Problem 9-3A (60 minutes)
1. Each EMPLOYEE’S FICA withholdings for Social Security
Dali
Trey
Kiesha
Chee
Total
Maximum base …………..
$128,400
$128,400
$128,400
Earned through 8/18 …..
127,300
6,900
1,250
Yet under maximum ……
$ 1,100
$121,500
$127,150
Subject to tax ……………..
Tax rate ……………………..
6.20%
Social Security tax ……..
$ 68.20
$ 55.80
$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 ……………………
1.45%
1.45%
1.45%
1.45%
Medicare tax …………….
$ 29.00
$ 13.05
$ 6.53
$ 5.80
$ 54.38
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
$ 54.38
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 ……..
127,300
127,500
6,900
1,250
Yet under maximum ………
0
0
100
5,750
Earned this week …………..
$ 2,000
$ 900
$ 450
$ 400
Subject to tax ………………..
100
Tax rate ………………………..
0.6%
0.6%
0.6%
FUTA tax ………………………
$ 0.00
$ 0.00
$ 0.60
$ 2.40
6. EMPLOYER’S SUTA taxes
Dali
Trey
Kiesha
Chee
Total
Subject to tax (from 5) …
$ 0
$ 0
$ 100
$ 400
Tax rate ………………………
5.4%
5.4%
5.4%
5.4%
SUTA tax …………………….
$ 0.00
$ 0.00
$ 5.40
$ 21.60
$ 27.00
7. Each EMPLOYEE’S net (take-home) pay
Dali
Trey
Kiesha
Chee
Total
$ 900.00
(27.90)
(6.53)
(284.00)
(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
FICA Social Sec. tax …….
68.20
55.80
27.90
24.80
176.70
FICA Medicare taxes ……
29.00
13.05
6.53
5.80
54.38
FUTA tax ……………………..
0.00
0.00
0.60
2.40
3.00
SUTA tax ……………………..
0.00
0.00
5.40
Total payroll expense …..
Problem 9-4A (40 minutes)
1.
Nov. 11
Cash ………………………………………………………………..
7,875
Sales ………………………………………………………….
7,875
Sold razors to customers.
11
2,100
Merchandise Inventory ……………………………….
2,100
Record cost of November 11 sale (105 x $20).
30
Warranty Expense ……………………………………………
630
Estimated Warranty Liability ……………………….
630
Record razor warranty expense
and liability at 8% of selling price.
Dec. 9
Estimated Warranty Liability …………………………….
300
Merchandise Inventory ……………………………….
300
Record cost of razor warranty
replacements (15 x $20).
16
Cash ………………………………………………………………..
16,500
Sales ………………………………………………………….
16,500
Sold razors to customers.
16
4,400
Merchandise Inventory ……………………………….
4,400
Record cost of December 16 sale (220 x $20).
Estimated Warranty Liability …………………………….
600
Merchandise Inventory ……………………………….
600
Record cost of razor warranty
replacements (30 x $20).
31
Warranty Expense ……………………………………………
1,320
Estimated Warranty Liability ……………………….
1,320
Record razor warranty expense
and liability at 8% of selling price.
Problem 9-4A (Concluded)
Jan. 5
Cash ………………………………………………………………..
11,250
Sales ………………………………………………………….
11,250
Sold razors to customers.
5
Cost of Goods Sold ………………………………………….
3,000
Merchandise Inventory ……………………………….
3,000
Record cost of January 5 sale (150 x $20).
Estimated Warranty Liability …………………………….
1,000
Merchandise Inventory ……………………………….
1,000
Warranty Expense ……………………………………………
Estimated Warranty Liability ……………………….
and liability at 8% of selling price.
2. Warranty expense for November and December
November ……………..
December ………………
Total ……………………..
3. Warranty expense for January
Sales in January …………………………
$11,250
Warranty percent ………………………..
8%
Warranty expense ………………………
$ 900
4. Balance of the estimated liability as of December 31
Warranty expense for November ………………………………
$ 630
credit
Warranty expense for December ………………………………
1,320
credit
Cost of replacing items in December (45 x $20) ………..
(900)
debit
Estimated Warranty Liability balance ……………………….
$1,050
credit
5. Balance of the estimated liability as of January 31
Beginning balance ………………………………………………….
credit
Warranty expense for January ………………………………..
credit
Cost of replacing items in January (50 x $20) …………..
debit
Estimated Warranty Liability balance ………………………
credit
Problem 9-5A (60 minutes)
1. Miller Company
= = 3.33
Weaver Company
= = 1.54
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 ……………
260,000
520,000
Interest expense (fixed) …………..
60,000
260,000
Net income ……………………………..
$ 200,000
$ 260,000
Net income increases by* ……….
43%
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 ……………
300,000
600,000
Interest expense (fixed) …………..
60,000
260,000
Net income ……………………………..
$ 240,000
$ 340,000
Net income increases by …………
71%
143%
4. Sales decrease by 10% (multiply prior sales by 0.9)
Miller Co.
Weaver Co.
Sales ………………………………….
Variable expenses ……………..
Income before interest ……….
180,000
360,000
Interest expense (fixed) ………
Net income …………………………
Net income decreases by ……
Income before interest & taxes
Interest expense
Income before interest & taxes
Interest expense
$200,000
$60,000
$400,000
$260,000
Problem 9-5A (Continued)
5. Sales decrease by 40% (multiply prior sales by 0.6)
Miller Co.
Weaver Co.
Sales ………………………………….
$600,000
$600,000
Variable expenses ……………..
480,000
360,000
Income before interest ……….
120,000
240,000
Interest expense (fixed) ………
60,000
260,000
Net income …………………………
$ 60,000
$ (20,000)
Net income decreases by ……
–57%
–114%
6. Miller Company
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 ……………………………………………………….
8,284
Record payment of FICA & federal income taxes.
31
Office Salaries Expense ……………………………………
11,200
Shop Salaries Expense …………………………………….
16,800
FICA⎯Social Sec. Taxes Payable ………………..
1,736
FICA⎯Medicare Taxes Payable …………………..
406
Employee Fed. Income Taxes Payable …………
Salaries Payable …………………………………………
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
State Unemployment Taxes Payable ……………
756
Federal Unemployment Taxes Payable ………..
84
Record employer payroll taxes.
SUTA = $1,400 x 10 employees x 5.4% = $756
Problem 9-6AA (Concluded)
Apr. 15
FICA⎯Social Security Taxes Payable ……………….
3,472
FICA⎯Medicare Taxes Payable ………………………..
812
Employee Fed. Income Taxes Payable ………………
4,000
Cash ……………………………………………………….
8,284
Record payment of FICA & federal income taxes.
15
Cash ……………………………………………………….
30
Cash ……………………………………………………….
30
No entry required upon filing Form 941.
PROBLEM SET B
Problem 9-1B (45 minutes)
Fox–Pro
Spring
Bank
City
Bank
1.
Maturity dates
Date of the note …………………………..
Term of the note (in days) ……………
Maturity date …………………………..
2.
Interest due at maturity
Principal of the note …………………….
$4,600
$12,000
$8,000
Annual interest rate …………………….
15%
10%
9%
Fraction of year …………………………..
60/360
120/360
45/360
Interest expense ………………………….
$ 115
$ 400
$ 90
3.
Accrued interest on City Bank note at the end of Year 1
Total interest for note ……………………………………………………….
$ 90
Fraction of term in Year 1 ………………………………………………….
25/45
Accrued interest expense …………………………………………………
$ 50
4.
Interest on City Bank note in Year 2
Total interest for note ……………………………………………………….
$ 90
Fraction of term in Year 2 ………………………………………………….
20/45
Interest expense in Year 2 …………………………………………………
$ 40
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
July 15
Cash ………………………………………………………………..
12,000
Notes Payable⎯Spring Bank ………………………
12,000
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 …………………………...
12,000
Cash …………………………………………………………..
12,400
Paid note with interest.
Dec. 6
Cash ………………………………………………………………..
8,000
Notes Payable⎯City Bank …………………………..
Borrowed cash with a 45-day, 9% note.
Interest Expense ………………………………………………
50
Interest Payable ………………………………………….
Accrued interest on note payable.
Jan. 20
Interest Expense ………………………………………………
40
Interest Payable ……………………………………………….
50
Notes Payable⎯City Bank ………………………………..
8,000
Cash …………………………………………………………..
8,090
Paid note with interest.
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* …………
3,534.00
FICA—Medicare Taxes Payable** …………………
826.50
Employee Fed. Income Taxes Payable …………
8,625.00
Employee Med. Insurance Payable ………………
1,160.00
Employee Union Dues Payable ……………………
138.00
Salaries Payable …………………………..……………..
Part 2
Jan. 8
Payroll Taxes Expense …………………………..…………
7,780.50
FICA—Social Security Taxes Payable ………….
3,534.00
FICA—Medicare Taxes Payable ……………………
826.50
State Unemployment Taxes Payable* …………..
3,078.00
Federal Unemployment Taxes Payable** ………..
342.00
Problem 9-3B (60 minutes)
1. Each EMPLOYEE’S FICA withholdings for Social Security
Ahmed
Carlos
Jun
Marie
Total
Maximum base ……………
$128,400
$128,400
$128,400
$128,400
Earned through 9/23 ……
126,800
126,885
6,650
23,700
Yet under maximum …….
$ 1,600
$ 1,515
$121,750
$104,700
Subject to tax ………………
$ 1,515
$ 1,000
Tax rate ………………………
6.20%
6.20%
6.20%
6.20%
Social Security tax ………
$ 93.93
$ 62.00
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 ………………………
1.45%
1.45%
1.45%
1.45%
Medicare tax ……………….
$ 36.25
$ 21.97
$ 6.89
$ 14.50
$ 79.61
3. EMPLOYER’S FICA taxes for Social Security
Ahmed
Carlos
Jun
Marie
Total
$ 62.00
4. EMPLOYER’S FICA taxes for Medicare
Ahmed
Carlos
Jun
Marie
Total
Amount from part 2 ……..
$ 36.25
$ 21.97
$ 6.89
$ 14.50
$ 79.61
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 …
126,800
126,885
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%
0.6%
0.6%
FUTA tax ………………….
$ 0.00
$ 0.00
$ 2.10
$ 0.00
$ 2.10
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%
5.4%
5.4%
SUTA tax …………………
$ 0.00
$ 0.00
$ 18.90
$ 0.00
$ 18.90
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
FICA Social Sec. tax ….
FICA Medicare taxes …
(79.61)
Health insurance ……….
(20.00)
(20.00)
(20.00)
(80.00)
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
FICA Social Sec. tax ….
99.20
93.93
29.45
62.00
284.58
FICA Medicare taxes …
36.25
21.97
6.89
14.50
79.61
FUTA tax …………………..
0.00
0.00
2.10
0.00
2.10
SUTA tax …………………..
0.00
0.00
18.90
0.00
18.90
Health insurance ……….
30.00
30.00
30.00
30.00
120.00
Pension contrib. (5%) ..
125.00
75.75
23.75
50.00
274.50
Total payroll ………………
$2,790.45
$1,736.65
$586.09
$1,156.50
$6,269.69
Problem 9-4B (40 minutes)
1.
Nov. 16
Cash ………………………………………………………………..
2,500
Sales ………………………………………………………….
2,500
Sold coffee grinders to customers.
16
Cost of Goods Sold ………………………………………….
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 ………………………………………………………………..
10,000
Sales ………………………………………………………….
10,000
Sold coffee grinders to customers.
18
Cost of Goods Sold ………………………………………….
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.
Problem 9-4B (Concluded)
Jan. 7
Cash ………………………………………………………………..
2,000
Sales ………………………………………………………….
2,000
Sold coffee grinders to customers.
7
Cost of Goods Sold ………………………………………….
960
Merchandise Inventory ……………………………….
960
Record cost of January 7 sale (40 x $24).
Estimated Warranty Liability …………………………….
864
Merchandise Inventory ……………………………….
864
Warranty Expense ……………………………………………
200
Estimated Warranty Liability ……………………….
200
and liability at 10% of selling price.
2. Warranty expense for November and December
Sales
Percent
Warranty Expense
November ……………………
$ 2,500
10%
$ 250
December …………………….
10,000
10
1,000
Total …………………………..
$12,500
$1,250
3. Warranty expense for January
Sales in January………………………..
$2,000
Warranty percent ………………………
10%
Warranty expense ………………………
$ 200
4. Balance of the estimated liability as of December 31
Warranty expense for November ……………………………..
Warranty expense for December………………………………
Cost of replacing items in December (23 x $24) ………..
Estimated Warranty Liability balance ……………………….
5. Balance of the estimated liability as of January 31
Beginning balance …………………………………………………..
Warranty expense for January …………………………………
Cost of replacing items in January (36 x $24) …………..
Estimated Warranty Liability balance ……………………….
Problem 9-5B (60 minutes)
1. Ellis Company
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
Income before interest ……….
132,000
66,000
Interest expense (fixed) ………
90,000
30,000
Net income …………………………
$ 42,000
$ 36,000
Net income increases by …….
40%
20%
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 ……….
168,000
84,000
Interest expense (fixed) ………
90,000
30,000
Net income …………………………
$ 78,000
$ 54,000
Net income increases by …….
80%
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 ……….
96,000
48,000
Interest expense (fixed) ………
90,000
30,000
Net income …………………………
$ 6,000
$ 18,000
Net income decreases by ……
–80%
–40%
Problem 9-5B (Concluded)
5. Sales decrease by 50% (multiply prior sales by 0.50)
Ellis Co.
Seidel Co.
Sales ………………………………….
$120,000
$120,000
Variable expenses ……………..
60,000
90,000
Income before interest ……….
60,000
30,000
Interest expense (fixed) ………
90,000
30,000
Net income …………………………
$(30,000)
$ 0
Net income decreases by ……
–200%
–100%
6. Seidel Company
Problem 9-6BA (50 minutes)
June 15
FICA—Social Security Taxes Payable ……………….
992
FICA—Medicare Taxes Payable ………………………..
232
Employee Fed. Income Taxes Payable ………………
1,050
Cash ……………………………………………………….
2,274
Record payment of FICA & federal income taxes.
30
Office Salaries Expense ……………………………………
3,800
Shop Salaries Expense …………………………………….
4,200
FICA—Social Security Taxes Payable ………….
FICA—Medicare Taxes Payable …………………..
Employee Fed. Income Taxes Payable …………
1,050
Salaries Payable …………………………………………
6,338
Record payroll for the period.
30
Salaries Payable ………………………………………………
6,338
Cash ……………………………………………………….
6,338
Record payment of payroll.*
*Check numbers are likely entered in the Payroll Register.
30
Payroll Taxes Expense* …………………………………….
612
FICA⎯Social Security Taxes Payable ………….
496
FICA⎯Medicare Taxes Payable …………………..
116
SUTA = $0