ACG 2021 Lecture Notes - Lecture 17: Accounts Payable, Promissory Note, Sales Tax

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chocolateleopard236

4 Apr 2018

School

University of Florida

Department

Accounting

Course

ACG 2021

Professor

Jill Kristen Goslinga

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Document Summary

Accounts payable turnover = purchases from suppliers (on credit) / average accounts payable. Turnover expressed in days = 365 / accounts payable turnover. Short-term notes payable: due within one year, used to borrow cash or purchase asset, accrue interest. Sales tax payable: levied on retail sales, collected from customers and remitted to state. Accrued liabilities: result from expenses incurred but not yet paid, categories, salaries and wages payable, interest payable, income tax payable. Three liabilities associated with payroll: employee income tax payable, fica tax payable, and salaries payable. Payroll: major expense of most companies, many different forms, salary, wage, commission. Unearned revenues: business receives cash before earning revenue, results in a liability. Current portion of long-term debt: long-term debt often paid in installments, amount of principal payable within one year, company reclassifies amount from long-term to current. Estimated warranty payable: warranty expense is estimated in the year product is sold, matching principle.

Related Questions

Selected year-end financial statements of Cabot Corporationfollow. (All sales were on credit; selected balance sheet amountsat December 31, 2012, were inventory, $51,900; total assets,$179,400; common stock, $105,000; and retained earnings,$52,148.)

CABOT CORPORATION Income Statement For Year Ended December 31, 2013
Sales	$	451,600
Costof goods sold		297,150

Gross profit		154,450
Operating expenses		99,300
Interest expense		4,700

Income before taxes		50,450
Income taxes		20,323

Netincome	$	30,127

CABOT CORPORATION Balance Sheet December 31, 2013
Assets			Liabilities and Equity
Cash	$	20,000	Accounts payable	$	15,500
Short-term investments		9,000	Accrued wages payable		3,800
Accounts receivable, net		32,800	Income taxes payable		4,100
Notes receivable (trade)*		4,500	Long-term note payable, secured
Merchandise inventory		42,150	by mortgage on plant assets		65,400
Prepaid expenses		3,000	Common stock		105,000
Plant assets, net		147,300	Retained earnings		64,950

Total assets	$	258,750	Total liabilities and equity	$	258,750

* These areshort-term notes receivable arising from customer (trade)sales.

Required:

Compute the following: (1) current ratio, (2) acid-test ratio,(3) days' sales uncollected, (4) inventory turnover, (5) days'sales in inventory, (6) debt-to-equity ratio, (7) times interestearned, (8) profit margin ratio, (9) total asset turnover, (10)return on total assets, and (11) return on common stockholders'equity. (Use 365 days a year. Do not round intermediatecalculations.)

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Selected year-end financial statements of McCordCorporation follow. (All sales were on credit; selected balancesheet amounts at December 31, 2010, were inventory, $50,900; totalassets, $219,400; common stock, $80,000; and retained earnings,$52,348.)

McCORD CORPORATION Income Statement For Year Ended December 31, 2011
Sales	$	451,600
Cost of goods sold		296,950

Gross profit		154,650
Operating expenses		98,700
Interest expense		4,300

Income before taxes		51,650
Income taxes		20,807

Net income	$	30,843

McCORD CORPORATION Balance Sheet December 31, 2011
Assets			Liabilities and Equity
Cash	$	20,000	Accounts payable	$	24,500
Short-term investments		9,400	Accrued wages payable		3,600
Accounts receivable, net		29,400	Income taxes payable		3,400
Notes receivable (trade)*		6,000	Long-term note payable, secured
Merchandise inventory		32,150	by mortgage on plant assets		69,400
Prepaid expenses		2,850	Common stock		80,000
Plant assets, net		149,300	Retained earnings		68,200

Total assets	$	249,100	Total liabilities and equity	$	249,100

*These are short-term notes receivable arising from customer (trade)sales.

Required:

Compute thefollowing. (Use 365 days ayear. Do not round intermediate calculations and round your finalanswers to 1 decimal place. Omit the "%" sign in yourresponse):


(1)	Current ratio	to
(2)	Acid-test ratio	to
(3)	Days' sales uncollected	days
(4)	Inventory turnover	times
(5)	Days' sales in inventory	days
(6)	Debt-to-equity ratio	to
(7)	Times interest earned	times
(8)	Profit margin ratio	%
(9)	Total asset turnover	times
(10)	Return ontotal assets	%
(11)	Return on common stockholders' equity	%

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Required:

1. Open T-accounts for the listed accounts, inserting their unadjustedJune 30, 2014, balances.

2. Post the June 30, 2014, adjusting entries to the T-accounts opened.Round all amounts to the nearest whole dollar.

3. Prepare the liability section ofShell Storage Unitsâ balance sheet at June 30, 2014

The general ledger of Shell Storage Units at June 30, 2014, theend of the companyâs fiscal year, includes the following accountbalances before adjusting entries.

Notes Payable,Short-Term $20,000

AccountsPayable $235,620

Current Portion of Long-term Debt payable

Interest Payable

Salaries payable

Employee Income Tax Payable

Employer Payroll Costs Payable

Employee Insurance Benefits Payable

Estimated Vacation Pay Liability $12,360

Sales Tax and GSTPayable $5972

Unearned RentRevenue $18,000

Long-Term DebtPayable $250,000

The additional data needed to develop the adjusting entries atJune 30 are as follows:

A) The$20,000 short-term note payable was issued on February 28. Itmatures six months from data of issuance and bears interest at6%.

B) Thelong-term debt is payable in annual installments of $50,000 withthe next installment due on August 31. On that date, Shell StorageUnits will also pay one yearâs interest at 3%. Interest was lastpaid August 31 of the preceding year.

C) GrossSalaries for the last payroll of the fiscal year were $6328. Ofthis amount, employee payroll withholdings payable were $1365 andsalary payable was $4963.

D) Employer Payroll Costs Payable was $820, and Shell Storageâsliability for employee health insurance was $991.

E) ShellStorage estimates that vacation pay expense is 6% of gross salariesof $147,500 (the $147,500 includes the last payroll of the fiscalyear).

F) On March 1, the company collected one yearâs rent of $18,000 inadvance.

G) At June 30,Shell Storage is the defendant in a $200,000 lawsuit, which thecompany expects to win. However, the outcome is uncertain.

Notes Payable, Short-term	Accounts Payable	Current Portion of Long- term Debt Payable

Interest Payable	Salaries Payable	Employee Income Tax Payable

Employer Payroll Costs Payable	Employee Insurance Benefits Payable	Estimated Vacation Pay Liability

Sales Tax and
GST Payable

Unearned Rent Revenue

Long-term Debt Payable

SHELL STORAGE UNITS
Balance Sheet
June 30, 2014
LIABILITIES

limetermite608

ACG 2021 Lecture Notes - Lecture 17: Accounts Payable, Promissory Note, Sales Tax

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