SOLUTIONS TO PROBLEMS
PROBLEM 11-1A
(a) Jan. 5 Cash ………………………………………………….. 20,520
Sales Revenue ($20,520 ÷ 108%) …… 19,000
Sales Taxes Payable
($20,520 – $19,000) …………………… 1,520
12 Unearned Service Revenue …………………. 10,000
Service Revenue …………………………. 10,000
(b) (1) Jan. 31 Interest Expense …………………………. 60
Interest Payable ……………………. 60
($27,000 X 8% X 1/12 =
($180; $180 X 1/3)
PROBLEM 11-1A (Continued)
(c) Current liabilities
Notes payable …………………………………………………………. $27,000
PROBLEM 11-2A
(a) Jan. 2 Inventory ………………………………………….. 30,000
Accounts Payable ………………………. 30,000
Feb. 1 Accounts Payable …………………………….. 30,000
Notes Payable ……………………………. 30,000
Mar. 31 Interest Expense
($30,000 X 9% X 2/12) …………………….. 450
Interest Payable …………………………. 450
PROBLEM 11-2A (Continued)
(b)
Notes Payable
4/1 30,000
10/1 60,000
2/1 30,000
7/1 60,000
12/1 24,000
12/31 Bal. 24,000
12/31 Bal. 160
3/31 450
9/30 1,500
12/31 160
12/31 Bal. 2,110
(c) Current liabilities
Notes payable …………………………………………. $24,000
Interest payable ………………………………………. 160 $24,160
PROBLEM 11-3A
Earnings
Deductions
Employee
Hours
Regular
Over-
time
Gross
Pay
FICA
Federal
Income
Tax
State
Income
Tax
United
Fund
Total
Net Pay
Salaries and
Wages
Expense
Ben Abel
Rita Hager
40
42
600.00
640.00
0
48.00
600.00
688.00
45.90
52.63
49.00
22.00
18.00
20.64
5.00
5.00
117.90
100.27
482.10
587.73
600.00
688.00
Jack Never
Sue Perez
Totals
2,280.00
PROBLEM 11-3A (Continued)
(b) Mar. 15 Salaries and Wages Expense …………. 2,523.00
FICA Taxes Payable ……………….. 193.01
Federal Income Taxes
15 Payroll Tax Expense ……………………… 349.43
FICA Taxes Payable
(c) Mar. 16 Salaries and Wages Payable ………….. 2,039.30
Cash ……………………………………… 2,039.30
PROBLEM 11-4A
(a) Jan. 10 Union Dues Payable …………………. 870.00
Cash …………………………………. 870.00
12 FICA Taxes Payable ………………….. 760.00
Federal Income Taxes Payable ….. 1,204.60
Cash …………………………………. 1,964.60
15 U.S. Savings Bonds Payable ……… 360.00
Cash …………………………………. 360.00
31 Salaries and Wages Expense …….. 58,000.00
FICA Taxes Payable …………… 4,437.00
Federal Income Taxes
Payable …………………………. 2,158.00
State Income Taxes
Payable …………………………. 454.00
United Fund Contributions
PROBLEM 11-4A (Continued)
(b) 1. Jan. 31 Payroll Tax Expense………………….. 8,033.00
FICA Taxes Payable
($58,000 X 7.65%) …………….. 4,437.00
PROBLEM 11-5A
(a) Salaries and Wages Expense …………………………. 570,000
FICA Taxes Payable ………………………………… 38,645*
Federal Income Taxes Payable ………………… 174,400
(b) Payroll Tax Expense ………………………………………. 43,100
FICA Taxes Payable ………………………………… 38,645
Federal Unemployment Taxes Payable
($135,000 X 2.5%) ………………………………… 3,375
(c)
Employee
Wages,
Tips, Other
Compensation
Federal
Income
Tax
Withheld
State
Income
Tax
Withheld
FICA
Wages
FICA Tax
Withheld
COMPREHENSIVE PROBLEM SOLUTION
(a)
1.
Interest Payable ……………………………………….
Cash …………………………………………………
250
250
2.
Inventory …………………………………………………
Accounts Payable ……………………………..
261,100
261,100
Cost of Goods Sold ………………………………….
Inventory …………………………………………..
4.
Accounts Payable …………………………………….
Cash …………………………………………………
5.
Sales Taxes Payable …………………………………
Cash …………………………………………………
17,000
17,000
6.
Other Operating Expenses ………………………..
Cash …………………………………………………
30,000
30,000
7.
Salaries and Wages Expense …………………….
60,000
Federal Income Taxes Payable …………..
Salaries and Wages Payable ………………
COMPREHENSIVE PROBLEM SOLUTION (Continued)
Adjusting Entries
8.
Interest Expense ………………………………………
Interest Payable ………………………………..
250
250
9.
Insurance Expense ($6,000 ÷ 12) ……………….
Prepaid Insurance ……………………………..
500
500
10.
Depreciation Expense
($38,000 – $2,000) ÷ (5 X 12)…………………………
Accumulated Depreciation—
Equipment ……………………………………..
600
600
Payable (5.4% X 60,000) ………………….
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(a) and (b) Optional T accounts
Cash
Bal. 30,000
(3) 468,600
(1) 250
(4) 230,000
(5) 17,000
(6) 30,000
Bal. 221,350
Bal. 30,750
(2) 261,100
(3) 265,000
Bal. 26,850
(5) 17,000
(3) 28,600
Bal. 11,600
(7) 46,510
Prepaid Insurance
Bal. 6,000
Adj. 500
Bal. 5,500
Equipment
Bal. 38,000
Adj. 600
Bal. 50,000
(7) 8,900
Payable
adj. 480
Interest Payable
(1) 250
Bal. 250
adj. 250
Bal. 250
Accounts Payable
(4) 230,000
Bal. 13,750
(2) 261,100
Bal. 44,850
FICA Taxes Payable
(7) 4,590
adj. 4,590
Bal. 9,180
State Unemployment Taxes
Payable
adj. 3,240
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(a) and (b) (Continued)
Owner’s Capital
Bal. 40,750
(3) 440,000
adj. 500
Cost of Goods Sold
(3) 265,000
(7) 60,000
adj. 8,310
Depreciation Expense
adj. 600
Other Operating Expenses
(6) 30,000
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(b) MORGAN COMPANY
Adjusted Trial Balance
January 31, 2017
Account
Debit
Credit
Cash ……………………………………………………
$221,350
Inventory ……………………………………………..
26,850
Prepaid Insurance ………………………………..
Equipment …………………………………………..
38,000
Accumulated Depreciation—
Equipment ………………………………………..
$ 600
Accounts Payable ………………………………..
44,850
Interest Payable …………………………………..
250
Sales Taxes Payable …………………………….
11,600
Salaries and Wages Payable …………………
46,510
FICA Taxes Payable ……………………………..
Federal Income Taxes Payable ……………..
Federal Unemployment Taxes Payable ….
480
State Unemployment Taxes Payable ……..
Notes Payable ……………………………………..
50,000
Owner’s Capital ……………………………………
40,750
Sales Revenue …………………………..…………
440,000
Cost of Goods Sold ………………………………
265,000
Salaries and Wages Expense ………………..
60,000
Payroll Tax Expense …………………………….
8,310
Depreciation Expense …………………………..
Insurance Expense ………………………………
Other Operating Expenses ……………………
Interest Expense ………………………………….
$656,360
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(c) MORGAN COMPANY
Income Statement
For the Month Ended January 31, 2017
Sales revenue ………………………………………
$440,000
Cost of goods sold ………………………………
265,000
Gross profit …………………………………………
175,000
Operating expenses
Salaries and wages expense ………….
Payroll tax expense ……………………….
Depreciation expense ……………………
Insurance expense ………………………..
Other operating expenses ……………..
Total operating expenses ……………………..
99,410
Income from operations
75,590
Other expenses and losses …………………..
Interest expense ………………………………….
Net income ………………………………………….
MORGAN COMPANY
Owner’s Equity Statement
For the Month Ended January 31, 2017
Owner’s Capital, 12/31/16 ……………………..
$ 40,750
Add: Net income ………………………………..
Owner’s Capital, 1/31/17 ……………………….