Solutions Chapter 9 – Set B Exercises – Libby 7e
E9–1B.
Req. 1
(a)
Current assets ($630,000 – $392,000) …………………….
$238,000
Current liabilities:
Accounts payable ……………………………………………….
$76,000
Income taxes payable …………………………………………
10,000
Liability for withholding taxes ………………………………..
5,000
(b) Quick ratio: ($90,000 $124,300) = 0.72.
Working capital is critical for the efficient operation of a business. Current assets
Req. 2
No, contingent liabilities are reported in the notes, not on the balance sheet.
Therefore, they are not included in the required computations.
E9–2B.
Req. 1
May 31
Salary and wage expense (+E, –SE) ………………………………..
211,000
Liability for income taxes withheld-employees (+L) …………
43,000
Liability for insurance premiums withheld-employees (+L) .
2,000
FICA taxes payable-employees (+L) …………………………….
16,000
150,000
Payroll for May including employee deductions.
Rent revenue collected in advance ……………………….
8,000
Wages payable …………………………………………………..
9,000
Property taxes payable ………………………………………..
4,000
Note payable, 10% (due in 6 months) ……………………
11,500
Interest payable (due in 2 months) ………………………..
)
Working capital ……………………………………………………..
May 31
Payroll tax expense (+E, –SE) …………………………………………
16,000
FICA taxes payable-employer (+L) ……………………………….
16,000
Employer payroll taxes on May payroll.
Req. 3
Liability for income taxes withheld-employees (-L) ……………..
43,000
E9–3B.
Req. 1
The additional labor expense was $9,000, which is the total of payroll taxes that must
be paid by the employer. The $11,000 income taxes and the $9,000 FICA taxes paid
Req. 2
Balance sheet liabilities:
Liability for income taxes withheld ………………………………………………….
$ 11,000
FICA taxes payable ($9,000 + $9,000) ……………………………………………
Total ……………………………………………………………………………………….
Req. 3
Both managers and analysts would understand that a 10% increase in salaries is more
Liability for insurance premiums withheld-employees (-L) ……
2,000
FICA taxes payable-employees (-L) …………………………………
16,000
FICA taxes payable-employer (-L) …………………………………..
16,000
77,000
Remittance of payroll taxes and deductions for May payroll.
E9–4B.
Req. 1
September 1
Cash (+A) ……………………………………………………………..
4,200,000
Req. 2
December 31 (end of the accounting period):
Interest expense (+E, –SE) ………………………………………
84,000
Interest payable (+L) ……………………………………………
84,000
($4,200,000 x 6% x 4/12 = $84,000).
Req. 3
February 28 (maturity date):
Short Term Note payable (-L) …………………………………..
4,200,000
Interest payable (per above) (-L) ………………………………
84,000
Interest expense ($4,200,000 x 6% x 2/12) (+E, –SE) ….
42,000
Cash (-A) …………………………………………………………..
4,326,000
Paid note plus interest at maturity.
Req. 4
It is doubtful that long-term borrowing would be appropriate in this situation. After the
Christmas season, Grabber will collect cash from its credit sales. At this point, it does
Short Term Note payable (+L) ………………………………
4,200,000
Borrowed on 6-month, 6%, note payable.
E9–5B.
Req. 1
$60,000 x 0.7513
=
$45,078
Req. 2
$12,000 x 2.4869
=
$29,843
E9–6B.
Present value of annuity: $20,000 x 4.8684 = $97,368
E9–7B.
E9–8B.
Req. 1
December 31
Savings account (+A) ……………………………………………..
4,000
Cash (-A) …………………………………………………………..
4,000
$30,000 x 0.5132
=
$15,396
$20,000 x 6.1446
=
$60,772 – ($4,000 x 10) = $20,772 (time value of money or interest)
Req. 4
Req. 5
December 31
2012
2013
Savings account (+A) ………………………..
4,360
4,752
4,000
4,000
E9–9B.
Req. 1
May 31
Salary and wage expense (+E, –SE) …………………………..……
221,000
Liability for income taxes withheld-employees (+L) …………
53,000
Liability for insurance premiums withheld-employees (+L) .
5,000
FICA taxes payable-employees (+L) …………………………….
18,000
145,000
Payroll for May including employee deductions.
Payroll tax expense (+E, –SE) …………………………………………
18,000
FICA taxes payable-employer (+L) ……………………………….
18,000
Employer payroll taxes on May payroll.
Req. 3
Liability for income taxes withheld-employees (-L) ……………..
53,000
Liability for insurance premiums withheld-employees (-L) ……
5,000
FICA taxes payable-employees (-L) …………………………………
18,000
FICA taxes payable-employer (-L) …………………………………..
18,000
94,000
Remittance of payroll taxes and deductions for May payroll.
E9–10B.
$35,000 x 5.0330 = $176,155 (purchase price)