1. Lawrence Bodine is employed by Baylor Health Systems. During the month of June, Lawrence worked 195 hours. 15 of these hours were overtime, and were required to be paid at 150% of the normal hourly rate. Lawrence's hourly rate is $12.
Lawrence is single, and had $400 of federal income tax withheld from his pay. Baylor is in a state without an income tax.
Lawrence's pay is subject to social security taxes at an (assumed) 6.5% rate and Medicare/Medicaid at an (assumed) 1.5% rate. He has not exceeded the annual base for social security taxes.
Baylor pays for workers' compensation insurance at a 4% rate. None of this cost is paid by the employee.
Baylor provides its employees with health care insurance, and pays 90% of the $500 per employee monthly premium. The other 10% is paid by employees via payroll withholdings.
Lawrence participates in a tax-sheltered deferred savings plan and has 8% of his gross pay withheld each month. Baylor Health Systems provides a 75% matching contribution. In other words, for every dollar that Lawrence saves, Baylor will contribute an additional 75 cents.
Baylor's payroll is subject to federal (0.5%) and state (1.5%) unemployment taxes on each employee's gross pay, up to $8,000 per year. Lawrence had $6,000 of gross earnings in the months prior to June.
Lawrence participates in the Community Chest fund drive each month, via a $25 contribution that is withheld from his pay.
(a) Complete Lawrence's paycheck and the remittance advice (i.e., "paycheck stub"). The blank worksheet will be very helpful for this portion of the assignment.
2. Prepare journal entries to record each of the following independent stock issue situations.
(a) Sherri Hui Corporation issued 100,000 shares of $1 par value common stock. The issue price was $30 per share.
(b) Ariana Corporation issued 50,000 shares of no par common stock for $10 per share.
(c) Laser Golf issued 40,000 shares of $100 par value preferred stock. The issue price was $102 per share.
(d) Charleston Industries issued 5,000 shares of $5 par value common stock for land with a fair value of $75,000.
3. Krull Corporation presented the following selected information. The company has a calendar year end.
Before considering the effects of dividends, if any, Krull's net income for 20X7 was $2,500,000.
Before considering the effects of dividends, if any, Krull's net income for 20X8 was $3,000,000.
Krull declared $750,000 of dividends on November 15, 20X7. The date of record was January 15, 20X8. The dividends were paid on February 1, 20X8.
Stockholders' equity, at January 1, 20X7, was $5,000,000. No transactions impacted stockholders' equity throughout 20X7 and 20X8, other than the impact of earnings and dividends on retained earnings.
(a) Prepare journal entries, if needed, to reflect the dividend declaration, the date of record, and the date of payment.
(b) How much was net income for 20X7 and 20X8?
(c) How much was total equity at the end of 20X7 and 20X8?
(d) Is total "working capital" reduced on the date of declaration, date of record, and/or date of payment?
Kenya Corporation had an equity structure that consisted of $1 par value common stock, $3,500,000; paid-in capital in excess of par, $17,500,000; and retained earnings, $22,700,000.
Transaction A
Believing that its share price was depressed due to general market conditions, Kenya's board of directors authorized the reacquisition of 250,000 shares of common stock. These treasury shares were purchased at $10 per share.
Transaction B
Subsequent to Transaction A, the stock price increased to $17 per share, and half of the treasury shares were sold in the open market.
Transaction C
Subsequent to Transaction B, Kenya experienced business difficulties that necessitated it selling the remaining treasury shares to raise additional cash. The shares were sold for $6 per share.
(a) Assuming that all 3,500,000 shares of Kenya were issued at the same time and at the same price per share, what was the original issue price? How does this compare to the price paid in Transaction A, and is it rational for a company to pay more to buy back shares than it originally received upon the initial issuance?
(b) Prepare an appropriate journal entry to record Transaction A. Kenya records treasury shares at cost.
(c) Prepare an appropriate journal entry for Transaction B.
(d) Prepare an appropriate journal entry for Transaction C.
(e) Is there any income statement impact from these transactions? What is the impact on total stockholders' equity from each of the three transactions?
Attachment:- Homework_Problems.xls