1. The following data are taken from Pierce Corporation's monthly payroll for August, 2013:=
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Administrative salaries
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$16,000
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Sales salaries
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32,000
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Total payroll
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$48,000
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Wages subject to FICA taxes (6.2% + 1.45%)
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$48,000
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Wages subject to FUTA and state unemployment taxes
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$12,000
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Federal income taxes withheld from all salaries
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$6,200
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Assume that the company is subject to a 2.7% state unemployment tax and a 0.8% federal unemployment tax. Record the general journal entry to:
a. Accrue the payroll.
b. Accrue the employer's payroll taxes.
2. The following items represent various types of liabilities.
1. A manufacturing company is sued for alleged product liability. The company's attorney does not feel that the suit will result in liability to the company, but a loss is possible. If adversely adjudicated, the liability would be material.
2. Omega has sold products to Bright Eye Jewelers, a retailer that sold the products to customers. The manufacturer's warranty offers replacement of the product if it is found to be defective within 90 days of the sale to the consumer. Historically, 0.06% of the products are returned for replacement.
3. A customer has filed a lawsuit for a minor amount against Bright Eye Jewelers. Bright Eye's attorneys have reviewed the case and have found that many similar cases have never been awarded to the plaintiff.
Identify if the above independent situations should be (a) recorded in the financial statements, (b) disclosed in a footnote in the financial statements, or (c) neither.
3. On July 1, 2013, Stateside, Inc. issues 10,000 shares of $5 par value preferred stock at $50 cash per share and 20,000 shares of $1 par value common stock at $25 cash per share. What is the journal entry to record these transactions?