Reference no: EM131106762

Assignment

Problem 1

Accrued liability: current portion of long-term debt. On July 1, 20X1, Hall Company borrowed $225,000 via a long-term loan. Terms of the loan require that Hall pay interest and $75,000 of principal on July 1, 20X2, 20X3, and 20X4. The unpaid balance of the loan accrues interest at the rate of 10% per year. Hall has a December 31 year-end.

a. Compute Hall's accrued interest as of December 31, 20X1.
b. Present the appropriate balance sheet disclosure for the accrued interest and the current and long-term portion of the outstanding debt as of December 31, 20X1.
c. Repeat parts (a) and (b) using a date of December 31, 20X2, rather than December 31, 20X1. Assume that Hall is in compliance with the terms of the loan agreement.

Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing:

Social Security taxes: 6% on the first $55,000 earned
Medicare taxes: 1.5% on the first $130,000 earned
Federal income taxes withheld from wages: $7,500
State income taxes: 5% of gross earnings
Insurance withholdings: 1% of gross earnings
State unemployment taxes: 5.4% on the first $7,000 earned
Federal unemployment taxes: 0.8% on the first $7,000 earned

The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end.

a. Prepare the necessary entry to record Brookhaven's February payroll that will be paid on March 1.
b. Prepare the journal entry to record Brookhaven's payroll tax expense.

Problem 2

Current liabilities: entries and disclosure. A review of selected financial activities of Visconti's during 20XX disclosed the following:

12/1: Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable. Interest and principal are due at maturity.
2/10: Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Past experience with similar products indicates that 2% of the units will require repair, with warranty costs averaging $27 per unit.
12/22: Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.
12/26: Borrowed $5,000 from First City Bank; signed a $5,120 note payable due in 60 days.
12/31: Repaired six XY-80s during the month at a total cost of $162.
12/31: Accrued 3 days of salaries at a total cost of $1,400.
12/31: Accrued vacation pay amounting to 6% of December's $36,000 total wage and salary expense.

Instructions

a. Prepare journal entries to record the preceding transactions and events.

b. Determine accrued interest as of December 31, 20XX, and prepare the necessary adjusting entry or entries.

c. Prepare the current liability section of Visconti's December 31, 20XX balance sheet.

Problem 3

Issuance of stock: organization costs. Snowbound Corporation was incorporated in July. The firm's charter authorized the sale of 200,000 shares of $10 par-value common stock. The following transactions occurred during the year:

7/1: Sold 45,000 shares of common stock to investors for $18 per share. Cash was collected and the shares were issued.
7/7: Issued 600 shares to Sharon Dale, attorney-at-law, for services rendered during the corporation's organizational phase. Dale charged $12,600 for her work.
8/11: Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were issued.
12/14: Issued 30,000 shares to the MJB Company for land valued at $900,000.

Instructions

Prepare journal entries to record each transaction.