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CHAPTER 10 Current Liabilities and Payroll
Prob. 10–3A
1. Gross Federal Income Social Security Medicare
Earnings Tax Withheld Tax Withheld Tax Withheld
Arnett………
…
$ 8,250.00 $ 1,416.00 $ 495.00 $ 123.75
2. a. Social security tax paid by employer…………………………………
…
$19,780.80
b. Medicare tax paid by employer…………………………………………
…
4,945.20
c. Earnings subject to unemployment compensation tax,
$10,000 for all employees except Arnett, Harvin, and Ward.
Employee
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–4A
1.
Social Federal U.S. Sales Office
Total Security Medicare Income Savings Net Ck. Salaries Salaries
Employee Hours Regular Overtime Total Tax Tax Tax Bonds Total Pay No. Expense Expense
Aaron 46 2,720.00 612.00 3,332.00 199.92 49.98 750.20 100.00 1,100.10 2,231.90 901 3,332.00
Cobb 41 2,480.00 93.00 2,573.00 154.38 38.60 537.68 110.00 840.66 1,732.34 902 2,573.00
2. Sales Salaries Expense 19,060.00
Office Salaries Expense 3,800.00
PAYROLL FOR WEEK ENDING December 9, 2016
EARNINGS DEDUCTIONS PAID ACCOUNT DEBITED
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–5A
1. Dec. 2 Bond Deductions Payable 3,400
Cash 3,400
2 Social Security Tax Payable 9,273
Medicare Tax Payable 2,318
Employees Federal Income Tax Payable 15,455
Cash 27,046
13 Operations Salaries Expense 43,200
Officers Salaries Expense 27,200
Office Salaries Expense 6,800
Social Security Tax Payable 4,632
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–5A (Concluded)
Dec. 27 Operations Salaries Expense 42,800
Officers Salaries Expense 28,000
Office Salaries Expense 7,000
Social Security Tax Payable 4,668
Medicare Tax Payable 1,167
liability.
2. a. Dec. 31 Operations Salaries Expense 8,560
Officers Salaries Expense 5,600
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–1B
1. Apr. 15 Cash 225,000
Notes Payable 225,000
May 1 Equipment 310,400
Interest Expense ($320,000 × 180 ÷ 360 × 6%) 9,600
Notes Payable 320,000
15 Notes Payable 225,000
Interest Expense ($225,000 × 30 ÷ 360 × 6%) 1,125
Notes Payable 225,000
Cash 1,125
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–1B (Concluded)
2. a. Product Warranty Expense 26,800
Product Warranty Payable 26,800
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–2B
1. a. Dec. 30 Sales Salaries Expense 625,000
Warehouse Salaries Expense 240,000
Office Salaries Expense 320,000
Employees Income Tax Payable 232,260
2. a. Dec. 30 Sales Salaries Expense 625,000
Warehouse Salaries Expense 240,000
Office Salaries Expense 320,000
Employees Income Tax Payable 232,260
Social Security Tax Payable171,100
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–3B
1. Gross Federal Income Social Security Medicare
Earnings* Tax Withheld Tax Withheld Tax Withheld
Addai………………
…
$44,880 $ 9,372 $ 2,692.80 $ 673.20
Kasay………………
…
25,200 3,731 1,512.00 378.00
2. a. Social security tax paid by employer……………………………… $17,163.90
b. Medicare tax paid by employer……………………………………
…
4,290.98
c. Earnings subject to unemployment compensation tax,
Employee
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–4B
1.
Social Federal U.S. Sales Office
Total Security Medicare Income Savings Net Ck. Salaries Salaries
Employee Hours Regular Overtime Total Tax Tax Tax Bonds Total Pay No. Expense Expense
Carlton 52 2,000.00 900.00 2,900.00 174.00 43.50 667.00 60.00 944.50 1,955.50 328 2,900.00
Grove 4,000.00 240.00 60.00 860.00 100.00 1,260.00 2,740.00 329 4,000.00
Johnson 36 1,872.00 1,872.00 112.32 28.08 355.68 496.08 1,375.92 330 1,872.00
2. Sales Salaries Expense 16,743.00
Office Salaries Expense 7,200.00
Social Security Tax Payable 1,436.58
PAYROLL FOR WEEK ENDING December 9, 2016
EARNINGS DEDUCTIONS PAID ACCOUNT DEBITED
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–5B
1. Dec. 1 Medical Insurance Payable 2,520
Cash 2,520
1 Social Security Tax Payable 2,913
Medicare Tax Payable 728
Social Security Tax Payable 1,452
Medicare Tax Payable 363
Employees Federal Income Tax Payable 4,308
Employees State Income Tax Payable 1,089
Bond Deductions Payable 1,150
Medical Insurance Payable 420
Salaries Payable 15,418
CHAPTER 10 Current Liabilities and Payroll
Prob. 10–5B (Concluded)
Dec. 26 Sales Salaries Expense 14,250
Officers Salaries Expense 7,250
Office Salaries Expense 2,750
Social Security Tax Payable 1,455
26 Salaries Payable 15,873
Cash 15,873
26 Payroll Tax Expense 2,009
Social Security Tax Payable 1,455
30 Bond Deductions Payable 2,300
Cash 2,300
31 Pension Expense 65,500
Cash 55,400
Unfunded Pension Liability 10,100
To record pension cost and unfunded
liability.
2. Dec. 31 Sales Salaries Expense 4,275
Officers Salaries Expense 2,175
CHAPTER 10 Current Liabilities and Payroll
1. Jan. 3 Petty Cash 4,500
Cash 4,500
Feb. 26 Office Supplies 1,680
Miscellaneous Selling Expense 570
Miscellaneous Administrative Expense 880
Cash 3,130
June 2 Notes Receivable 180,000
Accounts Receivable—Ryanair 180,000
Aug. 1 Cash 182,400
Notes Receivable 180,000
Interest Revenue 2,400
($180,000 × 8% × 60 ÷ 360 = $2,400).
COMPREHENSIVE PROBLEM 3
CHAPTER 10 Current Liabilities and Payroll
Comp. Prob. 3 (Continued)
Sept. 15 Land 654,925
Interest Expense 15,075
Notes Payable 670,000
Nov. 30 Sales Salaries Expense 135,000
Office Salaries Expense 77,250
Employees Federal Income Tax Payable 39,266
Social Security Tax Payable 12,735
Medicare Tax Payable 3,184
Salaries Payable 157,065
30 Payroll Tax Expense 16,229
Social Security Tax Payable 12,735
CHAPTER 10 Current Liabilities and Payroll
Comp. Prob. 3 (Continued)
2.
Balance according to bank statement $283,000
3. Miscellaneous Expense 750
4. a. Bad Debt Expense 18,000
Allowance for Doubtful Accounts 18,000
To record estimated uncollectible accounts,
$16,000 + $2,000.
KORNETT COMPANY
Bank Reconciliation
December 31, 2016
CHAPTER 10 Current Liabilities and Payroll
Comp. Prob. 3 (Continued)
e. Depreciation Expense—Buildings 36,000
Depreciation Expense—Office Equipment 44,000
Depreciation Expense—Store Equipment 5,000
Computations:
Buildings ($900,000 × 4.0%)………………… $36,000
f. Amortization Expense—Patents 6,000
Patents 6,000
To record patent amortization,
$48,000 ÷ 8 years.
g. Depletion Expense 30,000
Accumulated Depletion 30,000
To record depletion,
($546,000 ÷ 910,000 tons) × 50,000 tons.
CHAPTER 10 Current Liabilities and Payroll
Comp. Prob. 3 (Continued)
5.
Current assets:
Petty cash $ 4,500
Cash 243,960
Total current assets $1,183,375
Property, plant, and equipment:
Land $654,925
Buildings $900,000
Less accumulated depreciation 36,000 864,000
Office equipment $246,000
Less accumulated depreciation 44,000 202,000
KORNETT COMPANY
Balance Sheet
December 31, 2016
Assets
CHAPTER 10 Current Liabilities and Payroll
Comp. Prob. 3 (Concluded)
Current liabilities:
Social security tax payable $ 25,470
Medicare tax payable 4,710
Employees federal income tax payable 40,000
State unemployment tax payable 270
Federal unemployment tax payable 40
Salaries payable 157,000
Accounts payable 131,600
Interest payable 28,000
Product warranty payable 76,000
Liabilities
CHAPTER 10 Current Liabilities and Payroll
CP 10–1
The firm has no implicit or explicit contract to pay any bonus. The bonus is discretionary,
even if the firm paid a two-week bonus for 10 straight years. The firm is not behaving
CP 10–2
Sumana’s interpretation of the pension issue is correct. The employee earns the pension
during the working years. The pension is part of the employee’s compensation that is
deferred until retirement. Thus, Felton should record an expense equal to the amount of
CASES & PROJECTS
CHAPTER 10 Current Liabilities and Payroll
CP 10–3
a. The so-called “underground economy” hides transactions from IRS scrutiny by
conducting business with cash (not check or credit card, which leaves an audit
trail). The intent in many such transactions is to evade income tax illegally. However,
just because a transaction is in cash does not exempt it from taxation. Tina Song
CP 10–4
The purpose of this activity is to familiarize students with retrieving and using IRS forms
Students should be able to find the three required forms without much difficulty.
Encourage students to retrieve the forms from the IRS Web site because this is a useful
source for any IRS form or publication that they might need. IRS Web site forms come in
.pdf format, which means Adobe Acrobat Reader or similar software is necessary to
open and print the file. PDF reader software is available as free plug-ins for most
CHAPTER 10 Current Liabilities and Payroll
CP 10–5
This activity does not require the student to research the contingency notes for Altria
Group. The contingency disclosure is extensive and complicated. Rather, the student
should identify Altria Group’s main business, and from this information determine the
