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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Recording Various Liabilities

Glenview Hardware had the following transactions that produced liabilities during 2020:

a. Purchased merchandise on credit for $30,000. ( Note: Assume a periodic inventory system.)

b. Year-end wages of $10,000 were incurred, but not paid. Related federal income taxes of $1,200, Social Security of $620 (employee portion), and Medicare taxes of $145 were with-held from employees.

c. Year-end estimated income taxes payable, but unpaid, for the year were $42,850.

d. Sold merchandise on account for $1,262, including state sales taxes of S48. ( Note: Assume a periodic inventory system.)

e. Employer’s share of Social Security and Medicare taxes for the period were $620 and $145, respectively.

f. Borrowed cash under a 90-day, 9%, $25,000 note.

Required:

Prepare the entry to record each of these transactions (treat each transaction independently).

To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

To calculate:

The Journal entries to record the transactions.

Explanation

The Journal entries to record the transactions are explained as follows:

Glenview Hardware
Journal Entries
# Account Titles Debit Credit
a Purchases $ 30,000
Accounts Payable $ 30,000
(Being merchandise purchased on account)
b. Salaries Expense $ 10,000
Federal Tax Payable $ 1,200
Social Security Tax Payable $ 620
Medicare Tax Payable $ 145
Salaries Payable $ 8,035
(Being payroll expense recorded)
c...

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