Question 1 - Recording income taxes
A business issued a 30-day, 4% note for $60,000 to a creditor on account. Illustrate the effects on the accounts and financial statements of recording (a) the issuance of the note and (b) the payment of the note at maturity, including interest.
Question 2 - Accrued product warranty
Awesome Audio Works, Inc. warrants its products for one year. The estimated product warranty is 2% of sales. Assume that sales were $500,000 for January. In February, a customer received warranty repairs requiring $2,500 of parts.
a. Determine the warranty liability at January 31, the end of the first month of the current year.
b. What accounts are decreased for the warranty work provided in February?
Question 3 - Recording payroll taxes
According to a summary of the payroll of Newman Publishing Co., $600,000 was subject to the 7.5% FICA tax. Also, $50,000 was subject to state and federal unemployment taxes.
a. Calculate the employer's payroll taxes, using the following rates: state unemployment, 4.3%; federal unemployment, 0.8%.
b. Illustrate the effects on the accounts and financial statements of recording the accrual of payroll taxes.