Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
Exercise 9-22B (25 minutes)
1.
Income Taxes Payable (target balance) ………………………
$28,300
Total accrued [($28,600 + $19,100 + $34,600) x .30] …….
Adjustment (additional expense) ……………………………….
$ 3,610
2.
(a)
Dec. 31
Income Tax Expense …………………………………….
3,610
Income Taxes Payable …………………………….
3,610
Jan. 20
Income Taxes Payable ………………………………….
Cash ……………………………………………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
PROBLEM SET A
Problem 9-1A (45 minutes)
Locust
NBR Bank
Fargo Bank
Maturity dates
Term of the note (in days) ….
Maturity date ……………………..
Interest due at maturity
Principal of the note …………..
$35,000
$80,000
$42,000
120/360
$ 875
$ 2,400
$ 560
Accrued interest on Fargo note at end of Year 1
Total interest for note ……………………………………………
$ 560
Accrued interest expense ………………………………………
$ 308
Interest on Fargo note in Year 2
Total interest for note ……………………………………………
$ 560
$ 252
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
609
Problem 9-1A (Concluded)
5.
Apr. 20
Merchandise Inventory ……………………………………
40,250
Accounts Payable—Locust ………………………..
40,250
Purchased merchandise on credit.
Accounts Payable—Locust ……………………………..
40,250
Cash …………………………………………………………
Notes Payable—Locust ……………………………..
35,000
Cash ………………………………………………………………
80,000
Notes Payable—NBR …………………………………
80,000
Borrowed cash with a 120-day, 9% note.
Interest Expense …………………………………………….
Notes Payable—Locust …………………………………..
35,000
Cash …………………………………………………………
35,875
Paid note with interest.
Nov. 5
Interest Expense …………………………………………….
2,400
Notes Payable—NBR ………………………………………
80,000
Cash …………………………………………………………
82,400
Paid note with interest.
28
Cash ………………………………………………………………
42,000
Notes Payable—Fargo Bank ………………………
42,000
Borrowed cash with 60-day, 8% note.
Interest Expense …………………………………………….
Interest Payable …………………………………………
Jan. 27
Interest Expense …………………………………………….
Notes Payable—Fargo Bank …………………………...
42,000
Interest Payable ………………………………………………
Cash …………………………………………………………
42,560
Paid note with interest.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
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Problem 9-2A (25 minutes)
Part 1
Jan. 8
Office Salaries Expense …………………………..
22,760.00
Sales Salaries Expense …………………………...
65,840.00
FICA—Social Sec. Taxes Payable* ………
5,493.20
FICA—Medicare Taxes Payable** ………..
1,284.70
Employee Fed. Inc. Taxes Payable ………
12,860.00
Employee Union Dues Payable …………..
Salaries Payable …………………………………
66,782.10
Part 2
Jan. 8
Payroll Taxes Expense …………………………….
12,093.90
FICA—Social Sec. Taxes Payable ……….
5,493.20
FICA—Medicare Taxes Payable …………..
1,284.70
State Unemployment Taxes Payable* ….
Federal Unemployment Taxes Payable** .
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
611
Problem 9-3A (60 minutes)
1. Each EMPLOYEE’S FICA withholdings for Social Security
Dali
Trey
Kiesha
Chee
Total
Maximum base ………….
$137,700
$137,700
$137,700
$137,700
Earned through 8/18 ….
Yet under maximum ….
Subject to tax ……………
Tax rate …………………….
6.20%
Social Security tax …….
$176.70
2. Each EMPLOYEE’S FICA withholdings for Medicare (no limits)
Dali
Trey
Kiesha
Chee
Total
Earned this week ……..
$ 2,000
$ 900
$ 450
$ 400
Tax rate ……………………
Medicare tax …………….
$ 29.00
$ 13.05
$ 6.53
$ 5.80
3. EMPLOYER’S FICA taxes for Social Security
Dali
Trey
Kiesha
Chee
Total
$ 68.20
$ 55.80
$ 27.90
$ 24.80
4. EMPLOYER’S FICA taxes for Medicare
Dali
Trey
Kiesha
Chee
Total
$ 29.00
$ 13.05
$ 5.80
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
612
Problem 9-3A (Concluded)
5. EMPLOYER’S FUTA taxes
Dali
Trey
Kiesha
Chee
Total
Maximum base …………..
$ 7,000
$ 7,000
$ 7,000
$ 7,000
Earned through 8/18 …..
136,600
136,800
6,900
1,250
Yet under maximum …..
Earned this week ……….
$ 2,000
$ 900
$ 450
$ 400
Subject to tax …………….
Tax rate ……………………..
0.6%
6. EMPLOYER’S SUTA taxes
Dali
Trey
Kiesha
Chee
Total
Subject to tax (from 5) ..
$ 0
$ 0
$ 100
$ 400
Tax rate ……………………..
5.4%
7. Each EMPLOYEE’S net (take-home) pay
Dali
Trey
Kiesha
Chee
Total
Gross earnings …………..
$2,000.00
$ 900.00
$450.00
$400.00
$3,750.00
Less
(13.05)
(30.00)
(20.00)
8. EMPLOYER’S total payroll-related expense for each employee
Dali
Trey
Kiesha
Chee
Total
Gross earnings …………
$2,000.00
$ 900.00
$450.00
$400.00
$3,750.00
Plus
FUTA tax …………………..
SUTA tax …………………..
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
613
Problem 9-4A (40 minutes)
1.
Nov. 11
Cash ………………………………………………………………
7,875
Sales …………………………………………………………
7,875
Sold razors to customers.
11
Cost of Goods Sold …………………………………………
2,100
Merchandise Inventory ………………………………
2,100
Record cost of November 11 sale (105 x $20).
30
Warranty Expense …………………………………………..
Estimated Warranty Liability ………………………
and liability at 8% of selling price.
Estimated Warranty Liability …………………………...
Merchandise Inventory ………………………………
replacements (15 x $20).
16
Cash ………………………………………………………………
16,500
Sales …………………………………………………………
16,500
Sold razors to customers.
16
Cost of Goods Sold …………………………………………
4,400
Merchandise Inventory ………………………………
4,400
Record cost of December 16 sale (220 x $20).
Estimated Warranty Liability …………………………...
Merchandise Inventory ………………………………
replacements (30 x $20).
31
Warranty Expense …………………………………………..
1,320
Estimated Warranty Liability ………………………
1,320
and liability at 8% of selling price.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
Problem 9-4A (Concluded)
Jan. 5
Cash ………………………………………………………………
11,250
Sales …………………………………………………………
11,250
Sold razors to customers.
Cost of Goods Sold …………………………………………
Merchandise Inventory ………………………………
Record cost of January 5 sale (150 x $20).
Estimated Warranty Liability …………………………...
Merchandise Inventory ………………………………
Warranty Expense …………………………………………..
Estimated Warranty Liability ………………………
and liability at 8% of selling price.
2. Warranty expense for November and December
Sales
Percent
Warranty Expense
November ……………..
$ 7,875
8%
$ 630
December ……………..
3. Warranty expense for January
Sales in January …………………….
$11,250
Warranty percent ……………………
4. Balance of the estimated liability as of December 31
Warranty expense for November …………………………...
$ 630
credit
Warranty expense for December …………………………...
credit
Cost of replacing items in December (45 x $20) ………
5. Balance of the estimated liability as of January 31
Beginning balance …………………………………………………
$1,050
credit
Warranty expense for January ……………………………….
credit
Cost of replacing items in January (50 x $20) …………
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
615
Problem 9-5A (60 minutes)
1. Miller Company
2. Sales increase by 30% (multiply prior sales by 1.3)
Miller Co.
Weaver Co.
Sales ………………………………….
$1,300,000
$1,300,000
Variable expenses ………………
1,040,000
780,000
Income before interest ………..
60,000
260,000
3. Sales increase by 50% (multiply prior sales by 1.5)
Miller Co.
Weaver Co.
Sales ………………………………….
$1,500,000
$1,500,000
Variable expenses ………………
1,200,000
900,000
Income before interest ………..
60,000
260,000
4. Sales decrease by 10% (multiply prior sales by 0.9)
Miller Co.
Weaver Co.
Sales ………………………………….
$900,000
$900,000
Variable expenses ………………
720,000
540,000
Income before interest ………..
60,000
260,000
$120,000
$100,000
Income before interest & taxes
$200,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
Problem 9-5A (Continued)
5. Sales decrease by 40% (multiply prior sales by 0.6)
Miller Co.
Weaver Co.
Sales ………………………………….
$600,000
$600,000
$ 60,000
6. Miller Company
Explanation: Having fewer fixed costs better ‘protects’ the company if
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
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Problem 9-6AA (50 minutes)
Mar. 15
FICA⎯Social Security Taxes Payable ……….
3,472
FICA⎯Medicare Taxes Payable …………………
812
Employee Fed. Income Taxes Payable. ……..
4,000
Cash …………………………………………………..
Record payment of FICA & federal income taxes.
FICA⎯Medicare Taxes Payable ……………
406
Record payroll for the period.
31
Salaries Payable ……………………………………….
21,858
Cash …………………………………………………..
21,858
Record payment of payroll.*
*Check numbers are likely entered in the Payroll Register.
31
Payroll Taxes Expense* …………………………….
2,982
FICA⎯Social Sec. Taxes Payable ………..
1,736
FICA⎯Medicare Taxes Payable ……………
406
Record employer payroll taxes.
SUTA = $1,400 x 10 employees x 5.4% = $756
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
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Problem 9-6AA (Concluded)
Apr. 15
FICA⎯Social Security Taxes Payable ……….
3,472
FICA⎯Medicare Taxes Payable …………………
812
Employee Fed. Income Taxes Payable ………
Cash …………………………………………………..
Record payment of FICA & federal income taxes.
15
30
Federal Unemployment Taxes Payable ……..
420
Cash …………………………………………………..
420
Record payment of FUTA taxes [$336 + $84].
30
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
PROBLEM SET B
Problem 9-1B (45 minutes)
Fox–Pro
Spring
Bank
City
Bank
Maturity dates
Term of the note (in days) ……
Maturity date ………………………
Interest due at maturity
Principal of the note ……………
$4,600
$12,000
$8,000
60/360
120/360
45/360
$ 90
Accrued interest on City Bank note at end of Year 1
Total interest for note …………………………..……………………….
$ 90
Accrued interest expense ……………………………………………..
$ 50
Interest on City Bank note in Year 2
Total interest for note …………………………..……………………….
$ 90
$ 40
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
Problem 9-1B (Concluded)
5.
Apr. 22
Merchandise Inventory ……………………………………
5,000
Accounts Payable⎯Fox–Pro ………………………
5,000
Purchased merchandise on credit.
Accounts Payable⎯Fox–Pro …………………………...
5,000
Cash …………………………………………………………
Notes Payable⎯Fox–Pro …………………………...
4,600
Notes Payable⎯Spring Bank ……………………..
Borrowed cash with a 120-day, 10% note.
22
Interest Expense …………………………………………….
115
Notes Payable⎯Fox–Pro …………………………………
4,600
Cash …………………………………………………………
4,715
Paid note with interest.
Nov. 12
Interest Expense …………………………………………….
400
Notes Payable⎯Spring Bank …………………………..
Cash …………………………………………………………
Dec. 6
8,000
Notes Payable⎯City Bank …………………………
Borrowed cash with a 45-day, 9% note.
Interest Expense …………………………………………….
50
Interest Payable …………………………………………
Jan. 20
Interest Expense …………………………………………….
40
Interest Payable ………………………………………………
50
Notes Payable⎯City Bank ………………………………
8,000
Cash …………………………………………………………
8,090
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
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Problem 9-2B (25 minutes)
Part 1
Jan. 8
Sales Salaries Expense ……………………………..
34,745.00
Office Salaries Expense …………………………….
21,225.00
Delivery Salaries Expense …………………………
1,030.00
FICA—Social Security Taxes Payable* ….
FICA—Medicare Taxes Payable** …………
Employee Med. Insurance Payable ……….
Employee Union Dues Payable …………….
Salaries Payable ………………………………….
Part 2
Jan. 8
Payroll Taxes Expense ………………………………
7,780.50
FICA—Social Security Taxes Payable …..
3,534.00
State Unemployment Taxes Payable* ……
3,078.00
Federal Unemployment Taxes Payable** …
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
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Problem 9-3B (60 minutes)
1. Each EMPLOYEE’S FICA withholdings for Social Security
Ahmed
Carlos
Jun
Marie
Total
Maximum base ………….
$137,700
$137,700
$137,700
$137,700
Earned through 9/23 ….
136,100
136,185
6,650
23,700
Yet under maximum ….
$114,000
Subject to tax ……………
Tax rate …………………….
6.20%
6.20%
6.20%
Social Security tax …….
2. Each EMPLOYEE’S FICA withholdings for Medicare (no limits)
Ahmed
Carlos
Jun
Marie
Total
Earned this week ………
$ 2,500
$ 1,515
$ 475
$ 1,000
Tax rate …………………….
Medicare tax ……………..
$ 36.25
$ 21.97
$ 6.89
$ 79.61
3. EMPLOYER’S FICA taxes for Social Security
Ahmed
Carlos
Jun
Marie
Total
4. EMPLOYER’S FICA taxes for Medicare
Ahmed
Carlos
Jun
Marie
Total
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
Problem 9-3B (Concluded)
5. EMPLOYER’S FUTA taxes
Ahmed
Carlos
Jun
Marie
Total
Maximum base ……….
$ 7,000
$ 7,000
$ 7,000
$ 7,000
Earned through 9/23 .
136,100
136,185
6,650
23,700
Yet under maximum …
$ 0
$ 0
$ 350
$ 0
Earned this week …….
$ 2,500
$ 1,515
$ 475
$ 1,000
Subject to tax………….
$ 0
$ 0
$ 350
$ 0
Tax rate ………………….
0.6%
0.6%
6. EMPLOYER’S SUTA taxes
Ahmed
Carlos
Jun
Marie
Total
Subject to tax (from 5)
$ 0
$ 0
$ 350
$ 0
Tax rate ………………….
5.4%
5.4%
7. Each EMPLOYEE’S net (take-home pay)
Ahmed
Carlos
Jun
Marie
Total
Gross earnings ………..
$2,500.00
$1,515.00
$475.00
$1,000.00
$5,490.00
Less
(79.61)
(20.00)
(20.00)
(20.00)
8. EMPLOYER’S total payroll-related expense for each employee
Ahmed
Carlos
Jun
Marie
Total
Gross earnings ………..
$2,500.00
$1,515.00
$475.00
$1,000.00
$5,490.00
Plus
FUTA tax ………………….
SUTA tax ………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
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Problem 9-4B (40 minutes)
1.
Nov. 16
Cash ………………………………………………………………
2,500
Sales …………………………………………………………
2,500
Sold coffee grinders to customers.
16
1,200
Merchandise Inventory ………………………………
1,200
Record cost of November 16 sale (50 x $24).
Warranty Expense …………………………………………..
250
Estimated Warranty Liability ………………………
250
Record coffee grinder warranty expense
and liability at 10% of selling price.
Dec. 12
Estimated Warranty Liability …………………………...
144
Merchandise Inventory ………………………………
144
Record cost of coffee grinder
warranty replacements (6 x $24).
18
Cash ………………………………………………………………
Sales …………………………………………………………
Sold coffee grinders to customers.
18
4,800
Merchandise Inventory ………………………………
4,800
Record cost of December 18 sale (200 x $24).
28
Estimated Warranty Liability …………………………...
408
Merchandise Inventory ………………………………
408
Record cost of coffee grinder
warranty replacements (17 x $24).
31
Warranty Expense …………………………………………..
1,000
Estimated Warranty Liability ………………………
1,000
Record coffee grinder warranty expense
and liability at 10% of selling price.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
Problem 9-4B (Concluded)
Jan. 7
Cash ………………………………………………………………
2,000
Sales …………………………………………………………
2,000
Sold coffee grinders to customers.
Cost of Goods Sold …………………………………………
Merchandise Inventory ………………………………
Record cost of January 7 sale (40 x $24).
Estimated Warranty Liability …………………………...
Merchandise Inventory ………………………………
Warranty Expense …………………………………………..
Estimated Warranty Liability ………………………
and liability at 10% of selling price.
2. Warranty expense for November and December
Sales
Percent
Warranty Expense
November …………………
December …………………
3. Warranty expense for January
Sales in January …………………….
Warranty percent ……………………
4. Balance of the estimated liability as of December 31
Warranty expense for November …………………………..
$ 250
credit
Warranty expense for December …………………………..
credit
Cost of replacing items in December (23 x $24) …….
5. Balance of the estimated liability as of January 31
Beginning balance ……………………………………………….
$ 698
credit
Warranty expense for January ………………………………
credit
Cost of replacing items in January (36 x $24) ………..
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 9
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Problem 9-5B (60 minutes)
1. Ellis Company
= = 1.33
Income before interest & taxes
Interest expense
$30,000
2. Sales increase by 10% (multiply prior sales by 1.10)
Ellis Co.
Seidel Co.
Sales ………………………………….
$264,000
$264,000
Variable expenses ………………
132,000
198,000
90,000
30,000
$ 42,000
$ 36,000
3. Sales increase by 40% (multiply prior sales by 1.40)
Ellis Co.
Seidel Co.
Sales ………………………………….
$336,000
$336,000
Variable expenses ………………
168,000
252,000
Income before interest ………..
90,000
30,000
$ 78,000
$ 54,000
4. Sales decrease by 20% (multiply prior sales by 0.80)
Ellis Co.
Seidel Co.
Sales ………………………………….
$192,000
$192,000
Variable expenses ………………
96,000
144,000
Income before interest ………..
90,000
30,000
Income before interest & taxes
Interest expense
$120,000
$90,000