ACCT 001A Lecture Notes - Lecture 14: List Of Auto Parts, Disability Insurance, Contingent Liability

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pucemallard867

25 Jun 2020

School

Pasadena City College

Department

Accounting

Course

ACCT 001A

Professor

Hossain

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Document Summary

Employer expenses for pensions or medical, dental, life and disability insurance. Assume an employer agrees to pay an amount for medical insurance equal to 800. 0 and contribute an additional 10% of the employees 120,000 gross salary to a retirement. Employer expenses for paid vacation by employees. Assume an employee earns 62,400 per year and earns two weeks of paid vacation per year. Vacation benefits expense debit 48 and credit vacation benefits payable 48. Many bonuses to employees are based on reported net income. Assume the annual yearly bonus to the store manager is equal to 10% of the. Dec. 31 employee bonus expense debit 9091 and credit bonus payable 9091. Seller"s obligation to replace or correct a product or service that fails to perform as expected within a specified period. To conform to the matching principle, the seller reports expected warranty expense when revenue from the sale is reported.

Related Questions

A company's had fixed interest expense of $3,300, its incomebefore interest expense and income taxes is $16,200, and its netincome is $6,600. The company's times interest earned ratioequals:

2.45.

0.50.

4.91.

2.00.

0.20.

A company's income before interest expense and income taxes is$225,000 and its interest expense is $75,000. Its times interestearned ratio is:

2.67

0.99

3.00

0.33

1.68

A company's fixed interest expense is $9,000, its income beforeinterest expense and income taxes is $38,250. Its net income is$11,850. The company's times interest earned ratio equals:

0.235.

0.76.

3.23.

4.25.

0.31.

An employee earned $43,600 during the year working for anemployer when the maximum limit for Social Security was $117,000.The FICA tax rate for Social Security is 6.2% and the FICA tax ratefor Medicare is 1.45%. The employee's annual FICA taxes amountis:

$632.20.

$2,703.20.

$6,670.80.

$3,335.40.

An employee earned $5,300 working for an employer in the currentyear. The current rate for FICA Social Security is 6.2% payable onearnings up to $117,000 maximum per year and the rate for FICAMedicare 1.45%. The employer's total FICA payroll tax for thisemployee is:

$405.45.

Zero, since the FICA tax is a deduction from an employee's pay,and not an employer tax.

$76.85.

$328.60.

$810.90.

An employee earned $62,400 during the year working for anemployer. The FICA tax rate for Social Security is 6.2% and theFICA tax rate for Medicare is 1.45%. The current FUTA tax rate is0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes areapplied to the first $7,000 of an employee's pay. What is theamount of total unemployment taxes the employee mustpay?

$101.50

$56.00

$378.00

$434.00

$0.00

Employees earn vacation pay at the rate of one day per month.During the month of July, 16 employees qualify for one vacation dayeach. Their average daily wage is $91 per day. What is the amountof vacation benefit expense to be recorded for the month ofJuly?

$16.0

$14,560.0

$1,456.0

$91.0

$145.6

A company estimates that warranty expense will be 4% of sales.The company's sales for the current period are $233,000. Thecurrent period's entry to record the warranty expense is:

Debit Warranty Expense $9320 credit Sales $9320.

Debit Warranty Expense $9320 credit Estimated Warranty Liability$9320.

Debit Estimated Warranty Liability $9320 credit Warranty Expense$7400.

Debit Estimated Warranty Liability $9320 credit Cash $9320.

No entry is recorded until the items are returned for warrantyrepairs.

A company has a selling price of $2,050 each for its printers.Each printer has a 2 year warranty that covers replacement ofdefective parts. It is estimated that 3% of all printers sold willbe returned under the warranty at an average cost of $155 each.During November, the company sold 35,000 printers, and 450 printerswere serviced under the warranty at a total cost of $60,000. Thebalance in the Estimated Warranty Liability account at November 1was $31,500. What is the company's warranty expense for the monthof November?

$69,750

$60,000

$81,375

$162,750

$28,500

An employee earns $6,500 per month working for an employer. TheFICA tax rate for Social Security is 6.2% and the FICA tax rate forMedicare is 1.45%. The current FUTA tax rate is 0.8%, and the SUTAtax rate is 5.4%. Both unemployment taxes are applied to the first$7,000 of an employee's pay. The employee has $222 in federalincome taxes withheld. The employee has voluntary deductions forhealth insurance of $190 and contributes $95 to a retirement planeach month. What is the amount of net pay for the employee for themonth of January? (Round your intermediate calculations totwo decimal places.)

$5,495.75

$5,590.00

$5,144.75

$5,092.75

$5,443.75

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Selected transactions of Shadrach Computer Corporation duringNovember and December of 2016 are as follows:

Nov.	1	Borrowed money from the bank byissuing a non-interest-bearing, $58,000, 90-day note. The note isdiscounted on a 12% basis.
	9	Sold 125 computers with a 1-yearassurance-type warranty for $5,600 each on credit (ignore cost ofgoods sold). Past experience indicates that warranty costs average$110 per computer.
	12	Sold 125 software packages at $270each on credit (ignore cost of goods sold). With each softwarepackage, Shadrach offered a premium in the form of a USB drive forthe return of one proof of purchase. The offer expires June 30,2017. The cost of each USB drive is $5, and Shadrach estimates that80% of the premiums will be redeemed; therefore, 100 USB driveswere purchased on credit.
	20	Paid $2,000 in fulfillment of thewarranty agreement on several of the computers sold on November9.
	30	Accrued monthly vacation pay.Shadrach has 80 employees who are each paid an average of $180 perday. Shadrach has a policy of allowing each employee 12 daysâ paidvacation per year; the related liability is recorded on a monthlybasis. Employees are paid monthly.
	30	Paid monthly payroll. Grosssalaries were $430,000. No vacations were taken during November.Income tax withholdings of 20% are applicable to the salaries ofall employees. A F.I.C.A. tax of 8% for both employees andemployers is also applicable. These rates apply to all salariesbecause no employeeâs salary has exceeded the maximum wage limit.The state allows the corporation a 1% unemployment compensationmerit-rating reduction from the normal rate of 5.4%. The federalunemployment rate is 0.6%. Prior to October, each individualemployee had accumulated a gross salary in excess of $7,000 for2016.
Dec.	14	Twenty proofs of purchase werereturned from the November 12 sale.
	29	An individual filed suit againstShadrach for damages caused in a November 5 accident that resultedwhen a member of the sales force hit the individualâs car while onpersonal business. The amount of the suit filed was $1,450. Becausethe employee was on personal business, the companyâs insurancecompany will not pay the claim. In Shadrachâs attorneyâs opinion,the amount of the suit is reasonable; furthermore, the companybelieves it is likely to lose the suit.
	31	Accrued monthly vacation pay.
	31	Paid monthly payroll. Grosssalaries were $433,000. The salaries included $6,500 of vacationpay in the sales force and $3,300 of vacation pay in the officestaff. The F.I.C.A. tax rate still applies to all wages because noemployeeâs salary exceeded the maximum wage limit.
	31	Recorded presidentâs bonus. Thepresident receives a 10% bonus on any income over $240,000, beforededucting income taxes and the bonus. Shadrachâs effective incometax rate is 30%, and income before income taxes and bonus for 2016was $560,000. The bonus will be paid in January 2017.

	Required:
	Prepare journal entries torecord the preceding transactions of Shadrach Computer Corporationfor 2016. Include year-end accruals. Round all calculations to thenearest dollar.

Chart of Accounts

CHARTOF ACCOUNTS

Shadrach Computer Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
132	Inventory of Premiums
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
221	Bonus Payable
222	Liability for CompensatedAbsences
224	FICA Taxes Payable
225	Federal Income Taxes WithholdingPayable
231	Salaries Payable
240	Estimated Warranty Liability
241	Estimated Premium Liability
245	Estimated Liability fromLawsuit
250	Unearned Revenue
260	Notes Payable
261	Discount on Notes Payable
271	Federal Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
522	Payroll Taxes Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
551	Warranty Expense
552	Premium Expense
559	Miscellaneous Expenses
561	Loss from Accident
910	Income Tax Expense

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PLEASE READ THE ENTIRE PROMPT AND ONLY ANSWER IF YOU ARE GOINGTO ANSWER THE QUESTION IN ITS ENTIRETY.

On January 1, x1, Brown Corp initiated a noncontributory definedbenefit pension plan for all six employees in its word processingdepartment. The plan benefit formula provides that each year ofservice earns each employee an annual retirement benefit of $4,000.The benefits are payable at the end of each year of retirement. Allsix employees are expected to retire on December 31, x6, and eachis expected to live for six years following retirement.

Brown Corp also provided retroactive benefits for employeeservices rendered prior to January 1, x1. Total years of servicefor which retroactive benefits were granted equaled 24 years (forall six employees combined rather than 24 years per employee). Theexpected return on plan assets is 10%. The settlement rate is8%.

Brown Corp will contribute an equal amount each year to thepension fund, which together with earnings at 10% is expected tofully fund the projected benefit obligation by December 31, x6.Brown Corp will make six annual contributions, beginning January 1,x1. Brown Corp will purchase annuity contracts on December 31, x6to settle its pension obligation.

Assume actual results equal the original estimates andassumptions. The tax rate is 40%.

Required:

Draw a time line to show the relationship between the pensionplan and the employment and retirement life of Brown Corpâsemployees. Be sure to show the total amount of benefits expected tobe paid each year (to all employees combined) during the expectedretirement period.

Calculate the amount that Brown Corp should contribute to thepension fund each year.

Calculate Prior Service Cost at the inception of the plan.

Calculate Service Cost for each year of service (for allemployees combined).

Using a spreadsheet, prepare a schedule that calculates for eachyear of service:

Pension Expense (you may simply input the numbers calculated in2-4 above)

Prepaid/Accrued Pension Cost (the amount of the debit or creditand the account balance)

The amount funded

The fund balance

The year end projected benefit obligation

The funded status

Include a column for each element of pension expense. You do notneed for the spreadsheet to calculate present values. Instead youmay simply put in the values calculated by hand in parts 2-5. Printyour schedule.

Prepare journal entries for all years.

Show what will appear in financial statements (Balance Sheet,Income Statement, and Statement of Cash Flows) for all years.

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ACCT 001A Lecture Notes - Lecture 14: List Of Auto Parts, Disability Insurance, Contingent Liability

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