Week 6_Accounting 220
CANN32
acct220_week_6_homework_problems.xlsxProblem 1
| There are 3 problems this week. Click on the tabs at the bottom of the spreadsheet to view each problem. |
| Prepare the journal entries for the eight following transactions. Use dates but descriptions are not required. |
| On 10/1/15, Equipment was purchased for $10,000 cash down payment and a 10% per annum promissory note of $40,000. |
| On 12/31/15, the fiscal year ended and the accrued interest was recorded as an adjusting entry. |
| On June 30, 2016 the note was paid in full. No interest has been accrued in 2016 yet. |
| There are 10,000 shares of $2 par common stock outstanding. The board of directors declares a 15 cent dividend per share on May 15, 2016. |
| On June 30, the above declared dividend is paid to holders of record as of June 20, 2016 |
| There are 8,000 shares of $10 par common stock outstanding. On July 15, 2016 the market value of the stock is $72 per share and the board of directors declares a 10% stock dividend. |
| On July 30, 2016 the above shown stock dividend is paid to holders of record as of July 20. |
| On August 10, 2016 the board of directors declares a 2-for-1 stock split of 50,000 outstanding shares of $15 par value common stock. |
Problem 2
| Examine the following items and prepare the current liabilities section of the Balance sheet for Annapolis Corporation as of December 31, 2015 | |
| The beginning of year accounts payable was $82,000. Purchases on trade accounts during the year were $452,000, and payments on account were $415,000. | |
| The company incurs substantial costs in its manufacturing plant. As of December 31, 2015, it is estimated that $38,000 of electricity has been used. The monthly billing for December has not yet been received. | |
| Annapolis Corporation has accepted deposits from customers in advance for product that will not ship until 2016 in the amount of $174,500. | |
| Annapolis Corporation has collected sales tax totaling $6,800 from customers during the month of December, 2015. This tax must be remitted to the state by January 10, 2016. | |
| Annapolis Corporation has $2,000,000 outstanding on a bank loan. The interest rate is 7.5% per annum and the interest is paid monthly on the first day of each month for the prior month. | |
| The loan listed above has principle repayment obligations equally spread over eight years beginning in 2016. | |
| Annapolis Corporation | |
| Partial Balance Sheet as of December 31, 2015 | |
| Current Liabilities | |
| Total Current Liabilities | $ - 0 |
Problem 3
| Payroll problem. The facts and instructions are listed below: | ||
| 1 | Mike works for Baltimore Corp. Fact's related to Mike's paycheck are listed below. He is paid $5,000 once per month on the last day of the month. He has already been paid for January. You are computing February payroll. | |
| 2 | Mike's pay is subject to social security taxes at a 6.2% rate and Medicare at a 1.45% rate. He has not exceeded the annual base for social security taxes. Assume the company will remit this tax and any employer match on the 3rd business day after pay day. | |
| 3 | Assume Mike's income tax withholding to be equal to 15% for Federal and 5% for Maryland. Assume that both of these withheld taxes will be remitted on the 3rd business day after pay day. | |
| 4 | Baltimore Corp. pays for workers' compensation insurance at a 3.5% rate. None of this cost is paid by the employee. | |
| 5 | Baltimore Corp provides its employees with health care insurance, and pays 80% of the $600 per employee monthly premium. The other 20% is paid by employees via payroll withholdings. The company has established a pre-tax plan for health insurance premiums. | |
| 6 | Mike participates in a tax-sheltered deferred savings plan (401k plan) and has 6% of his gross pay withheld each month. Baltimore Corp provides a 100% matching contribution of the first 5% of worker pay. There is no match after 5%. This is sent to the investment company on the 10th of the following month. | |
| 7 | Baltimore Corp's payroll is subject to federal (FUTA) tax of 6.2% of the first $7,000 of employee pay per year. The payroll is also subject to Maryland unemployment tax (SUTA) of 4.0% of the first $8,500 of employee pay per year. Both taxes are paid by the employer and the employee does not have these taxes withheld. | |
| 8 | Mike participates in the Charitable giving program to donate money to Baltimore Habitat for Humanity each month. $25 is withheld from his check and sent to the charity by Baltimore Corp on the 10th of the following month. | |
| (a) | Calculate Mikes net pay check in the space provided below. | |
| (b) | Prepare journal entries for Mike's pay and the related payroll expenses. | |
| (c) | What is the total cost to Baltimore Corp for Mike's services during February? | |
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| (b) | ||
| (c) | ||
