CHAPTER 11
SOLUTIONS TO EXERCISES—SET B
EXERCISE 11-1B
August 1, 2017
Cash ……………………………………………………………. 200,000
Notes Payable ………………………………………… 200,000
December 1, 2017
Cash ……………………………………………………………. 120,000
Notes Payable ………………………………………… 120,000
December 31, 2017
Interest Payable ……………………………………… 1,000
March 1, 2018
Notes Payable………………………………………………. 120,000
Interest Payable ……………………………………………. 1,000
Interest Expense ………………………………………….. 2,000
Cash ……………………………………………………… 123,000
May 1, 2018
EXERCISE 11-2B
(a) June 1 Cash ………………………………………………… 150,000
Notes Payable …………………………….. 150,000
EXERCISE 11-3B
SCOGGIN COMPANY
Apr. 10 Cash ……………………………………………………… 84,400
Sales Revenue ………………………………… 80,000
Sales Taxes Payable ………………………… 4,400
EXERCISE 11-4B
(a) Nov. 30 Cash …………………………………………………. 270,000
Unearned Subscription Revenue
(15,000 X $18) ………………………….. 270,000
EXERCISE 11-5B
(a) Estimated warranties outstanding:
Month
Estimate
Units Defective
November
1,600
600
(b) Warranty Expense (3,600 X $16) …………………………. 57,600
Warranty Liability ……………………………………….. 57,600
EXERCISE 11-6B
(a) If a contingency is remote (unlikely to occur), it need not be recorded or
disclosed.
(b) Since the contingency is probable and reasonably estimable, the liability
should be recorded in the accounts. In addition, the details should be
disclosed in the notes to the financial statements. The journal entry is:
EXERCISE 11-7B
(a) WEST ONLINE COMPANY
Partial Balance Sheet
Current liabilities
Long-term debt due within one year ………………………. $ 40,000
Accounts payable ………………………………………………… 77,000
Unearned ticket revenue ……………………………………….. 36,000
EXERCISE 11-8B
(a) Current ratio
2016 $6,050 ÷ $4,340 = 1.39:1
2017 $4,870 ÷ $3,450 = 1.41:1
(b) Current ratio
$4,670 ÷ $3,250 = 1.44:1
EXERCISE 11-9B
(a) 1. Regular 40 X $18 = $720
Overtime 2 X $27 = 54
Gross earnings $774
2. FICA taxes—$59.21 = ($774 X 7.65%).
(b) Salaries and Wages Expense …………………………….. 774.00
FICA Taxes Payable ……………………………………. 59.21
Federal Income Taxes Payable ……………………. 76.00
EXERCISE 11-10B
S. Berry $4,400 X 7.65% = $336.60. Berry’s total gross earnings for the
year are $101,900 = ($97,500 + $4,400), which is below the
$117,000 maximum for Social Security taxes.
C. Frey ($2,500 X 6.2%) + ($4,400 X 1.45%) = $163. Frey’s total gross
earnings for the year are $118,900 ($114,500 + $4,400). Thus,
J. Jovi ($4,400 X 1.45%) = $63.80. Jovi’s gross earnings prior to this
pay exceed the maximum amount subject to Social Security
taxes. However, all of the gross earnings in the December 31
pay period are subject to Medicare taxes.
EXERCISE 11-11B
(a) See next page.
(b) Jan. 31 Salaries and Wages Expense …………… 2,159.00
FICA Taxes Payable …………………. 165.16
EXERCISE 11-12B (Continued)
(a) GIPSON COMPANY
Payroll Register
For the Week Ending January 31
Earnings
Deductions
Employee
Total
Hours
Regular
Overtime
Gross
Pay
FICA
Taxes
Federal
Income Taxes
Health
Insurance
Total
Net
Pay
S. Lore
46
$ 560.00
$126.00
$ 686.00
$ 52.48
$ 45.00
$15.00
$112.48
$ 573.52
K. Dunn
Totals
$279.00
$166.00
$1,752.84
EXERCISE 11-11B (Continued)
(b) Jan. 31 Payroll Tax Expense …………………………... 299.02
FICA Taxes Payable …………………….. 165.16
EXERCISE 11-12B
(a) (1) $ 800 [$12,000 see (2) below – $11,200].
(2) $12,000 (FICA taxes $918 ÷ 7.65%).
(b) Feb. 28 Salaries and Wages Expense ……………… 12,000
FICA Taxes Payable …………………….. 918
Federal Income Taxes Payable …….. 1,022
EXERCISE 11-13B
(a) FICA tax ($570,000 X 6.2%) + ($650,000 X 1.45%) …. $44,765
SUTA tax ($125,000 X 5.4%) ……………………………….. 6,750
(b) Payroll Tax Expense ………………………………………….. 52,515
*EXERCISE 11-14B
Mar. 31 Vacation Benefits Expense
(12 X 2 X $240) …………………………………….. 5,760
Vacation Benefits Payable ………………… 5,760
*EXERCISE 11-15B
1. Vacation Benefits Expense ………………………………. 22,500
Vacation Benefits Payable
(30 X 5 X $150) …………………………………….. 22,500
SOLUTIONS TO PROBLEMS—SET C
PROBLEM 11-1C
(a) Jan. 1 Cash ……………………………………………………. 30,000
Notes Payable ……………………………….. 30,000
5 Cash ……………………………………………………. 10,400
Sales Revenue ($10,400 ÷ 104%) …….. 10,000
Sales Taxes Payable
($10,400 – $10,000) …………………….. 400
12 Unearned Service Revenue …………………… 9,000
Service Revenue …………………………... 9,000
(b) (1) Jan. 31 Interest Expense …………………………... 200
Interest Payable
($30,000 X 8% X 1/12) ………….. 200
(2) Jan. 31 Warranty Expense ($46,800 X 5%) ….. 2,340
Warranty Liability …………………… 2,340
PROBLEM 11-1C (Continued)
(c) Current liabilities
Notes payable …………………………………………………… $30,000
Accounts payable …………………………………………….. 42,500
Unearned service revenue ($15,000 – $9,000) ……… 6,000
PROBLEM 11-2C
(a) Jan. 2 Inventory ………………………………………….. 18,000
Accounts Payable ………………………. 18,000
Feb. 1 Accounts Payable …………………………….. 18,000
Notes Payable ……………………………. 18,000
Mar. 31 Interest Expense
($18,000 X 10% X 2/12) …………………… 300
Interest Payable …………………………. 300
Sept. 30 Interest Expense
($36,000 X 10% X 3/12) …………………… 900
Interest Payable …………………………. 900
PROBLEM 11-2C (Continued)
(b)
Notes Payable
4/1 18,000
10/1 36,000
2/1 18,000
7/1 36,000
12/1 20,000
12/31 Bal. 20,000
12/31 200
12/31 Bal. 200
Interest Expense
3/31 300
9/30 900
12/31 200
12/31 Bal. 1,400
PROBLEM 11–3C
MEEK DRUG STORE
Payroll Register
For the Week Ended February 15, 2017
Earnings
Deductions
Employee
Hours
Regular
Over-
time
Gross
Pay
FICA
Fed.
State
U.F.
Total
Net Pay
Salaries and
Wages
Expense
L. Paltz
39
585.00
0
585.00
44.75
54.00
17.55
0
116.30
468.70
585.00
Totals
2,065.00
219.00
2,284.00
194.00
68.52
17.50
PROBLEM 11-3C (Continued)
(b) Feb. 15 Salaries and Wages Expense ………… 2,284.00
FICA Taxes Payable ……………….. 174.72
Federal Income Taxes
Payable ……………………………… 194.00
15 Payroll Tax Expense ……………………… 316.33
FICA Taxes Payable
($2,284 X 8%) ……………………… 174.72
(c) Feb. 16 Salaries and Wages Payable ………….. 1,829.26
Cash ……………………………………… 1,829.26
PROBLEM 11-4C
(a) Jan. 10 Union Dues Payable …………………. 250.00
Cash …………………………………. 250.00
17 State Income Taxes Payable ……… 102.15
Cash …………………………………. 102.15
20 Federal Unemployment Taxes
31 Salaries and Wages Expense …….. 60,000.00
FICA Taxes Payable …………… 4,590.00
Federal Income Taxes
Payable …………………………. 2,970.00
State Income Taxes
PROBLEM 11-4C (Continued)
(b) 1. Jan. 31 Payroll Tax Expense …………………… 8,310.00
FICA Taxes Payable
($60,000 X 7.65%) ……………… 4,590.00
PROBLEM 11-5C
(a) Salaries and Wages Expense …………………………... 520,000
FICA Taxes Payable ………………………………….. 36,000
(b) Payroll Tax Expense ………………………………………… 38,385
FICA Taxes Payable ($450,000 X 7.65%) ……… 34,425
(c)
Employee
Wages,
Tips, Other
Compensation
Federal
Income
Tax
Withheld
State
Income
Tax
Withheld
FICA
Wages
FICA Tax
Withheld
(1) $60,000 X 3%.
(2) $27,000 X 3%.