Accounting 422 Questions

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The following are selected 2017 transactions of Sandhill Corporation.

Sept. 1		Purchased inventory from Encino Company on account for $44,800. Sandhill records purchases gross and uses a periodic inventory system.
Oct. 1		Issued a $44,800, 12-month, 8% note to Encino in payment of account.
Oct. 1		Borrowed $44,800 from the Shore Bank by signing a 12-month, zero-interest-bearing $49,760 note.

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(a)

Prepare journal entries for the selected transactions above. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record entries in the order displayed in the problem statement.)

Date	Account Titles and Explanation	Debit	Credit




October 1

Sarasota Hardware Company’s payroll for November 2017 is summarized below.

			Amount Subject to Payroll Taxes
				Unemployment Tax
Payroll	Wages Due	FICA		Federal	State
Factory	$131,500	$131,500		$41,500	$41,500
Sales	31,100	31,100		4,100	4,100
Administrative	37,400	37,400
Total	$200,000	$200,000		$45,600	$45,600

At this point in the year, some employees have already received wages in excess of those to which payroll taxes apply. Assume that the state unemployment tax is 2.5%. The FICA rate is 7.65% on an employee’s wages to $118,500 and 1.45% in excess of $118,500. Of the $200,000 wages subject to FICA tax, $20,700 of the sales wages is in excess of $118,500. Federal unemployment tax rate is 0.8% after credits. Income tax withheld amounts to $17,300 for factory, $6,600 for sales, and $5,500 for administrative.

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(a)

Prepare a schedule showing the employer’s total cost of wages for November by function. (Round answers to 0 decimal places, e.g. 5,275.)

	Factory	Sales	Administrative	Total
Salaries and Wages	$	$	$	$
FICA Taxes
FUTA Taxes
SUTA Taxes
Total Cost	$	$	$	$

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Presented below is a list of possible transactions. Analyze the effect of the 18 transactions on the financial statement categories indicated.

	Transactions	Assets	Liabilities	Owners’ Equity	Net Income
1.	Purchased inventory for $80,000 on account (assume perpetual system is used).

2.	Issued an $80,000 note payable in payment on account (see item 1 above).

3.	Recorded accrued interest on the note from item 2 above.

4.	Borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note.

5.	Recognized 4 months’ interest expense on the note from item 4 above.

6.	Recorded cash sales of $75,260, which includes 6% sales tax.

7.	Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various amounts withheld.

8.	Recorded employer’s payroll taxes.

9.	Accrued accumulated vacation pay.

10.	Recorded an asset retirement obligation.

11.	Recorded bonuses due to employees.

12.	Recorded a contingent loss on a lawsuit that the company will probably lose.

13.	Accrued warranty expense (assume expense warranty approach).

14.	Paid warranty costs that were accrued in item 13 above.

15.	Recorded sales of product and related service-type warranties.

16.	Paid warranty costs under contracts from item 15 above.

17.	Recognized warranty revenue (see item 15 above).

18.	Recorded estimated liability for premium claims outstanding.

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Crane Company issued $432,000 of 10%, 20-year bonds on January 1, 2017, at 103. Interest is payable semiannually on July 1 and January 1. Crane Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a)		The issuance of the bonds.
(b)		The payment of interest and the related amortization on July 1, 2017.
(c)		The accrual of interest and the related amortization on December 31, 2017.

Date	Account Titles and Explanation	Debit	Credit
1/1/17


7/1/17


12/31/17

Pronghorn Company sells 9% bonds having a maturity value of $1,550,000 for $1,382,384. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1. Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to 0 decimal places, e.g. 38,548.)

Schedule of Discount Amortization Straight-Line Method
Year	Cash Paid	Interest Expense	Discount Amortized	Carrying Amount of Bonds
Jan. 1, 2017	$	$	$	$
Jan. 1, 2018
Jan. 1, 2019
Jan. 1, 2020
Jan. 1, 2021
Jan. 1, 2022

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On June 30, 2017, Martinez Company issued $3,600,000 face value of 13%, 20-year bonds at $3,870,826, a yield of 12%. Martinez uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

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(a)

Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(1)		The issuance of the bonds on June 30, 2017.
(2)		The payment of interest and the amortization of the premium on December 31, 2017.
(3)		The payment of interest and the amortization of the premium on June 30, 2018.
(4)		The payment of interest and the amortization of the premium on December 31, 2018.

No.	Date	Account Titles and Explanation	Debit	Credit
(1)	June 30, 2017


(2)	December 31, 2017


(3)	June 30, 2018


(4)	December 31, 2018

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Sage Co. is building a new hockey arena at a cost of $2,620,000. It received a downpayment of $450,000 from local businesses to support the project, and now needs to borrow $2,170,000 to complete the project. It therefore decides to issue $2,170,000 of 11%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 10%.

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(a)

Prepare the journal entry to record the issuance of the bonds on January 1, 2016. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
January 1, 2016