1. Partner investments; journal entries. The LP partnership was formed on 1st January, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed cash of $50,000 and equipment with value of $20,000.
a. Organize the journal entries needed to record the investments of Levy and Parcells.
2. Payroll accounting. Consider that the subsequent 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 required entry to record Brookhaven's February payroll. The entry will include deductions for the subsequent:
• Social Security taxes
• Medicare taxes
• Federal income taxes withheld
• State income taxes
• Insurance withholdings
b. Prepare journal entry to record Brookhaven's payroll tax expense. The entry will include the subsequent:
• Matching Social Security taxes
• Matching Medicare taxes
• State unemployment taxes
• Federal unemployment taxes
3. Current liabilities: disclosure and entries. A review of selected financial activities of Visconti's during 20XX disclosed the subsequent:
12/1 Borrowed $20,000 from First City Bank by signing a 3- month, 15 percent note payable. Interest and principal are due at maturity.
2/10 Established a warranty liability for the XY-80, a fresh product. Sales are expected to total 1,000 units during the month. Past experience with similar products shows 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 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.
Instructions
a. Create journal entries to record the transactions.
b. Create adjusting entries on October 31 to record accrued interest.
c. Create the Current Liability section of Red Bank's balance sheet as of October 31. Suppose that the Accounts Payable account totals $203,600 on this date.
4. 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 subsequent 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.
8/11 Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were issued.
9/1 Declared a cash dividend on 9/1 for $1.00 a share for shareholders on record 10/1 with payment being made on 11/1.
Instructions
a. Create journal entries for two stock issues.
b. Create journal entries for cash dividend declaration and payment.
5. Notes payable. Red Bank Enterprises was involved in the subsequent transactions during the fiscal year ending October 31:
8/2: Borrowed $75,000 from Bank of Kingsville by signing a 120-day note.
8/20: Issued a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck. The note is due in 180 days and carries a 12 percent interest rate.
9/10: Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.
9/11: Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.
10/10: The note to Pans Enterprises was paid in full.
10/31: The note to Datatex Equipment was paid in full.
11/30: Paid note to Bank of Kingville
Instructions
a. Create journal entries to record the transactions.
b. Create adjusting entries on October 31 to record accrued interest.
c. Create the Current Liability section of Red Bank's balance sheet as of October 31. Suppose that the Accounts Payable account totals $203,600 on this date.