CHAPTER 13
SOLUTIONS TO B PROBLEMS
PROBLEM 13-1B
(a) March 10
Purchases ………………………………………………………
42,000
Accounts Payable ………………………………….
42,000
March 19
Accounts Payable …………………………………………..
Purchase Discounts ($42,000 X 1%) ………..
Cash ……………………………………………………..
Cash ………………………………………………………………
Discount on Notes Payable ……………………………..
Notes Payable ………………………………………..
June 30
Equipment ……………………………………………………..
40,000
Cash ……………………………………………………..
6,000
Notes Payable ………………………………………..
34,000
September 8
Retained Earnings (Dividends) ………………………..
Dividends Payable ………………………………….
Dividends Payable ………………………………………….
Cash ……………………………………………………..
PROBLEM 13-1B (continued)
(b) December 31
1. No adjustment necessary
2. Interest Expense ($28,000 X 9/24) ………………..
10,500
Discount on Notes Payable …………………….
3. Interest Expense ($34,000 X 8% X 6/12) ………..
Interest Payable ……………………………………..
4. No adjustment necessary
PROBLEM 13-2B
1.
Dec. 10
Trucks ($70,000 X 1.06)…………………………..
74,200
Cash ……………………………………………………….
74,200
2.
Dec. 10
Cash ……………………………………………………….
Due to Customer …………………………..
3.
Dec. 1-31
Cash ……………………………………………………….
Sales Taxes Payable
($494,340 X 0.06) …………………………..
29,660
4.
Dec. 31
Land Improvements …………………………..
61,500
Asset Retirement Obligation …………………………..
61,500
PROBLEM 13-3B
Entries for Payroll 1
Salaries and Wages Expense …………………………………..
6,770.00*
Withholding Taxes Payable (12% X $6,770)* ……..
812.40
FICA Taxes Payable (7.65% X $6,770) ……………….
Union Dues Payable (1% X $6,770) …………………..
Cash …………………………..………………………………….
* $2,000 + $3,200 + $610 + $960 = $6,770
Payroll Tax Expense ………………………………………………..
538.04
FICA Taxes Payable (7.65% X $6,770) ……………….
517.91
FUTA Taxes Payable (0.8% X $610)…………………..
SUTA Taxes Payable (2.5% X $610) ………………….
Entries for Payroll 2 and 3
Salaries and Wages Payable (Vacation) ……………………
2,960.00*
Salaries and Wages Expense …………………………………..
3,810.00**
Withholding Taxes Payable (12% X $6,770) ……….
812.40
FICA Taxes Payable (7.65% X $6,770) ……………….
Union Dues Payable (1% X $6,770) …………………..
Cash …………………………..………………………………….
* ($4,000 + $1,920) ÷ 2
** $3,200 + $610
Payroll Tax Expense ………………………………………………..
538.04
FICA Taxes Payable (7.65% X $6,770) ……………….
517.91
FUTA Taxes Payable (0.8% X $610)…………………..
SUTA Taxes Payable (2.5% X $610) ………………….
Entries for Payroll 4
Salaries and Wages Expense …………………………………..
6,770.00
Withholding Taxes Payable (12% X $6,770) ……….
812.40
FICA Taxes Payable (7.65% X $6,770) ……………….
517.91
Union Dues Payable (1% X $6,770) …………………..
PROBLEM 13-3B (Continued)
Payroll Tax Expense ……………………………………………….
538.04
FICA Taxes Payable (7.65% X $6,770) ……………….
517.91
FUTA Taxes Payable (0.8% X $610) ………………….
SUTA Taxes Payable (2.5% X $610) ………………….
Monthly Payment of Payroll Liabilities
Withholding Taxes Payable ($812.40 X 4) ………………….
3,249.60
FICA Taxes Payable ($517.91 X 8) …………………………..
4,143.28
Union Dues Payable ($67.70 X 4) ……………………………..
FUTA Taxes Payable ($4.88 X 4) ……………………………….
SUTA Taxes Payable ($15.25 X 4) …………………………..
Cash ………………………………………………………………
PROBLEM 13-4B
(a)
Name
Earnings
to June 30
September
Earnings
Income Tax
Withholding
FICA
SUTA
FUTA
Jerry Kaye
$ 75,000
$15,000
$1,500
$1,147.50
–
–
Jessie Randle
104,000
17,000
1,700
420.10 a
–
–
Javier White
6,000
800
80
61.20
$ 6.40**
Jeremy Taggle
125,000
21,000
2,100
–
Joan Short
3,600
1,500
150
114.75
–
Salaries and Wages Expense …………………………..
62,400.00
Withholding Taxes Payable …………………………..
6,240.00
FICA Taxes Payable ………………………………………..
2,591.20
Cash ……………………………………………………….
53,568.80
(b)
Payroll Tax Expense ……………………………………………….
2,632.60
FICA Taxes Payable ………………………………………..
2,591,20
FUTA Taxes Payable ……………………………………….
SUTA Taxes Payable ……………………………………….
(c)
Withholding Taxes Payable ……………………………………..
6,240.00
FICA Taxes Payable ………………………………………………..
5,182.40
FUTA Taxes Payable ……………………………………………….
SUTA Taxes Payable ……………………………………………….
Cash ……………………………………………………….
PROBLEM 13-5B
(a)
Cash (1,100 X $4,000)………………………………………………
4,400,000
Sales Revenue ……………………………………………….
4,400,000
(b)
Cash (1,100 X $4,000)………………………………………………
4,400,000
Sales Revenue ……………………………………………….
4,400,000
Warranty Expense (1,100 X [$125 + $220]) ………………..
Warranty Liability ……………………………………………
(c) No liability would be disclosed under the cash-basis method relative
to future costs due to warranties on past sales.
(d)
Current Liabilities:
Warranty Liability ……………………………………………
$189,750
Long-term Liabilities:
Warranty Liability ……………………………………………
$189,750
(e)
Warranty Expense …………………………………………………..
Salaries and Wages Payable …………………………..
(f)
Warranty Payable ……………………………………………………
198,850
Inventory ……………………………………………………….
71,950
Salaries and Wages Payable …………………………..
126,900
PROBLEM 13-6B
(a)
Cash ………………………………………………………………………
1,411,400
Sales Revenue (625 X $2,100) ………………………….
1,312,500
Unearned Warranty Revenue (460 X $215) …………..
98,900
(b)
Current Liabilities:
Unearned Warranty Revenue ($98,900/5) ………….
$ 19,780
(Note: Warranty costs assumed to be
Long-term Liabilities:
Unearned Warranty Revenue
($98,800 X 4/5) ……………………………………………..
$ 79,120
(c)
Unearned Warranty Revenue …………………………..
Warranty Revenue …………………………………………..
Warranty Expense …………………………………………………..
Inventory ……………………………………………………….
Salaries and Wages Payable …………………………..
(d)
Current Liabilities:
Unearned Warranty Revenue …………………………..
$ 19,780
Long-term Liabilities:
Unearned Warranty Revenue …………………………..
$ 59,340
PROBLEM 13-7B
(a)
(1)
Cash …………………………..…………………………..
2,928,000
Sales Revenue (240 X $12,200) …………………………..
2,928,000
(2)
Warranty Expense ([240 X $635] / 2) ………………………….
76,200
Inventory ($260 X 240 X 1/2) …………………………..
(3)
Warranty Expense ……………………………………………………
76,200
Warranty Liability
(240 machines X $635) – $76,200 ………………………
(4)
Warranty Liability …………………………………………………….
76,200
Inventory ……………………………………………………….
Salaries and Wages Payable …………………………..
(b)
(1)
Cash …………………………..…………………………..
2,928,000
Sales Revenue ………………………………………………….
2,928,000
(2)
Warranty Expense ……………………………………………………
76,200
Inventory ……………………………………………………….
31,200
Salaries and Wages Payable …………………………..
45,000
(3)
Under the cash-basis method, the total warranty expense is
(4)
Warranty Expense ……………………………………………………
76,200
Inventory ……………………………………………………….
31,200
Salaries and Wages Payable …………………………..
45,000
(c)
Cash-basis method:
PROBLEM 13-7B (Continued)
Expense warranty accrual method:
As of 12/31/14 the balance sheet would disclose a current liability
in the amount of $76,200 for Warranty Liability.
(d)
In the case of Treanor Company, the expense warranty accrual method
PROBLEM 13-8B
Inventory of Premiums ……………………………………………
225,000
Cash ………………………………………………………………
225,000
(To record purchase of 100,000 hot meal
carriers at $2.25 each)
Cash ………………………………………………………………………
Sales Revenue ………………………………………………..
(To record sales of 2,200,000 dinners at
$4.75 each)
Premium Expense …………………………………………………..
Inventory of Premiums ……………………………………
(To record redemption of 230,000 coupons,
[230,000 ÷ 10] X $2.25 = $51,750)
Premium Expense …………………………………………………..
96,750
Premium Liability ……………………………………………
96,750
(To record estimated liability for premium
claims outstanding at December 31, 2015)
Total estimated redemptions (30%) ………………………….
Coupons redeemed in 2015 ……………………………………..
Cost of estimated claims outstanding (430,000 ÷ 10) X $2.25 = $96,750
PROBLEM 13-9B
(a) 2014
Inventory of Premiums …………………………………………….
480,000
Cash …………………………..………………………………….
480,000
Cash ……………………………………………………….……………..
Sales Revenue ………………………………………………..
(To record the sale of 6,200,500 candy bars
at 20 cents each)
(To record the purchase of 600,000
Cash
160,000
Premium Expense …………………………………………………..
96,000
Inventory of Premiums …………………………………….
256,000
[To record the redemption of 1,600,000
UPC codes, the receipt of $160,000
(1,600,000 ÷ 5) X $0.50, and the emailing
of 320,000 download codes]
Computation of premium expense:
Less: Cash received—320,000 X $0.50 …………….
Premium Expense …………………………………………………..
37,200*
Premium Liability ……………………………………………
37,200
(To record the estimated liability for
premium claims outstanding at 12/31/14)