2016
Date
Account Titles
Debit
Credit
Jan.
Salaries Expense ($1,525 + $1,820)
3,345.00
Employee Income Tax Payable ($250 + $280)
530.00
FICA Tax − SS Payable ($91.50 + $109.20)
200.70
FICA Tax – Med. Payable ($22.88 + $27.30)
50.18
Cash ($1,130.62 + 1,433.50)
2,564.12
9–100
EXERCISE 9-10B
a.
Catherine – March
Gross Earnings
$4,500.00
Deductions:
Federal Income Tax ($4,500 x 15%)
$675.00
FICA Tax – SS ($4,500 x 6%)
270.00
FICA Tax – Medicare ($4,500 x 1.5%)
67.50
Total Deductions
(1,012.50)
Net Pay
$3,487.50
Jordan – March
Gross Earnings
$11,000.00
Deductions:
Federal Income Tax ($11,000 x 20%)
$2,200.00
FICA Tax – SS ($11,000 x 6%)
660.00
FICA Tax – Medicare ($11,000 x 1.5%)
165.00
Total Deductions
(3,025.00)
Net Pay
$7,975.00
EXERCISE 9-10B (cont.)
b.
Catherine – December
Gross Earnings
$4,500.00
Deductions:
Federal Income Tax ($4,500 x 15%)
$675.00
FICA Tax – SS ($4,500 x 6%)
270.00
FICA Tax – Medicare ($4,500 x 1.5%)
67.50
Total Deductions
(1,012.50)
Net Pay
$3,487.50
Jordan – December
Gross Earnings
$11,000.00
Deductions:
Federal Income Tax ($11,000 x 20%)
$2,200.00
FICA Tax – Medicare ($11,000 x
1.5%)
165.00
Total Deductions
(2,365.00)
Net Pay
$8,635.00
c. Jordan’s net pay is different in December because he does not pay
Catherine
9–102
9–103
EXERCISE 9-10B d. (cont.)
Amount appearing on W-2 for 2016
Jordan
Box 1 Wages, tips, and other compensation
11,000.00 x 12
132,000.00
Box 2 Federal income tax withheld
2,200.00 x 12
26,400.00
Box 3 Social Security wages
Maximum
110,000.00
Box 4 Social Security tax withheld
110,000.00 x 6%
6,600.00
Box 5 Medicare wages and tips
11,000.00 x 12
132,000.00
Box 6 Medicare tax withheld
165.00 x 12
1,980.00
9–104
EXERCISE 9-11B
a. (1)
Jen
Gross Earnings
$5,200.00
Deductions:
Federal Income Tax
$800.00
FICA Tax – SS ($5,200 x 6%)
312.00
FICA Tax – Medicare ($5,200 x 1.5%)
78.00
Total Deductions
(1,190.00)
Net Pay
$4,010.00
(2). Jen’s monthly FICA tax:
(3). Culver Co. payroll tax expense – January:
Employer FICA Social Security tax $312.00
Employer FICA Medicare tax 78.00
Employer unemployment tax ($5,200 x 6.0%) 312.00
9–105
EXERCISE 9-11B (cont.)
b. (1) for January – November
Jen
Gross Earnings
$10,000.00
Deductions:
Federal Income Tax
$800.00
FICA Tax – SS ($10,000 x 6%)
600.00
FICA Tax – Medicare ($10,000 x 1.5%)
150.00
Total Deductions
(1,550.00)
Net Pay
$8,450.00
Jen
Gross Earnings
$10,000.00
Deductions:
Federal Income Tax
$800.00
FICA Tax – SS ($110,000 − $110,000) x
6%
-0-
FICA Tax – Medicare ($10,000 x 1.5%)
150.00
Total Deductions
(950.00)
Net Pay
$9,050.00
(2). Jen’s monthly FICA tax: (For January – November)
(2). Jen’s monthly FICA tax: (For December)
Social Security tax (none due) $ .00
(1) Culver Co. payroll tax expense – January:
9–106
Employer unemployment tax ($7,000 x 6.0%) 420.00
9–107
EXERCISE 9-11B (cont.)
b.
(2) Culver Co. payroll tax expense – February:
(3) Culver Co. payroll tax expense – March:
(4) Culver Co. payroll tax expense – December:
Employer FICA Social Security tax* $ .00
EXERCISE 9-12B
a.
Computation of Accrued Fringe Benefits per month
Vacation Pay Expense
$500
Employee Medical Insurance Expense
780
Employee Pension Expense
400
Total Monthly Fringe Benefits Expense
$1,680
Vacation Pay Expense
Employee Medical Insurance Expense
Employee Pension Expense
Vacation Pay Payable
Employee Medical Insurance Payable
Employee Pension Liability
Salary Costs:
$500 x 250 days
FICA Social Security Tax Expense
FICA Medicare Tax Expense
Unemployment Tax Expense
Vacation Pay Expense
$500 x 12
Total Payroll Cost
9–109