Chapter 9: Q4DQ (page 428)
If $988 is the total of a sale that includes sales tax of 4%, what is the selling price of the item only?
The selling price of the item is $950.
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What is the combined amount (in percent) of the employee and employer Social Security tax rate? (Assume wages do not exceed $118,500 per year.)
Keesha Co. borrows \(200,000 cash on November 1, 2017, by signing a 90-day, 9% note with a face value
of \)200,000.
1. On what date does this note mature?
2. How much interest expense results from this note in 2017? (Assume a 360-day year.)
3. How much interest expense results from this note in 2018? (Assume a 360-day year.)
4. Prepare journal entries to record (a) issuance of the note, (b) accrual of interest at the end of 2017, and
(c) payment of the note at maturity. (Assume no reversing entries are made.)
Using the data in situation aof Exercise 9-5, prepare the employer’s September 30 journal entries to record
salary expense and its related payroll liabilities for this employee. The employee’s federal income
taxes withheld by the employer are $80 for this pay period. (Round amounts to cents.)
Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table contains the company’s unadjusted trial balance as of December 31, 2017.
BUG-OFF EXTERMINATORS December 31, 2017 | ||||||
| Particulars | Unadjusted trial balance | Adjustments | Adjusted trial balance | |||
| Debit \( | Credit \) | Debit \( | Credit \) | Debit \( | Credit \) | |
| Cash | \(17,000 | |||||
| Accounts receivables | 4,000 | |||||
| Allowance for doubtful accounts | \)828 | |||||
| Merchandise inventory | 11,700 | |||||
| Trucks | 32,000 | |||||
| Accumulated depreciation – trucks | 0 | |||||
| Equipment | 45,000 | |||||
| Accumulated depreciation – equipment | 12,200 | |||||
| Account payable | 5,000 | |||||
| Estimated warranty liability | 1,400 | |||||
| Unearned service revenue | 0 | |||||
| Interest payable | 0 | |||||
| Long-term note payable | 15,000 | |||||
| Common stock | 10,000 | |||||
| Retained earnings | 49,700 | |||||
| Dividend | 10,000 | |||||
| Extermination service revenue | 60,000 | |||||
| Interest revenue | 872 | |||||
| Sales | 71,026 | |||||
| Cost of goods sold | 46,300 | |||||
| Depreciation expenses – truck | 0 | |||||
| Depreciation expenses – equipment | 0 | |||||
| Wages expenses | 35,000 | |||||
| Interest expenses | 0 | |||||
| Rent expenses | 9,000 | |||||
| Bad debt expenses | 0 | |||||
| Miscellaneous expenses | 1,226 | |||||
| Repair expenses | 8,000 | |||||
| Utility expenses | 6,800 | |||||
| Warranty expenses | 0 | |||||
| Total | \(226,026 | \)226,026 | ||||
The following information in a through h applies to the company at the end of the current year.
a. The bank reconciliation as of December 31, 2017, includes the following facts.
Cash balance per bank | \(15,100 |
Cash balance per book | 17,000 |
Outstanding checks | 1,800 |
Deposit in transit | 2,450 |
Interest earned (on bank account) | 52 |
Bank service charges (miscellaneous expenses) | 15 |
Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.)
b. An examination of customers’ accounts shows that accounts totaling \)679 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be \(700.
c. A truck is purchased and placed in service on January 1, 2017. Its cost is being depreciated with the straight-line method using the following facts and estimates.
Original cost | \)32,000 |
Expected salvage value | 8,000 |
Useful life (years) | 4 |
d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2015. They are being depreciated with the straight-line method using these facts and estimates.
Sprayer | Injector | |
Original cost | \(27,000 | \)18,000 |
Expected salvage value | 3,000 | 2,500 |
Useful life (years) | 8 | 5 |
e. On August 1, 2017, the company is paid \(3,840 cash in advance to provide monthly service for an apartment complex for one year. The company began providing the services in August. When the cash was received, the full amount was credited to the Extermination Services Revenue account.
f. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination services revenue of \)57,760 for 2017. No warranty expense has been recorded for 2017. All costs of servicing warranties in 2017 were properly debited to the Estimated Warranty Liability account.
g. The \(15,000 long-term note is an 8%, five-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2017.
h. The ending inventory of merchandise is counted and determined to have a cost of \)11,700. Bug-Off uses a perpetual inventory system.
Required
1. Use the preceding information to determine amounts for the following items.
a. Correct (reconciled) ending balance of Cash, and the amount of the omitted check.
b. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.
c. Depreciation expense for the truck used during year 2017.
d. Depreciation expense for the two items of equipment used during year 2017.
e. The adjusted 2017 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts.
f. The adjusted 2017 ending balances of the Warranty Expense and the Estimated Warranty Liability accounts.
g. The adjusted 2017 ending balances of the Interest Expense and the Interest Payable accounts. (Round amounts to nearest whole dollar.)
2. Use the results of part 1 to complete the six-column table by first entering the appropriate adjustments for items a through g and then completing the Adjusted Trial Balance columns. (Hint: Item b requires two adjustments.)
3. Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Off’s adjusted balance for Merchandise Inventory matches the year-end physical count.
4. Prepare a single-step income statement, a statement of retained earnings (cash dividends during 2017 were $10,000), and a classified balance sheet.
Noura Company offers an annual bonus to the employees if the company meets certain net income goals.
Prepare the journal entry to record a $15,000 bonus owed to its workers (to be shared equally) at calendar year-end.
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