Chapter 11: Q14RQ (page 604)
Curtis Company is facing a potential lawsuit. Curtis’s lawyers think that it is reasonably possible that it will lose the lawsuit. How should Curtis report this lawsuit?
Reasonable possible contingent liability is recorded in the notes to the financial statement.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Watson Publishing completed the following transactions during 2018: Oct. 1 Sold a six-month subscription (starting on November 1), collecting cash of $240, plus sales tax of 8%. Nov. 15 Remitted (paid) the sales tax to the state of Tennessee. Dec. 31 Made the necessary adjustment at year-end to record the amount of subscription revenue earned during the year. Journalize the transactions (explanations are not required). Round to the nearest dollar.
How do unearned revenues arise?
On August 10, Swanson Company recorded sales of merchandise inventory on account, \(4,000. The sales were subject to sales tax of 4%. The company uses the perpetual inventory system. On September 30, Swanson paid \)500 of sales tax to the state.
1. Journalize the transaction to record the sale on August 10. Ignore cost of goods sold.
Liam Wallace is general manager of Moonwalk Salons. During 2018, Wallace worked for the company all year at a \(13,400 monthly salary. He also earned a year-end bonus equal to 5% of his annual salary.
Wallace’s federal income tax withheld during 2018 was \)2,010 per month, plus \(1,608 on his bonus check. State income tax withheld came to \)110 per month, plus \(80 on the bonus. FICA tax was withheld on the annual earnings. Wallace authorized the following payroll deductions: Charity Fund contribution of 2% of total earnings and life insurance of \)15 per month.
Moonwalk incurred payroll tax expense on Wallace for FICA tax. The company also paid state unemployment tax and federal unemployment tax.
Requirements
1. Compute Wallace’s gross pay, payroll deductions, and net pay for the full year 2018. Round all amounts to the nearest dollar.
2. Compute Moonwalk’s total 2018 payroll tax expense for Wallace.
3. Make the journal entry to record Moonwalk’s expense for Wallace’s total earnings for the year, his payroll deductions, and net pay. Debit Salaries Expense and Bonus Expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.
4. Make the journal entry to record the accrual of Moonwalk’s payroll tax expense for Wallace’s total earnings.
5. Make the journal entry for the payment of the payroll withholdings and taxes.
: On June 1, Hunting Man Magazine collected cash of $63,000 on future annual subscriptions starting on July 1. Requirements
1. Journalize the transaction to record the collection of cash on June 1.
2. Journalize the transaction required at December 31, the magazine’s year-end, assuming no revenue earned has been recorded. (Round adjustment to the nearest whole dollar.)
What do you think about this solution?
We value your feedback to improve our textbook solutions.
