Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
545
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 ……
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 ………
Tax rate ……………………
Medicare tax …………….
3. EMPLOYER’S FICA taxes for Social Security
Dali
Trey
Kiesha
Chee
Total
4. EMPLOYER’S FICA taxes for Medicare
Dali
Trey
Kiesha
Chee
Total
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
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 ………
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
(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
FUTA tax ……………………..
SUTA tax ……………………..
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
547
Problem 9-4A (40 minutes)
1.
Nov. 11
Cash ………………………………………………………………..
7,875
Sales ………………………………………………………….
7,875
Sold razors to customers.
2,100
Merchandise Inventory ……………………………….
2,100
Record cost of November 11 sale (105 x $20).
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).
Cash ………………………………………………………………..
Sales ………………………………………………………….
Sold razors to customers.
4,400
Merchandise Inventory ……………………………….
4,400
Record cost of December 16 sale (220 x $20).
29
Estimated Warranty Liability …………………………….
600
Merchandise Inventory ……………………………….
600
Record cost of razor warranty
replacements (30 x $20).
Warranty Expense ……………………………………………
1,320
Estimated Warranty Liability ……………………….
1,320
Record razor warranty expense
and liability at 8% of selling price.
Warranty expense for January ………………………………..
credit
Cost of replacing items in January (50 x $20) …………..
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 …………………………
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
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
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 ……………
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 ………………….
900,000
Income before interest ……………
260,000
4. Sales decrease by 10% (multiply prior sales by 0.9)
Miller Co.
Weaver Co.
Sales ………………………………….
$900,000
$900,000
Income before interest & taxes
$200,000
Variable expenses ……………..
Income before interest ……….
$120,000
$100,000
Wild and Shaw, Financial & Managerial Accounting, 8e 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
Variable expenses ……………..
480,000
360,000
Income before interest ……….
60,000
260,000
$ 60,000
6. Miller Company
Explanation: Having fewer fixed costs better ‘protects’ the company if
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
551
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 …………………..
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 …………………..
Record employer payroll taxes.
SUTA = $1,400 x 10 employees x 5.4% = $756
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
552
Problem 9-6AA (Concluded)
Apr. 15
FICA⎯Social Security Taxes Payable ……………….
3,472
FICA⎯Medicare Taxes Payable ………………………..
Employee Fed. Income Taxes Payable ………………
Cash ……………………………………………………….
Record payment of FICA & federal income taxes.
15
State Unemployment Taxes Payable …………………
3,780
Cash ……………………………………………………….
3,780
Record payment of SUTA taxes [$3,024 + $756].
30
Cash ……………………………………………………….
30
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
PROBLEM SET B
Problem 9-1B (45 minutes)
Fox–Pro
Spring
Bank
City
Bank
1.
Maturity dates
Term of the note (in days) ……………
Maturity date …………………………..
2.
Interest due at maturity
Principal of the note …………………….
$4,600
$12,000
$8,000
60/360
120/360
45/360
$ 90
3.
Accrued interest on City Bank note at the end of Year 1
Total interest for note ……………………………………………………….
$ 90
Accrued interest expense …………………………………………………
$ 50
4.
Interest on City Bank note in Year 2
Total interest for note ……………………………………………………….
$ 90
$ 40
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
554
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 …………………………………………………………..
Paid note with interest.
Dec. 6
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.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
555
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 & Managerial Accounting, 8e Solutions Manual: Chapter 9
556
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 ……
Yet under maximum …….
$104,700
Subject to tax ………………
Tax rate ………………………
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
$ 62.00
4. EMPLOYER’S FICA taxes for Medicare
Ahmed
Carlos
Jun
Marie
Total
Wild and Shaw, Financial & Managerial Accounting, 8e 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 …
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
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 & Managerial Accounting, 8e Solutions Manual: Chapter 9
558
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 & Managerial Accounting, 8e 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 ……………………
$ 2,500
10%
$ 250
December …………………….
3. Warranty expense for January
Sales in January………………………..
$2,000
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) …………..
560
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 ……….
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
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 ……………..
Income before interest ……….
6. Seidel Company
Explanation: Having fewer fixed costs better ‘protects’ the company if
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 9
562
Problem 9-6BA (50 minutes)
June 15
FICA—Social Security Taxes Payable ……………….
992
Employee Fed. Income Taxes Payable ………………
1,050
Cash ……………………………………………………….
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 …………
Salaries Payable …………………………………………
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 ………….