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ACTG 1P12 Lecture Notes - Lecture 9: Employee Benefits, Financial Instrument

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lemonbeetle162
1 Feb 2016
School
Brock University
Department
Accounting
Course
ACTG 1P12
Professor
Glenn Skrubbeltrang

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Document Summary

Operating line of credit - (also known as a credit facility) a pre-arranged agreement to borrow money at a bank, up to an agreed-upon amount. Collateral assets pledged as security for the payment of a debt. Bank indebtness is when the bank account is overdrawn. Dr cash, cr sales, cr sales tax payable. Dr property tax expense, cr property tax payable. If a portion is prepaid and paying off previous transaction: dr property tax payable, Dr property tax expense, dr prepaid property tax, cr cash. For the prepayment: dr property tax expense, cr prepaid property tax. As employees perform services for their employer, the employer incurs three types of liabilities related to the employees" salaries or wages: (1) the net pay owed to employees (2) employee payroll deductions (3) employer payroll obligations. Management personnel paid salaries and those paid on an hourly basis paid wages. Gross pay the total compensation (such as salaries or wages) earned by an employee.

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Related Questions

The Green Thumb Gardener is a retail store that sells plants,soil, and decorative pots. On December 31, 2019, the firm's generalledger contained the accounts and balances that appearbelow.

ACCOUNTS ANDBALANCES
Cash $ 5,200 Dr.
Accounts Receivable 2,100 Dr.
Allowance for DoubtfulAccounts 47 Cr.
Merchandise Inventory 10,800 Dr.
Supplies 1,150 Dr.
Prepaid Advertising 960 Dr.
Store Equipment 7,800 Dr.
Accumulated Depreciation—StoreEquipment 1,450 Cr.
Office Equipment 1,300 Dr.
Accumulated Depreciation—OfficeEquipment 230 Cr.
Accounts Payable 2,575 Cr.
Social Security Tax Payable 380 Cr.
Medicare Tax Payable 83 Cr.
Federal Unemployment TaxPayable
State Unemployment TaxPayable
Salaries Payable
Beth Argo, Capital 22,927 Cr.
Beth Argo, Drawing 19,500 Dr.
Sales 87,548 Cr.
Sales Returns andAllowances 1,050 Dr.
Purchases 44,900 Dr.
Purchases Returns andAllowances 380 Cr.
Rent Expense 5,500 Dr.
Telephone Expense 540 Dr.
Salaries Expense 13,600 Dr.
Payroll Taxes Expense 1,220 Dr.
Income Summary
Supplies Expense
Advertising Expense
Depreciation Expense—StoreEquipment
Depreciation Expense—OfficeEquipment
Uncollectible AccountsExpense


ADJUSTMENTS

a.–b. Merchandise inventory on December 31,2019, is $11,821.

During 2019, the firm had net credit sales of $30,000; the firmestimates that 0.6 percent of these sales will result inuncollectible accounts.

On December 31, 2019, an inventory of the supplies showed thatitems costing $250 were on hand.

On October 1, 2019, the firm signed a six-month advertisingcontract for $960 with a local newspaper and paid the full amountin advance.

On January 2, 2018, the firm purchased store equipment for$7,800. At that time, the equipment was estimated to have a usefullife of five years and a salvage value of $550.

On January 2, 2018, the firm purchased office equipment for$1,300. At that time, the equipment was estimated to have a usefullife of five years and a salvage value of $150.

On December 31, 2019, the firm owed salaries of $1,780 that willnot be paid until 2020.

On December 31, 2019, the firm owed the employer’s socialsecurity tax (assume 6.2 percent) and Medicare tax (assume 1.45percent) on the entire $1,780 of accrued wages.

On December 31, 2019, the firm owed federal unemployment tax(assume 0.6 percent) and state unemployment tax (assume 5.4percent) on the entire $1,780 of accrued wages.


Required:

Prepare the Trial Balance section of a 10-column worksheet. Theworksheet covers the year ended December 31, 2019.

Enter the adjustments above in the Adjustments section of theworksheet.

Complete the worksheet.


Analyze:
By what amount were the assets of the business affected byadjustments?

I have done all the adjusting entries and was wondering ifsomeone could take a look at them. I would really appreciate it ifyou could give me some feedback if any are wrong and how to fixthem. Two that I am real unsure about are "b." and "q." but againif you could look at them all I would be very grateful. ThankYou

DeeDee DoubleEntry, Incorporated
End of Period Worksheet
For the Year Ended December31, 2017
Unadjusted Adjusted
Account Title Trial Balance Adjustments Trial Balance
DR CR DR CR DR CR
Cash 240,300 - 27,000 213,300
Restricted Cash 27,000 27,000
Accounts Receivable 925,000 - 925,000
Allowance for Doubtful Accounts - 49,000 67,000 18,000
Interest Receivable - 688 688
Merchandise Inventory 187,500 - 3,700 191,200
Prepaid Insurance 9,000 - 5,211 3,789
Prepaid Advertising - - 12,000 12,000
Prepaid Rent - - 7,500 7,500
Office Supplies 7,800 - 2,941 4,859
Note Receivable 75,000 - 75,000
Available for Sale Securities 380,000 - 380,000
Office Building 4,250,000 - 4,250,000
Accumulated Depreciation - OfficeBuilding - 221,500 38,750 260,250
Storage Building 1,650,000 - 1,650,000
Accumulated Depreciation - StorageBuilding - - 46,667 46,667
Land 450,000 - 450,000
Leasehold Improvements 190,000 - 5,459 195,459
Accumulated Depreciation - LeaseholdImprovements - - 728 728
Office Equipment 125,000 - 125,000
Accumulated Depreciation - OfficeEquipment - 42,000 16,600 58,600
Patent 250,000 - 250,000
Accumulated Amortization 31,250 31,250
Accounts Payable - 145,000 145,000
Sales Tax Payable - - 19,821 19,821
Salaries Payable - - 39,249 39,249
Payroll Taxes Payable - - 3,251 3,251
Interest Payable - - 127,750 127,750
Income Tax Payable - - 245,756 245,756
Unearned Rent Revenue - 96,000 25,263 70,737
Loan Payable - Onstar Bank - 500,000 500,000
Loan Payable - Coldstar Bank - 2,250,000 2,250,000
Common Stock - 425,000 425,000
Additional Paid in Capital - 2,800,000 2,800,000
Retained Earnings - 1,379,420 1,379,420
Accumulated Other ComprehensiveIncome - 8,500 8,500
Dividends 280,000 - 280,000
Sales - 4,380,250 19,821 4,360,429
Sales Returns and Allowances 19,500 - 19,500
Sales Discounts 14,600 - 14,600
Cost of Goods Sold 1,817,900 - 3,700 1,814,200
Amortization Expense 31,250 31,250
Sales Salaries Expense 676,400 - 25,500 701,900
Office Salaries Expense 434,000 - 17,000 451,000
Advertising Expense 54,000 - 12,000 42,000
Depreciation Expense - OfficeBuilding - - 38,750 38,750
Depreciation Expense - StorageBuilding 46,667 46,667
Depreciation Expense - LeaseholdImprovements - - 728 728
Depreciation Expense - OfficeEquipment - - 16,600 16,600
Leasing Expense - Stores 132,000 - 132,000
Miscellaneous Selling Expense 16,950 - 5,459 11,491
Rent Expense - Storage Facility 18,000 - 7,500 10,500
Insurance Expense 2,000 - 5,211 7,211
Office Supplies Expense 28,500 - 2,941 31,441
Warranty Expense 5,000 5,709 10,709
Miscellaneous Administrative Expense 9,220 - 9,220
Rent Revenue - - 25,263 25,263
Interest Revenue on Note Receivable - - 688 688
Dividend Revenue on AFS Securities - 18,000 18,000
Warranty Liability 5,709 5,709
Income Tax Expense 245,756 245,756
Interest Expense 127,750 127,750
Bad Debt Expense 67,000 - 67,000
12,314,670 12,314,670 732,292 732,292 12,822,067 12,822,067
DeeDee DoubleEntry, Incorporated
Adjusting Journal Entries
For the Year Ended December31, 2017
Item Account Title Dr. Cr.
a. Restricted Cash 27,000
Cash 27,000
b. Allowance for Doubtful Accounts 67,000
Bad Debt Expense 67,000
c. Office Supplies Expense 2941
Office Supplies 2941
d. Prepaid Rent 7500
Rent Expense - Storage Facility 7500
e. Interest Receivable 688
Interest Revenue on Note Receivable 688
f. Insurance Expense 5211
Prepaid Insurance 5211
g. Depreciation Expense - Office Building 38750
Accumulated Depreciation - Office Building 38750
h. Office Salaries Expense 17000
Sales Salaries Expense 25500
Salaries Payable 39249
Payroll Taxes Payable 3251
i. Prepaid Advertising 12000
Advertising Expense 12000
j. Unearned Rent Revenue 25263
Rent Revenue 25263
k. Accumulated Other Comprehensive Income 89000
Available for Sale Securities 89000
l. Depreciation Expense - Office Equipment 16600
Accumulated Depreciation - Office Equipment 16600
m. Sales 19821
Sales Tax Payable 19821
n. Amortization Expense 31250
Accumulated Amortization 31250
o. Depreciation Expense - Storage Building 46667
Accumulated Depreciation - Storage Building 46667
p. Leasehold Improvements 5459
Miscellaneous Selling Expense 5459
Depreciation Expense - Leasehold Improvements 728
Accumulated Depreciation - Leasehold Improvements 728
q. Interest Expense 17500
Interest Payable 17500
Interest Expense 110250
Interest Payable 110250
r. Warranty Expense 5709
Warranty Liability 5709
s. Merchandise Inventory 3700
Cost of Goods Sold 3700
t. Income Tax Expense 245,756.00
Income Tax Payable 245,756.00

DeeDee does banking at three different financial institutions.The details are as DeeDee Double Entry

Bank

Account #

 Balance
Coterica 123456 175,000
Coterica 123457 (10,000)
4th BAnk 345689 82,000

Bank Two

 397567 (6,700)

a. You also note the Board of Directors has restricted $27,000of cash for future expansion. This $27,000 is part of the cashbalance. The future expansion will not occur for several moreyears.

b. Based on your inquiries, you note that $67,000 of accountsreceivable had been written off during the year. The clerk haddebited bad debt expense for $67,000 and credited AccountsReceivable for $67,000. When $15,000 of accounts previously writtenoff had been collected, the accountant debited cash and creditedsales. The company uses the allowance method based on the aging ofaccounts receivable. Based on this method, DeeDee determines thatuncollectible accounts are $89,000 at the end of 2017. (Replace theX with the last digit of your student number).

c. Per a physical count of office supplies, $4,859 (enter thelast two digits of your student number) of supplies remained at theend of 2017. The balance on the worksheet in the office suppliesaccount represents last years ending balance. During the year,$28,500 of office supplies were purchased and immediatelyexpensed.

d. Because of strong demand and a need for additional inventory,DeeDee needed some temporary additional storage space so on June 1,2017 they rented a unit for an annual rate of $18,000 and they paidthe entire amount up front.

e. On November 1st, 2017, (Enter your birthday month) DeeDeeloaned a key supplier, $75,000. A promissory note was signed andissued. The agreed upon interest rate was 5.5% and the key supplierhas agreed to pay interest and $15,000 of the principle eachJanuary 1st. The note was recorded in Notes Receivableand is the only note outstanding.

f. On February 1, 2017, DeeDee renewed a 19 month insurancepolicy for $9,000. All cash was paid at the time the policy wassigned and prepaid insurance was increased. (Replace the X with thelast digit of your student number.) All other transactionsinvolving insurance were properly recorded.

g. The office building was bought in January 1, 2015 by DeeDeeand DeeDee originally planned to use the building for 40 years andestimated no salvage value. DeeDee depreciates the building on a straightline basis. Now in 2017, DeeDee estimates the total life to remain at 40 years,but believes the salvage will be $900,000. (Replace theX with the last digit of your student number.)

h. DeeDee is open seven days a week and has a daily payroll of$8500. Employees are paid every Friday, December 31 is a Wednesday.40% of the payroll is for office employees, 60% of payroll is forsales employees. The employer portion of FICA expense is 7.65% andno employee has reached the maximum. DeeDee records payroll taxexpenses in salary expense.

i. On December 1, 2017 DeeDee paid ABC Advertising $16,000 for afour month campaign of advertising services. Equal services areprovided each month. All other advertising paid forduring the year has been consumed.

j. On August 1, 2017, DeeDee rented a portion of one store toMarketing Majors Inc. The contract was for 19 (enter the last digitof your student number) months and DeeDee required all of the cashup front. The rent is being earned equally each month. This is theonly item in which rent is being earned by the company.

k. As of 12/31/2017 the Available for Sale Securities have afair value of $291,000 (enter the last digit of your student numberin place of the X). Due to the market conditions, the company doesnot plan on selling the assets in 2017, but their intent is to sellat some point in time. You can ignore the tax effect onunrealized gains and losses. (Hint: Unrealized Gains andLosses are closed to Accumulated Other Comprehensive Income at theend of the year.)

l. DeeDee uses the DDB method to depreciate office equipment. Nooffice equipment was added during 2017. It is estimated that theoffice equipment has a useful life of 10 years with a salvage valueof $2,000. Prior depreciation was correctly calculated based onperiod of time held.

m. After reviewing details of sales, you note that the salestaxes collected on the last week of December’s sales were includedin sales revenue. Sales recorded the last week of December thatincluded the sales tax of 12% (enter your birthday month plus 1)amounted to $185,000.

n. On November 1, 2017 (enter your birthday month), DeeDeerecorded a patent in the amount of $250,000. The company paidoutside legal fees of $120,000 to have the patent registered. Theother $130,000 represents internal costs in developing the patent.The patent is good for 20 years, but the company estimates that thepatent will have a useful life of 8 years with no residual value.No one knows what to do with this information so no amortizationhas been recorded for 2017. Amortization is straight line and thecompany depreciates using partial years for intangible assets.

o. The storage building was self-constructed this year byDeeDee. The Company had their initial expenditure of $700,000 onJanuary 1. They paid an additional $500,000 on March 1st, $300,000 on June 1st, and then the final payment of$150,000 on August 1st. when the building was completedand occupancy occurred. Payments to contractor were properlycapitalized. The company has decided to use S/L method fordepreciation. The storage building is estimated to have a life of30 years and a savage value of $250,000. The companywill take a full year of depreciation in year of acquisition.

p. You note that Leasehold Improvements have not beendepreciated for this year. DeeDee started to lease some new retailspace in 2017 and added shelving and fixtures to this leased space.Based on your review of invoices, the previous accountantcapitalized the cost of fixtures but did not capitalize theshipping and installation costs of $5,459 ((enter the last threedigits of your student number in place of the XXX). . These costswere expensed and recorded as a miscellaneous administrativeexpense. DeeDee has decided to use double declining balance (DDB)depreciation for this item and to take a full year of depreciationin the year of acquisition. The leasehold improvements have auseful life of 15 years with a salvage value of$10,000.

q. DeeDee Double Entry has two loans outstanding as of12/31/2017. Interest is paid annually on January 1st. The facts on each loan are asfollows: Onstar Bank Loan – outstanding since January 1, 2017 with a 3.5%interest rate. This loan was taken out to finance the constructionof the Storage Building. Interest for the year and 15% of theprinciple will be paid to the bank on January 1, 2018. Except forrecording the initial cash received and loan, no additional entries have beenmade. Coldstar Bank Loan – also outstanding all of 2017 with a 4.9% interest rate (enter the last digit of your student number).Interest is due on January 1, 2018. Principle is due on January 1,2023. Since interest will not be paid to the Bank until 2018,DeeDee’s office staff did not accrue any interest.

r. DeeDee added a one-year warranty to one of its computer gamesthis year. It is estimated that the total cost of servicing thewarranties on the 2017 sales will be $10,459 (enter the last threedigits of your student number). During 2017, $4,750 wasrefunded to customers for warranty issues on 2017 sales andrecorded as warranty expense.

s. DeeDee uses the FIFO Inventory Method in valuing inventory.The inventory balance of $187,500 was based on a physical count at12/31/2017. Based on your analysis, you have noted that $12,500 ofmarketing games that belonged to Marketing Majors Inc. was includedin the account. You also note that goods were in transit from avendor on December 31, 2017. The cost of the inventory was $16,200and the goods were shipped f.o.b. shipping point on December 29,2017.

t. DeeDee has a straight tax rate of 28%. Income tax expense isNet Income before taxes times 28%. (Hint: Prepare the IncomeStatement up to Net Income before Taxes and then record thisadjusting journal entry.

Prepare a Classified Balance Sheet on theproper worksheet as of 12/31/17. Your Statement should beformatted. You should use formulas in all cells, not constantnumbers.

Stuck on this.... any help would be appreciated.

DeeDee DoubleEntry, Incorporated
End of Period Worksheet
For the Year Ended December31, 2017
Unadjusted Adjusted
Account Title Trial Balance Adjustments Trial Balance
DR CR DR CR DR CR
Cash 240,300 - 27,000 213,300
Restricted Cash 27,000 27,000
Accounts Receivable 925,000 - 925,000
Allowance for Doubtful Accounts - 49,000 67,000 18,000
Interest Receivable - 688 688
Merchandise Inventory 187,500 - 3,700 191,200
Prepaid Insurance 9,000 - 5,211 3,789
Prepaid Advertising - - 12,000 12,000
Prepaid Rent - - 7,500 7,500
Office Supplies 7,800 - 2,941 4,859
Note Receivable 75,000 - 75,000
Available for Sale Securities 380,000 - 380,000
Office Building 4,250,000 - 4,250,000
Accumulated Depreciation - OfficeBuilding - 221,500 38,750 260,250
Storage Building 1,650,000 - 1,650,000
Accumulated Depreciation - StorageBuilding - - 46,667 46,667
Land 450,000 - 450,000
Leasehold Improvements 190,000 - 5,459 195,459
Accumulated Depreciation - LeaseholdImprovements - - 728 728
Office Equipment 125,000 - 125,000
Accumulated Depreciation - OfficeEquipment - 42,000 16,600 58,600
Patent 250,000 - 250,000
Accumulated Amortization 31,250 31,250
Accounts Payable - 145,000 145,000
Sales Tax Payable - - 19,821 19,821
Salaries Payable - - 39,249 39,249
Payroll Taxes Payable - - 3,251 3,251
Interest Payable - - 127,750 127,750
Income Tax Payable - - 245,756 245,756
Unearned Rent Revenue - 96,000 25,263 70,737
Loan Payable - Onstar Bank - 500,000 500,000
Loan Payable - Coldstar Bank - 2,250,000 2,250,000
Common Stock - 425,000 425,000
Additional Paid in Capital - 2,800,000 2,800,000
Retained Earnings - 1,379,420 1,379,420
Accumulated Other ComprehensiveIncome - 8,500 8,500
Dividends 280,000 - 280,000
Sales - 4,380,250 19,821 4,360,429
Sales Returns and Allowances 19,500 - 19,500
Sales Discounts 14,600 - 14,600
Cost of Goods Sold 1,817,900 - 3,700 1,814,200
Amortization Expense 31,250 31,250
Sales Salaries Expense 676,400 - 25,500 701,900
Office Salaries Expense 434,000 - 17,000 451,000
Advertising Expense 54,000 - 12,000 42,000
Depreciation Expense - OfficeBuilding - - 38,750 38,750
Depreciation Expense - StorageBuilding 46,667 46,667
Depreciation Expense - LeaseholdImprovements - - 728 728
Depreciation Expense - OfficeEquipment - - 16,600 16,600
Leasing Expense - Stores 132,000 - 132,000
Miscellaneous Selling Expense 16,950 - 5,459 11,491
Rent Expense - Storage Facility 18,000 - 7,500 10,500
Insurance Expense 2,000 - 5,211 7,211
Office Supplies Expense 28,500 - 2,941 31,441
Warranty Expense 5,000 5,709 10,709
Miscellaneous Administrative Expense 9,220 - 9,220
Rent Revenue - - 25,263 25,263
Interest Revenue on Note Receivable - - 688 688
Dividend Revenue on AFS Securities - 18,000 18,000
Warranty Liability 5,709 5,709
Income Tax Expense 245,756 245,756
Interest Expense 127,750 127,750
Bad Debt Expense 67,000 - 67,000
12,314,670 12,314,670 732,292 732,292 12,822,067 12,822,067