Input your answers on this document. NOTE: OMIT JOURNAL EXPLANATIONS ON ALL JOURNAL ENTRIES.
1. Complete the payroll register given below. Assume that employment taxes are as follows: Social Security, 4.2 percent (..042); Medicare, 1.45 percent (.0145), all taxable earnings; state unemployment, 5.4 percent (.054); federal unemployment, .8 percent (.008). Prepare journal entries for items a through e below. Omit explanations.
Total Earnings Taxable Earnings Deductions
Net Pay
Wages Expense Debited
State Unemp.
Federal Unemp.
Social Security
Medicare
Social Security
Medicare
Federal Inc. Tax
Union Dues
Total
96,000 32,000 32,000 87,000 96,000 14,540 1,350
a. Journalize the payroll entry in general journal form payable to a payroll bank account.
Description Debit Credit
b. Journalize the entry to pay the employees.
Description Debit Credit
c. Journalize the entry to record the employer payroll taxes.
Description Debit Credit
d. Journalize the entry for the issuance of a check for the payment of the employees’ federal income tax and FICA tax (employee and employer).
Description Debit Credit
e. Journalize the entry for issuance of a check for payment of state unemployment taxes.
Description Debit Credit
2. Claireco uses the allowance method to write off all bad debts. On 12/31/14 an aged accounts receivable indicated that bad debt expense would be $35,000. The balance in the Allowance account on that date was a credit of $8,000. It was also estimated that the bad debts expense for the year would be 1% of the years credit sales of $40,000,000.
Required: A.Assume that you want to inform the banking industry
what your bad debt exposure will be and use the aged accounts
receivable as the basis of your bad debt estimate,make thejournal
entry required on 12/31/14.
B. Assume that you want to inform your investors
what your bad debt exposure will be and base your estimate on your credit sales, make the journal entry required on 12/31/14.
DATE ACCOUNT DR CR
3. B. Hayes deposits all receipts in the bank on the day they are received and makes all payments by check On June 30, the Ledger Balance of Cash is $2,433 after all posting is completed. The bank statement dated June 30 shows a balance of $2,687. You are given the following information to prepare a bank reconciliation in the space provided below.
a. Outstanding checks, $305.
b. A deposit of $463 was placed in the night depository on June 30 and did not appear on the bank statement.
c. The bank included a debit memo for service charges, $25.
d. An NSF check for $60 from E. Bain, a charge customer, was returned by the bank.
e. The bank collected a note for $497 ($450 principal plus $47 interest).
Bank Statement Balance
Add:
Deduct:
Adjusted Bank Statement Balance
Ledger Balance of Cash
Add:
Add:
Deduct:
Deduct:
Adjusted Ledger Balance of Cash
4. Itco uses a perpetual inventory system. During the month of October the following transactions took place:
10/1 Balance: 2,000 uts. @ $5.00/ut
10/5 Purchased: 5,000 uts. @ $5.25/ut
10/10 Purchased: 8,000 uts. @ $5.50/ut
10/12 Sold 12,000 uts. for $10.00 ea.
10/15 Purchased: 4,000 uts. @ $5.75/ut
10/22 Sold 5,000 uts. for $10.00 ea.
Required:
a. Complete the perpetual inventory record (provided) for the above transactions using FIFO
b.. Complete the perpetual inventory record (provided) for the above transactions using LIFO
c. Make the required journal entry on 10/5 for the FIFO method.
d. Make the required journal entry on 10/12 for the FIFO method.
FIFO
PURCHASES SOLD BALANCE
DATE UNITS COST TOTAL UNITS COST TOTAL UNITS COST TOTAL
LIFO
PURCHASES SOLD BALANCE
DATE UNITS COST TOTAL UNITS COST TOTAL UNITS COST TOTAL
C. Purchase on 10/5:
DATE ACCOUNT DR CR
D. Sale on 10/12
DATE ACCOUNT DR CR
5. On October 1, 2014 XYZ Inc. sold $50,000 worth of merchandise to a customer with terms
of 3/10net30.
Requied (omit journal descriptions):
A. Using the GROSS method record the sale on 10/1/14
DATE ACCOUNT DR CR
B. Using the GROSS method record the net payment if it was received on 10/10/14.
DATE ACCOUNT DR CR
C. Using the GROSS method record the net payment if it was received on 10/31/14.
DATE ACCOUNT DR CR
D. Using the NET method record the sale on 10/1/14
DATE ACCOUNT DR CR
E. Using the NET method record the net payment if it was received on 10/10/14.
DATE ACCOUNT DR CR
F. Using the NET method record the net payment if it was received on 10/31/14.
DATE ACCOUNT DR CR
HIGHLIGHT THE ANSWER THAT ISMOST CORRECT INYELLOW!
6. On a bank statement, a deposit of $402 was recorded as $204. The difference of $198 should be treated as a(n)
a. deduction from the ledger balance of cash.
b. addition to the bank statement balance.
c. deduction from the bank statement balance.
d. addition to the ledger balance of cash.
e. addition to the Sales account.
7. Which of the following statements is correct concerning a Petty Cash Fund?
a. When reimbursing the Petty Cash Fund, the Petty Cash Fund account would be debited.
b. If no change is made in the size of the fund, the Petty Cash Fund account is debited only when the fund is first established.
c. If the Petty Cash Fund amount is decreased, the Petty Cash Fund account would be debited.
d. The Petty Cash Fund is not listed on the financial statements.
8. Net pay is equal to
a. take-home pay plus all deductions.
b. take-home pay minus all deductions.
c. gross pay plus all deductions.
d. gross pay minus all deductions.
e. gross pay minus only federal and state income taxes.
9. What are the two parts of FICA taxes
a. Medical and Disability
b. Social Security and Disability
c. Social Security and Medicare
d. FUTA and SUTA
10. Flexible spending plans and 401(k) deductions are normally considered
a. Tax free earnings
b. Pre-tax deductions
c. Post-tax deductions
d. Normal tax deductions
11. Mary Reeves has gross wages of $3,000 for the week ending October 30. Mary’s total accumulated gross wages earned this year, prior to this payroll, is $107,250. If the FICA rates are: Social Security: 4.2% on a limit of $106,800 and Medicare 1.45%. What are Mary’s FICA-Social Security and FICA-Medicare taxes for the week?
a. $0; $43.50
b. $186.00; $43.50
c. $186.00; $0
d. $0; $0
12. In the journal entry to record the payment of the taxes shown on the quarterly 941 tax form, the debit(s) would be to
a. Cash only.
b. FICA Tax Payable (employee and employer) and Federal Income Tax Payable.
c. FICA Tax Payable (employee only) and Federal Income Tax Payable.
d. Federal Income Tax Payable only.
e. FICA Tax Payable (employer only) and Federal Income Tax Payable.
13. Which of the following amounts does Form 941 ask for?
a. Total number of employees during the quarter
b. Total wages and tips subject to federal tax withholding
c. Total federal income tax withheld
d. All of these
e. None of these
14. Sally Marks has cumulative earnings of $105,600 and earns $5,500 during the current pay period. If the FICA rate is 4.2% for Social Security, with a limit of $106,800, and 1.45% for Medicare, applied to all earnings, the total FICA tax to be withheld for this pay period is:
a. $130.15
b. $420.75
c. $91.80
d. $79.75
15. Which of the following statements is true?
a. SUTA and FUTA Tax Rates are always the same
b. Payroll Tax Expense involves Federal Income Tax Withholding.
c. The FUTA wage taxable limit is $7,000
d. Withholding Federal Income Taxes is optional for the employer
16. Entries in the purchases journal are posted to the
a. general ledger only.
b. accounts payable ledger only.
c. accounts payable ledger and the purchases ledger.
d. general ledger and the accounts payable ledger.
e. accounts payable ledger and the accounts receivable ledger.
17. J. Smith purchases merchandise from Hi-View Industries for $25,250 on account. Upon inspection of the merchandise received, J. Smith discovers damaged goods in the amount of $1,000 and requests to return the damaged merchandise to Hi-View Industries. What source document would Hi-View industries use for the journal entry to process this return?
a. Debit Memorandum
b. Credit Memorandum
c. Purchase Memorandum
d. Return Memorandum
18. The two major methods used to estimate Bad Debt Expense are:
a. The Direct Write off method and the Estimated method.
b. The Percent of Cash Sales method and the Outstanding Accounts Receivable Method.
c. The Historical % of Credit Sales and the Aged Accounts Receivable Method.
d. The Aged Accounts Receivable and Direct Write off method.
19. Under the perpetual inventory system, the sale of goods is recorded with two entries. One entry debits Cash or Accounts Receivable and credits sales. The second entry
a. debits Cost of Goods Sold and credits Merchandise Inventory.
b. debits Merchandise Inventory and credits Cost of Goods Sold.
c. debits Cost of Goods Sold and credit Purchases.
d. debits Purchases and credits Merchandise Inventory.
e. debits Income Summary and credits Cost of Goods Sold.
20. Jones Supply Co. sold merchandise on account to J. Smith, invoice no. 151, for $185.50, plus 6% sales tax. What is the entry made to Accounts Receivable and Sales Tax Payable respectively?
a. $185.50 DR, $11.13 CR
b. $185.50 CR, $11.13 DR
c. $196.63 DR, $11.13 CR
d. $196.63 CR, $11.13 DR
ANSWER THE FOLLOWING QUESTION ON THIS DOCUMENT WITH A FEW SHORT
SENTENCES.
21. Why does the Direct Write Off method violate GAAP?
22. How do you determine what the Cost of Goods Sold is in a periodic inventory system?
23. What are the four major methods used to value inventory?
24.Why was the perpetual system not widely used before the mid-seventies?