Concept explainers
Prepare the
Explanation of Solution
Note payable: Note payable denotes a long-term liability that describes the amount borrowed, signed and issued note. The note carries all the details of payable amounts, interest amounts, and maturity dates.
Discount on notes payable: This is the value that arises when the note is issued at less than par value. The discount which is the interest value is included in the face value of note, and is recording as contra-liability to Notes Payable account with a normal debit balance.
Warranty:
Warranty is a written guarantee that is given by the seller to the buyer for the product against product’s defect.
Income tax:
Income tax is the compulsory contribution made by the individuals and companies for the benefits that are received from the government. This income tax will be paid on the amount that is earned by the individual or company.
Bonus:
Bonus is an extra payment given by the employer to the employees with the regular salary to increase the company earnings.
Payroll tax:
Payroll tax refers to the tax that are equally contributed by employees and employer based on the salary and wages of an employee. Payroll tax includes taxes like federal tax, local income tax, state tax, social security tax and federal and state
Prepare the journal entries in the books of Corporation SC for the month November.
Date | Account titles and explanation | Debit ($) |
Credit ($) |
November 1, 2016 | Cash | 38,800 | |
Discount on notes payable | 1,200 | ||
Notes Payable | 40,000 | ||
(To record the amount borrowed by issuing 90-days, non-interest bearing note) | |||
November 9, 2016 | Accounts receivable | 500,000 | |
Sales | 500,000 | ||
(To record the sale of 100 computers on credit) | |||
November 9, 2016 | Warranty expense | 12,500 | |
Estimated warranty liability | 12,500 | ||
(To record the estimated warranty liability) | |||
November 12, 2016 | Accounts receivable | 30,000 | |
Sales | 30,000 | ||
(To record the sale of 100 software packages on credit) | |||
November 12, 2016 | Inventory of premiums | 400 | |
Accounts payable | 400 | ||
(To record the purchase of 80 USB drives on credit) | |||
November 12, 2016 | Premium expense | 400 | |
Estimated premium liability | 400 | ||
(To record estimated premium liability) | |||
November 20, 2016 | Estimated warranty liability | 2,900 | |
Cash | 2,900 | ||
(To record payment of estimated premium liability) | |||
November 30, 2016 | Salaries expenses | 14,400 | |
Liabilities for compensated absences (1) | 14,400 | ||
(To record the liability of compensated absences for the month of November) | |||
November 30, 2016 | Salaries expenses | 432,000 | |
Federal income taxes withholding payable | 86,400 | ||
F.I.C.A taxes payable | 34,560 | ||
Cash (Balancing figure) | 311,040 | ||
(To record salaries expenses and employees withholding items) | |||
November 30, 2016 | Payroll tax expenses | 34,560 | |
F.I.C.A taxes payable | 34,560 | ||
(To record the employer payroll taxes) |
Table (1)
Working note (1):
Determine the liability for compensated absences for the month of November.
Prepare the journal entries in the books of Corporation SC for the month December.
Date | Account titles and explanation | Debit () | Credit() |
December 14, 2016 | Estimated premium liability | 100 | |
Inventory of premiums | 100 | ||
(To record the 20 proof of purchase were returned from the November 12 sale) | |||
December 29, 2016 | Loss from accident | 1,500 | |
Estimated liability from lawsuit | 1,500 | ||
To record the estimated liability and accrue of loss) | |||
December 31, 2016 | Salaries expenses | 14,400 | |
Liabilities for compensated absences | 14,400 | ||
(To record the liability of compensated absences for the month of December) | |||
December 31, 2016 | Salaries expenses | 425,000 | |
Liability for compensated absences | 10,000 | ||
Federal income taxes withholding payable | 87,000 | ||
F.I.C.A taxes payable | 34,800 | ||
Cash | 313,200 | ||
(To record salaries expenses and employees withholding items) | |||
December 31, 2016 | Payroll tax expenses | 34,800 | |
F.I.C.A taxes payable | 34,800 | ||
(To record the employer payroll taxes) | |||
December 31, 2016 | Salaries expenses(Officer’s bonus) | 36,000 | |
Bonus payable (2) | 36,000 | ||
(To record the bonus payable to the president for the year 2016) | |||
December 31, 2016 | Income tax expenses (3) | 157,200 | |
Income taxes payable | 157,200 | ||
(To recognize the income tax expenses of the year 2016) | |||
December 31, 2016 | Interest expenses | 800 | |
Discount on notes payable | 800 | ||
(To recognize the interest expenses for 2 months) |
Table (2)
Working note (2):
Calculate the amount of president bonus for 2016.
Working note (3):
Calculate the income tax expense Corporation SC for the year 2016.
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Chapter 9 Solutions
EBK INTERMEDIATE ACCOUNTING: REPORTING
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