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Chapter 11: Q9SE (page 605)

On December 31, Weston Company estimates that it will pay its employees a 5% bonus on net income after deducting the bonus. The company reports net income of $64,000 before the calculation of the bonus. The bonus will be paid on January 15 of the next year.Requirements
1. Journalize the December 31 transaction for Weston.
2. Journalize the payment of the bonus on January 15.

Short Answer

Expert verified

Employee bonus expenses is $3,048
Employee bonus payable is $3,048

Step by step solution

01

Bonus

$\begin{array}{l} \begin{matrix} Bonus= \frac{(Bonus% × $64,000)}{(1+Bonus%)} \\ = \frac{(0.05× $64,000)}{(1+0.05)} \\ =$3,048 \end{matrix} \end{array}$

02

Journal Entries

Date	Particulars	Debit	Credit
Dec 31	Employee Bonus Expense	$3,048
	Employee Bonus payable		$3,048
	To record employee bonus expense

Jan,15	Employee bonus payable	$3,048
	Cash		$3,048
	To record cash payment for employee bonus payable.

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Most popular questions from this chapter

The following transactions of Jasmine Reef occurred during 2018:

Apr. 30 Reef is party to a patent infringement lawsuit of \(190,000. Reef’sattorney is certain it is remote that Reef will lose this lawsuit.

Jun. 30 Estimated warranty expense at 2% of sales of \)350,000.

Jul. 28 Warranty claims paid in the amount of \(5,500.

Sep. 30 Reef is party to a lawsuit for copyright violation of \)80,000. Reef’sattorney advises that it is probable Reef will lose this lawsuit. Theattorney estimates the loss at \(80,000.

Dec. 31 Reef estimated warranty expense on sales for the second half of the yearof \)510,000 at 2%.

Requirements

1. Journalize required transactions, if any, in Reef ’s general journal. Explanations arenot required.

2. What is the balance in Estimated Warranty Payable assuming a beginning balanceof $0?

Erin O’Neil Associates reported short-term notes payable and salaries payable as follows:

	2018	2017
Current Liabilities—partial:
Short-term Notes Payable	\(16,900	\) 16,000
Salaries Payable	3,400	4,000

During 2018, O’Neil paid off both current liabilities that were left over from 2017, borrowed cash on short-term notes payable, and accrued salaries expense. Journalize all four of these transactions for O’Neil during 2018. Assume no interest on short-term notes payable of $16,000.

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.

The following transactions of Philadelphia Pharmacies occurred during 2017 and 2018:

2017

Jan. 9 Purchased computer equipment at a cost of \(7,000, signing a six-month, 8% note payable for that amount.

29 Recorded the week’s sales of \)68,000, three-fourths on credit and one-fourth for cash. Sales amounts are subject to a 6% state sales tax. Ignore cost of goods sold.

Feb. 5 Sent the last week’s sales tax to the state.

Jul. 9 Paid the six-month, 8% note, plus interest, at maturity.

Aug. 31 Purchased merchandise inventory for \(3,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system.

Dec. 31 Accrued warranty expense, which is estimated at 2% of sales of \)609,000.

31 Accrued interest on all outstanding notes payable.

2018

Feb. 28 Paid the six-month 10% note, plus interest, at maturity.

Journalize the transactions in Plymouth’s general journal. Explanations are not required.

Consider the following note payable transactions of Creative Video Productions. 2017 Aug. 1 Purchased equipment costing $16,000 by issuing a one-year, 9% note payable. Dec. 31 Accrued interest on the note payable. 2018 Aug. 1 Paid the note payable plus interest at maturity. Journalize the transactions for the company.

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