ACC 205 Complete Week 4 Assignments Exercise  - Journal and  Discussion Questions – A+ Graded Course Material – Ashford

Week 4 Exercise Assignment Liability

1.  Partner investments; journal entriesThe LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed cash of $50,000 and equipment with a value of $20,000.

a.    Prepare the journal entries needed to record the investments of Levy and Parcells.

2. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing:

·  Social Security taxes: 6% on the first $55,000 earned

·  Medicare taxes: 1.5% on the first $130,000 earned

·  Federal income taxes withheld from wages: $7,500

·  State income taxes: 5% of gross earnings

·  Insurance withholdings: 1% of gross earnings

·  State unemployment taxes: 5.4% on the first $7,000 earned

·  Federal unemployment taxes: 0.8% on the first $7,000 earned

The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end.

a. Prepare the necessary entry to record Brookhaven’s February payroll. The entry will include deductions for the following:

·  Social Security taxes

·  Medicare taxes

·  Federal income taxes withheld

·  State income taxes

·  Insurance withholdings

b. Prepare the journal entry to record Brookhaven’s payroll tax expense. The entry will include the following:

·  Matching Social Security taxes

·  Matching Medicare taxes

·  State unemployment taxes

·  Federal unemployment taxes

3.  Current liabilities: entries and disclosure. A review of selected financial activities of Visconti’s during 20XX disclosed the following:

12/1

Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable. Interest and principal are due at maturity.

2/10

Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Past experience with similar products indicates that 2% of the units will require repair, with warranty costs averaging $27 per unit.

12/22

Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.

12/26

Borrowed $5,000 from First City Bank; signed a note payable due in 60 days.

12/31

Repaired six XY-80s during the month at a total cost of $162.

12/31

Accrued 3 days of salaries at a total cost of $1,400.

Instructions

a. Prepare journal entries to record the transactions.

b. Prepare adjusting entries on October 31 to record accrued interest.

c. Prepare the Current Liability section of Red Bank’s balance sheet as of October 31. Assume that the Accounts Payable account totals $203,600 on this date.

4. Issuance of stock: organization costs. Snowbound Corporation was incorporated in July. The firm’s charter authorized the sale of 200,000 shares of $10 par-value common stock. The following transactions occurred during the year:

7/1:

Sold 45,000 shares of common stock to investors for $18 per share. Cash was collected and the shares were issued.

8/11

Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were issued.

9/1  Declared a cash dividend on 9/1 for $1.00 a share for shareholders on record 10/1 with payment being made on 11/1.

Instructions

a.  Prepare journal entries for the two stock issues.

b.  Prepare journal entries for the cash dividend declaration and payment.

5. Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31:

8/2:

Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note.

8/20:

Issued a $40,000 note to Harris Motors for the purchase of a $40,000 de­livery truck. The note is due in 180 days and carries a 12% interest rate.

9/10:

Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.

9/11:

Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and car­ries a 14% interest rate.

10/10:

The note to Pans Enterprises was paid in full.

10/31:    The note to Datatex Equipment was paid in full.

11/30:   Paid note to Bank of Kingville

Instructions

a. Prepare journal entries to record the transactions.

b. Prepare adjusting entries on October 31 to record accrued interest.

c. Prepare the Current Liability section of Red Bank’s balance sheet as of October 31. Assume that the Accounts Payable account totals $203,600 on this date.

Week 4 Discussion Questions

Current Liability

What is a current liability?  From a user of financial statements perspective why do you believe current liabilities are separated from long-term liabilities?  Based on your current experience and any additional research you may have done provide two examples of situations where businesses collect monies from customers and employees and reports these amounts as a current liability. 

Client Recommendations

A client comes to you thinking about starting a consulting business.  Specifically your client is interested in what type of entity should be created for this new business.  Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation.  Based on these advantages and disadvantages provide a clear recommendation to your client.  

Let at least two of your peers posts know if an alternative choice of entity would be possible.  What would be the benefits of this new entity choice?  Would there be any disadvantages associated with this new entity selection.

Week 4 Journal

Future Obligations Journal

 
The current liability section of the balance sheet lists the liabilities that are due within the next 12 months.  Reflecting on your current financial situation, apply the concept of current liabilities.  What does this analysis tell you about your future obligations?  What did you learn from this experience?


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