Q1:
For each of the following purchases, does the purchase represent a capital or a revenue expenditure?
a. Complete remodeling of a restaurant dining mom at a cost of $80,000.
b. Repainting the exterior of a delivery truck at a cost of $500.
c. Purchase of a pizza oven at a cost of $18,001
d. Purchase of a dozen pencil sharpeners with a life of ten years at a total cost of $65.
e. Overhaul of the engine on a tour bus at a cost of $5,000, extending the life of the bus by five years.
E Purchase of a computer system at a cost of $35,000.
Indicate whether the assets below should be listed on the balance sheet under Current Assets or Property and Equipment:
Q2:
What basic items should be included in a master payroll file?
What information is provided in a payroll journal? What information is pro-vided by an employee earnings record?
What arc the differences between the entry to record payroll and the entry to record payroll taxes?
What does the acronym FICA stand for? Is a RCA tax an employer tax or an employee tax?
What do the acronyms FL1TA and SUTA represent? Are FUTA and SUTA taxes paid by the employer, the employee, or both?
What do the terms ad valorem and mil mean?
Longview Hotels operates ten properties in the Midwest. The company employs the follow¬ing procedures to control payroll:
a. Tom Johnson, the human resources manager, carefully interviews all prospective employees, authorizes their hiring, prepares the payroll, and distributes the checks.
b. Donna Miller, the front desk manager, deletes individuals from her department's labor force and provides payroll employees with front desk employees' wage rates.
c. At the end of each shift, hotel dining room employees write down their hours on a blank sheet of paper and place it on the desk of the food and beverage manager.
d. All employees are paid by checks drawn on the general bank account of the company.
e. All individual paychecks are kept in the respective departments until they are claimed by employees.
Required:
Draft a memo suggesting changes that the operation should make to better control payroll.
Indicate whether the following statements are true or false and explain why:
a. If a company is a mom and pop operation, it would be acceptable under current tax laws to pay employees in cash with no withholding.
b. An employee's immediate supervisor should hold a check for the employee if he or she is taking a leave of absence.
c. Duties regarding the payroll process should be segregated to ensure that proper payroll procedures are followed.
Q3:
The labor force master list should be under the control of the human resources depart¬ment.
Time clocks arc a great way to ensure the proper recording of time worked. I. Employees wage rates-are provided to payroll by the marketing department.
Explain the difference between accounts payable and notes payable and determine whether the following items are accounts payable or notes payable:
a. An amount Owed to a supplier for a purchase.
Q4:
Duke and Earl form a partnership to start a fine dining restaurant. What is r Duke's liability for Earl's actions in each of the following situations?
a. Earl orders $25,000 worth of food and beverages from American Foods, Inc., for use in the restaurant.
b. Earl purchases a personal automobile for driving to and from the restau¬rant, and signs a note for $18,000.
c. Earl signs a lease on a building for the restaurant, agreeing to pay $3,000 per month.
d. Earl signs a home improvement loan in the amount of $8,000 for an addi-tion to his home.
Q5:
Problems
Cook and Sell are forminga partnership to start a catenng business. Cook'scontributions/et be cash of S20,000, equipment that cost $8,000 and has a fair market value of 510,000, and inventory worth S10,000. Stirs contribution includes land that cost S15,000 and is now wonh $0,000, a building with a fair market value of $80,000 and a mortgage of 560,000, and equip. ment worth $5,000.
Required:
Determine the capital balances for the two partners at the date of the partnership's formation.
Griffin and I la II are partners in the motel business. On January 1, 20X1, their capital balances were $50,000 and $40,000 respectively. During 20X1 Griffin drew $25,000 and Hall drew 530,000out of the partnership. The profit for 20X1 wa.s 560,000and is to be dividedin the ratio of 40 percent for Griffin to 60 percent for Hall.
Required:
Determine the capital balances of Griffin and Hall for December 31, 20X1.