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9-36
EXERCISE 9-11A (cont.)
b. (3) Assume gross salary is $9,600:
Sky Co. payroll tax expense - January:
Employer FICA Social Security tax ($9,600 x 6%) $ 576
Employer FICA Medicare tax ($9,600 x 1.5%) 144
9-37
EXERCISE 9-12A
a.
Computation of Accrued Fringe Benefits per month
Vacation Pay Expense (2 employees; 1-day cost)
$630
Employee Medical Insurance Expense
650
Employee Pension Expense
400
Total Monthly Fringe Benefits Expense
$1,680
Account Titles
Debit
Credit
Vacation Pay Expense
630
Employee Medical Insurance Expense
650
Employee Pension Expense
400
Vacation Pay Payable
630
Employee Medical Insurance Payable
650
Employee Pension Liability
400
b.
Asset
s
=
Liabilitie
s
+
Equity
Income Statement
Cash
=
Various
Payable
s
+
Com.
Stoc
k
+
Ret.
Earn.
Rev.
−
Exp.
=
Net Inc.
Cash
Flow
NA
(1,680)
NA
(1,680)
NA
1,680
(1,680)
NA
c.
Schedule of Payroll Costs
Salary Costs:
$630 x 250 days
$157,500.00
FICA Social Security Tax Expense
$157,500 x 6%
9,450.00
FICA Medicare Tax Expense
$157,500 x 1.5%
2,362.50
Unemployment Tax Expense
$21,000 x 6.0%
1,260.00
Vacation Pay Expense
$420 x 12
5,040.00
Employee Medical Insurance Expense
$650 x 12
7,800.00
Employee Pension Expense
$400 x 12
4,800.00
Total Payroll Cost
$188,212.50
9-38
EXERCISE 9-13A a.
Park Co.
General Journal for 2016
Event
Account Titles
Debit
Credit
1.
Cash
50,000
Common Stock
50,000
2.
Merchandise Inventory
180,000
Accounts Payable
180,000
3a.
Cash
262,500
Sales Revenue
250,000
Sales Tax Payable ($250,000 x 5%)
12,500
3b.
Cost of Goods Sold
140,000
Merchandise Inventory
140,000
4.
Cash
50,000
Notes Payable
50,000
5.
Accounts Payable
180,000
Cash
180,000
6.
Sales Tax Payable ($190,000 x 5%)
9,500
Cash
9,500
7.
Salaries Expense
46,000
Employee Income Tax Payable
5,300
FICA – Social Security Tax Pay.
2,760
FICA – Medicare Tax Payable
690
Cash
37,250
8.
Warranties Payable
5,800
Cash
5,800
9.
Operating Expenses
36,000
Cash
36,000
10.
Dividends
2,000
Cash
2,000
9-39
9-40
EXERCISE 9-13A a. (cont.)
Park Co.
General Journal for 2016
Event
Account Titles
Debit
Credit
11.
Warranty Expense ($250,000 x 3%)
7,500
Warranties Payable
7,500
12.
Interest Expense ($50,000 x 7% x 10/12)
2,917
Interest Payable
2,917
13.
Payroll Tax Expense
3,870
FICA - Soc. Security Tax Pay.1
2,760
FICA - Med. Tax Payable2
690
Federal Unemploy. Tax Payable3
42
State Unemployment Tax Payable4
378
9-41
EXERCISE 9-13A (cont.)
b.
Park Co.
T-Accounts for 2016
Assets
=
Liabilities
+
Stockholder’s Equity
Cash
Accounts Payable
Common Stock
1. 50,000
5. 180,000
5. 180,000
2. 180,000
1. 50,000
3a.
262,500
6. 9,500
Bal. -0-
Bal. 50,000
4. 50,000
7. 37,250
8. 5,800
Employ. Inc. Tax
Payable
Dividends
9. 36,000
7. 5,300
10. 2,000
10. 2,000
Bal. 5,300
Bal. 2,000
Bal. 91,950
FICA – SS Tax Payable
7. 2,760
Sales Revenue
Merchandise Inventory
13. 2,760
3a. 250,000
2. 180,000
3b. 140,000
Bal. 5,520
Bal.250,000
Bal. 40,000
FICA – Med. Tax
Payable
7. 690
Cost of Goods Sold
13. 690
3b. 140,000
Bal. 1,380
Bal. 140,000
Fed. Unemp. Tax
Payable
Operating Expenses
13. 42
9. 36,000
Bal. 42
Bal. 36,000
State Unemp. Tax
Payable
Payroll Tax Expense
13. 378
13. 3,870
Bal. 378
Bal. 3,870
9-42
Sales Tax Payable
Salaries Expense
6. 9,500
3a. 12,500
7. 46,000
Bal. 3,000
Bal. 46,000
Warranties Payable
Warranty Expense
8. 5,800
11. 7,500
11. 7,500
Bal. 1,700
Bal. 7,500
9-43
EXERCISE 9-13A b. (cont.)
Park Co.
T-Accounts for 2016
Assets
=
Liabilities
+
Stockholder’s Equity
Interest Payable
Interest Expense
12. 2,917
12. 2,917
Bal. 2,917
Bal. 2,917
Notes Payable
4. 50,000
Bal. 50,000
9-44
EXERCISE 9-13A (cont.)
c.
Park Co.
Income Statement
For the Year Ended December 31, 2016
Sales Revenue
$250,000
Cost of Goods Sold
(140,000)
Gross Margin
110,000
Expenses
Operating Expenses
$36,000
Payroll Tax Expense
3,870
Salaries Expenses
46,000
Warranty Expense
7,500
Total Operating Expenses
(93,370)
Operating Income
16,630
Interest Expense
(2,917)
Net Income
$13,713
Park Co.
Statement of Changes in Stockholders’ Equity
For the Year Ended December 31, 2016
Beginning Common Stock
$ -0-
Add: Common Stock Issued
50,000
Ending Common Stock
$50,000
Beginning Retained Earnings
-0-
Add: Net Income
$13,713
Less: Dividends
(2,000)
Ending Retained Earnings
11,713
Total Stockholders’ Equity
$61,713
9-45
EXERCISE 9-13A c. (cont.)
Park Co.
Balance Sheet
As of December 31, 2016
Assets
Cash
$ 91,950
Merchandise Inventory
40,000
Total Assets
$131,950
Liabilities
Employee Income Tax Payable
$5,300
FICA Tax – Social Security Tax Payable
5,520
FICA Tax – Medicare Tax Payable
1,380
Federal Unemployment Tax Payable
42
State Unemployment Tax Payable
378
Sales Tax Payable
3,000
Warranties Payable
1,700
Interest Payable
2,917
Notes Payable
50,000
Total Liabilities
70,237
Stockholders’ Equity
Common Stock
$50,000
Retained Earnings
11,713
Total Stockholders’ Equity
61,713
Total Liabilities and Stockholders’ Equity
$131,950
9-46
EXERCISE 9-13A c. (cont.)
Park Co.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Inflow from Customers
$250,000
Inflow from Sales Tax
12,500
Outflow to Purchase Inventory
(180,000)
Outflow for Expenses1
(79,050)
Outflow for Sales Tax
(9,500)
Net Cash Flow from Operating Activities
($6,050)
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Inflow from Stock Issue
$ 50,000
Inflow from Loan
50,000
Outflow for Dividends
(2,000)
Net Cash Flow from Financing Activities
98,000
Net Change in Cash
91,950
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$91,950
1. $37,250 + $5,800 + $36,000 = $79,050
9-47
EXERCISE 9-14A
Alpha Co.
Classified Balance Sheet
As of December 31, 2016
Assets
Current Assets
Cash
$20,500
Accounts Receivable
26,500
Merchandise Inventory
26,300
Total Current Assets
$73,300
Property, Plant and Equipment
Land
$10,000
Total Property, Plant and Equipment
10,000
Total Assets
$83,300
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable
$ 12,200
Long-Term Liabilities
Notes Payable
17,500
Total Liabilities
$29,700
Stockholders’ Equity
Common Stock
$30,000
Retained Earnings
23,600
Total Stockholders’ Equity
53,600
Total Liabilities and Stockholders’ Equity
$83,300
9-48
EXERCISE 9-15A
a. Cedar: 1.6 to 1 ($40,000 ÷ $25,000)
Maple: 1.3 to 1 ($70,000 ÷ $55,000)
EXERCISE 9-16A
9-50
EXERCISE 9-16A (cont.)
d.
Parish General Journal
Date
Account Titles
Debit
Credit
4/1/16
Cash
110,400
Discount on Notes Payable
9,600
Notes Payable
120,000
12/31/16
Interest Expense
7,200
Discount on Notes Payable
7,200
3/31/17
Interest Expense
2,400
Discount on Notes Payable
2,400
3/31/17
Notes Payable
120,000
Cash
120,000
9-51
EXERCISE 9-17A (Appendix)
a.
Balance Sheet
Income Statement
Event
Assets
=
Liabilities
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
=
Notes Pay.
−
Disc. on NP
+
Ret. Ear.
1.
47,840
=
52,000
−
4,160
+
NA
NA
−
NA
=
NA
47,840 FA
Balance Sheet
Income Statement
Event
Assets
=
Liabilities
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
=
Notes Pay.
+
Int. Pay.
+
Ret. Ear.
2.
52,000
=
52,000
+
NA
+
NA
NA
−
NA
=
NA
52,000 FA
b. Discount Note: $52,000 x 8% = $4,160
Interest-bearing Note: $52,000 x 8% = $4,160
9-52
EXERCISE 9-18A
Harden Co.
General Journal
Date
Account Titles
Debit
Credit
a.
7/1/16
Cash1
56,400
Discount on Notes Payable
3,600
Notes Payable
60,000
b.
12/31/16
Interest Expense2
1,800
Discount on Notes Payable
1,800
c.
6/30/17
Interest Expense3
1,800
Discount on Notes Payable
1,800
6/30/17
Notes Payable
60,000
Cash
60,000
PROBLEM 9-19A
Malco Enterprises
Effect of Events on the Accounting Equation
2016 and 2017
Assets
=
Liabilities
Stockholders’
Equity
Event
Cash
Accts.
Rec.
=
Notes
Payable
Interest
Payable
Common
Stock
Retained
Earnings
2016
1.
10,000
10,000
2. Loan
36,000
36,000
3. Rev.
72,500
72,500
4. Coll. AR
61,300
(61,300)
5. Op. Exp.
(39,000)
(39,000)
6. Int. Acc.
1,080*
(1,080)
End. Bal.
68,300
11,200
=
36,000
1,080
+
32,420
2017
Beg. Bal.
68,300
11,200
36,000
1,080
32,420
1. Rev.
85,200
85,200
2. Coll. AR
71,500
(71,500)
3. Op. Exp.
(45,000)
(45,000)
4. Int. Acc.
1,080*
(1,080)
5. Pay Int. &
Prin.
(38,160)
(36,000)
(2,160)
End. Bal.
56,640
24,900
=
-0-
-0-
+10,000
71,540
9-54
PROBLEM 9-20A
a.
Walnut Enterprises
General Journal for 2016
Event
Account Title
Debit
Credit
1.
Cash
50,000
Notes Payable
50,000
2.
Cash ($130,000 x 1.06)
137,800
Service Revenue
130,000
Sales Tax Payable
7,800
3.
Operating Expenses
62,000
Cash
62,000
4.
Sales Tax Payable ($110,000 x 6%)
6,600
Cash
6,600
5.
Interest Expense1
2,250
Interest Payable
2,250
