ACCT 110 Lecture Notes - Lecture 18: Santa Barbara City College, Canada Pension Plan, Accounts Payable

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2 Dec 2020

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Pierce corp has a december 31 year end. It received its property tax invoice of ,000 for the calendar year on april 30. Prepare the journal entries to record the property tax on a) april 30, b) july 15, c) december 31. Dr property tax expense (36000 x 4/12) 12,000: dr property tax payable 12,000. Dr property tax expense (36000 x 2. 5/12) 7,500. Dr prepaid property tax (36,000 x 5. 5/12) 16,500. Cr cash 36,000: dr property tax expense 16,500. Three types of liabilities related to employee salaries and wages: salary or wages owed to employees (known as gross pay, payroll deductions required to be withheld from employees" gross pay. Employees" gross pay less payroll deductions is known as net pay (or take home pay: employer payroll obligations. Required by law to be deducted (withheld) from employees gross or total pay: mandatory deductions include amounts withheld for federal and provincial tax incomes.

Related Questions

Czar was authorized to issue 3,000,000 shares of $1 par Common Stock but has only issued 520,000 shares of common stock as of 12/31/2018. No new shares were issued during 2018.

1. On the âAdjusting Journal Entriesâ worksheet, prepare in journal entry form all adjusting and correcting journal entries based on the following information. All information was provided to you as of 12/31/2018. (Round all numbers to the nearest dollar). Label journal entries a through t.

P- On 2,1, 2018, Czar rented a portion of one store to Pellston Inc. The contract was for 15 months and Czar required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company.

Q- Czar started to lease some new retail space in 2018 and added shelving and fixtures to this leased space. Based on your review of invoices, the previous accountant capitalized the cost of fixtures but did not capitalize the shipping and installation costs of $2,815. These costs were expensed and recorded as a miscellaneous selling expense. Czar has decided to use double declining balance (DDB) depreciation for this item and to take a full year of depreciation in the year of acquisition. The leasehold improvements have a useful life of 15 years with a salvage value of $12,000.

R- Czar uses the FIFO Inventory Method in valuing inventory. The inventory balance of $340,000 was based on a physical count at 12/31/2018. Based on your analysis, you have noted that $10,000 of marketing games that belonged to Pellston Inc. was included in the account. You also note that $5,600 of goods shipped to Czar f.o.b. destination were in transit on December 31, 2018 and included in the physical count.

Czar Incorporated
End of Period Worksheet
For the Year Ended December 31, 2018
	Unadjusted				Adjusted
Account Title	Trial Balance		Adjustments		Trial Balance
	DR	CR	DR	CR	DR	CR
Cash	264,000	-
Accounts Receivable	555,984	-
Allowance for Doubtful Accounts	-	13,600
Interest Receivable	-	-
Merchandise Inventory	340,000	-
Prepaid Insurance	-	-
LIFO Reserve	-	25,600
Prepaid Advertising	-	-
Prepaid Rent	13,600	-
Office Supplies	4,800	-
Note Receivable	20,000
Available for Sale Securities	300,000	-
Office Building	3,000,000	-
Accumulated Depreciation - Office Building	-	70,000
Storage Building	1,020,000	-
Accumulated Depreciation - Storage Building	-	-
Land	600,000	-
Leasehold Improvements	180,000	-
Accumulated Depreciation - Leasehold Improvements	-	-
Office Equipment	260,000	-
Accumulated Depreciation - Office Equipment	-	52,000
Patent	120,000	-
Accounts Payable	-	276,000
Sales Tax Payable	-	-
Salaries Payable	-	113,600
Payroll Taxes Payable	-	20,000
Interest Payable	-	-
Income Tax Payable	-	-
Unearned Rent Revenue	-	-
Loan Payable - First Trust	-	520,000
Loan Payable - Coldwell Bank	-	1,600,000
Common Stock	-	520,000
Additional Paid in Capital	-	1,599,000
Retained Earnings	-	736,000
Accumulated Other Comprehensive Income	-	20,000
Dividends	67,800	-
Sales	-	3,622,560
Sales Returns and Allowances	33,800	-
Sales Discounts	15,400	-
Cost of Goods Sold	1,583,600	-
Sales Salaries Expense	349,120	-
Office Salaries Expense	219,200	-
Advertising Expense	12,800	-
Depreciation Expense - Office Building	-
Depreciation Expense - Leasehold Improvements	-	-
Depreciation Expense - Office Equipment	-	-
Leasing Expense - Stores	105,600	-
Miscellaneous Selling Expense	18400	-
Research & Development Expense	12,000
Rent Expense - Storage Facility	-	-
Insurance Expense	12,000	-
Office Supplies Expense	28,000	-
Miscellaneous Administrative Expense	7,336	-
Rent Revenue	-	60,000
Interest Revenue on Note Receivable	-	-
Dividend Revenue on AFS Securities	-	20,000
Interest Expense	-	-
Bad Debt Expense	28,000	-
Amortization Expense	-	-
Income Tax Expense	-	-
Payroll Taxes Expense	96,920	-
Rebate Expense	-	-
Unrealized holding loss	-	-
Depreciation Expense-Storage Building	-	-
Loss on Impairment	-	-
Rebate Liability	-	-
Restricted Cash for Future Expansion	-	-
	9,268,360	9,268,360

. Make all 16 adjustments to journal entries. Remember to include a description under each journal entry.

1	On March 1, ABC purchased a one-year liability insurance policy for $98,400.
	Upon purchase, the following journal entry was made:
		Dr Prepaid insurance			98,400
			Cr Cash			98,400
	The expired portion of insurance must be recorded as of 12/31/14.
	Notice that the expired portion from March through November has been recorded already.
	Make sure that the Prepaid Insurance balance after the adjusting entry is correct.


2	Depreciation expense must be recorded for the month of December.
	The building was purchased with cash on February 1, 2014, for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000.
		The method of depreciation for the building is straight-line.
	The equipment was purchased with cash on February 1, 2014, for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000.
		The method of depreciation for the equipment is double-declining balance.
	Depreciation has been recorded for the building and equipment for months February through November.


3	On December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month,
	and XYZ paid ABC on December 1 in advance for the first three months' rent.
	The entry made on December 1 was as follows:
		Dr Cash			36,000
			Cr Unearned rent revenue			36,000
	The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/14.


4	Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours.
	Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015.
	The liability for wages payable must be recorded as of 12/31/14.


5	On November 30, 2014, ABC borrowed $235,000 from American National Bank by issuing an interest-bearing note payable.
	This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%.
	The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item)
		Dr Cash			235,000
			Cr Notes payable			235,000
	On February 28, 2015 ABC must pay the bank the amount borrowed plus interest.
	Assume the beginning balance for Notes Payable is correct.
	Interest through 12/31/14 must be accrued on the $235,000 note.


6	ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete
	physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at
	that time totaled $75,000, which reflects historical cost.
	Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment.


	Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level.
	A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of
	completion and shipping is 15% of retail. Be sure to make an additional adjustment, if necessary, to properly value ending inventory
	using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for accounting
	for adjustments of inventory to market value.


7	It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized
	that their intangible asset might be impaired on December 31, 2014. Record the impairment if any.
	The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500.


8	On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury
	stock was $7 per share, or $49,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14,
	ABC reissued these 7,000 shares of treasury stock at $10 per share. Record the journal entry required for the reissuance of the treasury stock.


9	On 12/31/14, ABC issued 5,000 shares of $3 par value common stock at the closing market price of $7 per share. Prepare ABC's journal entry
	to reflect the issuance of the stock on 12/31/14.


10	On 7/1/14, ABC sold 12% bonds having a maturity value of $800,000 for $861,771, resulting in an effective yield of 10%. The bonds are
	dated 7/1/14, and mature 7/1/19. Interest is payable semiannually on July 1 and January 1. ABC uses the effective interest method of
	amortization for bond premium or discount. Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14.
	Hint: Develop an abbreviated amortization schedule to accurately determine the interest expense.


11	The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies.

		Securities					Cost	Fair Value
		2,200 shares of Toyota Corporation Common Stock					$ 100,000	$ 125,000
		1,100 shares of G.M. Corporation Common Stock					$ 67,000	$ 34,000
							$ 167,000	$ 159,000
	Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading.


12	On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $200,000 of the 8%, 5-year bonds of Intuit Corporation for $177,824,
	which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization.
	Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used.
	Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to the
	investment account.


13	ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used,
	prepare the entry to record bad debt expense.


14	On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make
	annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000
	unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line method
	of depreciation for the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet
	been made concerning this lease arrangement. After determining the type of lease arrangement (capital or operating), prepare the necessary multiple-part journal
	entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for
	this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.)


15	ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension
	plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014.
	Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry.

	Pension asset/liability (January 1)			$0
	Actual return on plan assets			$40,000
	Expected return on plan assets			$20,000
	Contributions (funding) in 2014			$37,000
	Fair value of plan assets (December 31)			$75,000
	Settlement rate			10%
	Projected benefit obligation (January 1)			$0
	Service cost			$60,000
	Benefits paid in 2014			$0
	*For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature.

16	On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of
	$10 per share on December 31, 2014. Additional information is as follows:
		a. The service period related to the restricted stock is 2 years.
		b. Vesting occurs if the CFO stays with the company for a two-year period.
		c. The par value of the common stock is $3 per share.
	Make the appropriate accounting entry as of the grant date, 12/31/14. Note: use the alternative method as described in your textbook for deferred compensation.

	Do this step after preparing the Income Statement except for the Income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense)
17	Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15.
	However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full
	on the return's March 15, 2015 due date.
	ABC's income tax rate is 40%. The entire year's income tax expense was estimated at the beginning of 2014 to be $69,600,
	so January through November income tax expense recognized amounts to $63,800 (11/12 months).
	Since we are assuming estimates are not made during the year, the balance in Income taxes payable represents
	tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities.
	Based on the income before income taxes figure from the income statement, record December's income tax expense
	so that the entire year's total tax expense is correct.

The following items were selected from among the transactions completed by Sherwood Co. during the current year:

Mar.	1	Purchased merchandise on account from Kirkwood Co., $366,000, terms n/30.
	31	Issued a 30-day, 6% note for $366,000 to Kirkwood Co., on account.
Apr.	30	Paid Kirkwood Co. the amount owed on the note of March 31.
Jun.	1	Borrowed $198,000 from Triple Creek Bank, issuing a 45-day, 8% note.
Jul.	1	Purchased tools by issuing a $270,000, 60-day note to Poulin Co., which discounted the note at the rate of 6%.
	16	Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6.5% note for $198,000. (Journalize both the debit and credit to the notes payable account.)
Aug.	15	Paid Triple Creek Bank the amount due on the note of July 16.
	30	Paid Poulin Co. the amount due on the note of July 1.
Dec.	1	Purchased equipment from Greenwood Co. for $400,000, paying $108,000 cash and issuing a series of ten 8% notes for $29,200 each, coming due at 30-day intervals.
	22	Settled a product liability lawsuit with a customer for $320,000, payable in January. Accrued the loss in a litigation claims payable account.
	31	Paid the amount due to Greenwood Co. on the first note in the series issued on December 1.

Required:

Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar.

Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles):

	a. Product warranty cost, $29,000.
	b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.

Chart of Accounts

CHART OF ACCOUNTS

Sherwood Co.

General Ledger

	ASSETS
110	Cash
111	Accounts Receivable
112	Interest Receivable
113	Notes Receivable
115	Inventory
116	Supplies
118	Prepaid Insurance
120	Land
123	Building
124	Accumulated Depreciation-Building
125	Office Equipment
126	Accumulated Depreciation-Office Equipment
127	Tools
128	Accumulated Depreciation-Tools

	LIABILITIES
210	Accounts Payable-Kirkwood Co.
211	Accounts Payable-Greenwood Co.
212	Accounts Payable-Poulin Co.
213	Interest Payable
214	Notes Payable
215	Salaries Payable
216	Social Security Tax Payable
217	Medicare Tax Payable
218	Employees Federal Income Tax Payable
219	Employees State Income Tax Payable
220	Group Insurance Payable
221	Bond Deductions Payable
224	Federal Unemployment Tax Payable
225	State Unemployment Tax Payable
226	Vacation Pay Payable
227	Unfunded Pension Liability
228	Product Warranty Payable
229	Litigation Claims Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends
313	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Salaries Expense
524	Depreciation Expense-Building
525	Delivery Expense
526	Repairs Expense
529	Selling Expenses
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Depreciation Expense-Tools
534	Insurance Expense
535	Supplies Expense
536	Payroll Tax Expense
537	Vacation Pay Expense
538	Pension Expense
539	Cash Short and Over
540	Product Warranty Expense
541	Miscellaneous Expense
710	Interest Expense
720	Litigation Loss

Journal

1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Scroll down to access page 12 of the journal. Round your answers to the nearest dollar.

PAGE 11

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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29

Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles):

A.	Product warranty cost, $29,000.
B.	Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.

PAGE 12

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3
4
5

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ACCT 110 Lecture Notes - Lecture 18: Santa Barbara City College, Canada Pension Plan, Accounts Payable

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