ACC207 Principles 2

Ch 10 A

Chapter 10 Homework

Name: Tsvetomira Ivanova

Problem 1
On January 1, 2015, Howell Corporation issued $600,000, 6%, 9-year bonds
dated January 1, 2015, at 97. The bonds pay annual interest on January 1. The
company uses the straight-line method of amortization and has a calendar
year end.
Instructions
Prepare all the journal entries that Howell Corporation would make related to
this bond issue through January 1, 2016.
Answer
1-Jan-15 Cash
Discount on bonds payable
Bonds payable

31-Dec-15 Interest expense

Premium on bonds
Interest payable

1-Jan-16 Interest payable

Cash

582,000
18,000
600,000

38,000
2,000
36,000

36,000
36,000

Problem 2
In providing accounting services to small business, you encounter the following
situations pertaining to cash sales.
1)
Advancer Company rings up sales and sales taxes separately on
its cash register. On April 10 the register totals are sales $62,000
and sales taxes $4,340.
2)

Farmdale Company does not segregate sales and sales taxes. Its
register total for April 15 is $62,130, which includes a 9% sales
tax.

Instructions
Prepare the entries to record the sales transactions and related taxes for
(a) Advancer Company and (b) Farmdale Company.
Answer
ADVANCER COMPANY
10-Apr Cash

66,340
Sales revenue
Sales tax payable

FARMDALE COMPANY
15-Apr Cash
Sales revenue
Sales tax payable
(62,130/1,09)= 57,000

62,000
4,340

62,130
57,000
5,130

Problem 3
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ACC207 Principles 2

Ch 10 A

During the month of March, Weston Company's employees earned wages of

$104,000. Withholdings related to these wages include Social Security taxes
(FICA), $18,700 for federal income tax, $7,800 for state income tax, and $2,000
for charitable contributions. The company incurred no cost related to these earnings for
federal unemployment tax, but incurred $1,700, for state unemployment tax.
Instructions
(a)

(b)

Prepare the necessary March 31 journal entry to record wages

expense and wages payable. Assume that wages earned
during March will be paid during April.
Prepare the entry to record the company's payroll tax expense.
31-Mar Salaries and wages expense
FICA taxes payable
Federal income tax payable
State income taxes
Charitable contributions
Salaries and wages payable
1-Jan Payroll tax expense
FICA taxes payable
State unemployment taxes

104,000
7,956
18,700
7,800
2,000
67,544
9,656
7,956
1,700

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ACC207 Principles 2

Ch 10 B

Chapter 10 Homework

Name: Tsvetomira Ivanova

Problem 1
Brand Company issued $800,000, 11%, 8-year bonds on January 1, 2015, at 104.
Interest is payable annually on January 1. Brand uses the straight-line method of
amortization and has a calendar year end.
Instructions
Prepare all journal entries made through January 2016 related to the bond issue.
Answer
1-Jan-15 Cash

832,000
Bonds payable
Premium on bonds payable

31-Dec-15 Bond interest expense

Premium on bonds payable
Interest payable

1-Jan-16 Bonds interest payable

Cash

800,000
32,000

84,000
4,000
88,000

88,000
88,000

Problem 2
In providing accounting services to small business, you encounter the following
situations pertaining to cash sales.
1)
Morton Company does not segregate sales and sales taxes. Its
register total for May 15 is $48,150, which includes an 7% sales tax.
2)

Minor Company rings up sales and sales taxes separately on its

cash register. On April 10 the register totals are sales $36,000 and
sales taxes $2,880

Instructions
Prepare the entries to record the sales transactions and related taxes for
(a) Morton Company and (b) Minor Company.
Answer
MORTON COMPANY
15-May Cash

48,150

Sales revenue
Tax payable
(48,150/1.07)= 45,000
MINOR COMPANY
10-Apr Cash

45,000
3,150

38,880
Sales revenue
Tax payable

36,000
2,880

Problem 3
During the month of March, Heston Company's employees earned wages of
$97,000. Withholdings related to these wages were Social Security taxes
(FICA), $17,500 for federal income tax, $7,300 for state income tax, and $1,400
for union dues. The company incurred no cost related to these earnings for
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ACC207 Principles 2

Ch 10 B

federal unemployment tax, but incurred $1,500, for state unemployment tax.
Instructions
(a)

Prepare the necessary March 31 journal entry to record wages

expense and wages payable. Assume that wages earned
during March will be paid during April.

(b)

Prepare the entry to record the company's payroll tax expense.

31-Mar-13 Salaries and wages expense
FICA taxes payable
Federal income tax payable
State income taxes
Union dues
Salaries and wages payable
31-Mar-13 Payroll tax expense
FICA taxes payable
State unemployment taxes

97,000
7,421
17,500
7,300
1,400
63,379
8,921
7,421
1,500

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ACC207 Principles 2

Ch 10 C

Chapter 10 Homework

Name: Tsvetomira Ivanova

Problem 1
Lionel Company issued $900,000, 9%, 10-year bonds on January 1, 2015, at 103.
Interest is payable annually on January 1. Brand uses the straight-line method of
amortization and has a calendar year end.
Instructions
Prepare all journal entries made through January 2016 related to the bond issue.
Answer
1-Jan-15 Cash

927,000
Bonds payable
Premium on bonds payable

900,000
27,000

31-Dec-15 Interest expense

78,300
Premium on bonds payable
2,700
Interest payable
To record annual accrued onterest and amortization of bond premium

1-Jan-16 Bonds payable

Cash

81,000

81,000
81,000

Problem 2
In providing accounting services to small business, you encounter the following
situations pertaining to cash sales.
1)
Perry Company does not segregate sales and sales taxes. Its
register total for May 15 is $41,040 which includes an 8% sales tax.
2)

Swift Company rings up sales and sales taxes separately on its

cash register. On April 10 the register totals are sales $58,000 and
sales taxes $3,220

Instructions
Prepare the entries to record the sales transactions and related taxes for
(a) Perry Company and (b)Swift Company.
Answer
PERRY COMPANY
15-May-13 Cash

41,040
Sales revenue
Tax payable

SWIFT COMPANY
10-Apr-13 Cash

38,000
3,040

61,220
Sales revenue
Tax payable

58,000
3,220

Problem 3
During the month of March, Preston Company's employees earned wages of
$112,000. Withholdings related to these wages were Social Security taxes
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ACC207 Principles 2

Ch 10 C

(FICA), $20,200 for federal income tax, $8,400 for state income tax, and $1,800
for medical premiums. The company incurred no cost related to these earnings for
federal unemployment tax, but incurred $1,800, for state unemployment tax.
Instructions
(a)

Prepare the necessary March 31 journal entry to record wages

expense and wages payable. Assume that wages earned
during March will be paid during April.

(b)

Prepare the entry to record the company's payroll tax expense.

31-Mar-13 Salaries and wages expense
FICA taxes payable
Federal income tax payable
State income taxes
Medical premiums
Salaries and wages payable
31-Mar-13 Payroll tax expense
FICA taxes payable
State unemployment taxes

112,000
8,568
20,200
8,400
1,800
73,032
10,368
8,568
1,800

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