Mane Company
P10-1A On January 1, 2011, the ledger of Mane Company contains the following liability accounts.
Accounts Payable $52,000 Sales Taxes Payable 7,700
Unearned Service Revenue 16,000
During January the following selected transactions occurred.
Jan. 5 Sold merchandise for cash totaling $22,680, which includes 8% sales taxes. 12 Provided services for customers who had made advance payments of $10,000. (Credit Service Revenue.) 14 Paid state revenue department for sales taxes collected in December 2010 ($7,700). 20 Sold 800 units of a new product on credit at $50 per unit, plus 8% sales tax. 21 Borrowed $18,000 from UCLA Bank on a 3-month, 8%, $18,000 note. 25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.
Instructions
(a) Journalize the January transactions. …show more content…
Jan 5th
Cash
22,680
Sales
21,000
Sales Tax Payable
1,680
Jan 12th
Unearned Revenue
10,000
Service Revenue
10,000
Jan 14th
Sales Tax Payable
7,700
Cash
7,700
Jan 20th
Cash
43,200
Sales
40,000
Sales Tax Payable
3,200
Jan 21th
Cash
18,000
Notes Payable
40,000
Jan 25th
Cash
12,420
Sales
11,500
Sales Tax Payable
920
(b) Journalize the adjusting entries at January 31 for the outstanding notes payable. (Hint: Use one-third of a month for the UCLA Bank note.)
Jan 31th
Interest Expense
40
Interest Payable
40
18000 x .08 x [(1/12) * (1/3)]
(c) Prepare the current liabilities section of the balance sheet at January 31, 2011. Assume no change in accounts payable.
Notes Payable
18,000
Accounts Payable
52,000
Unearned Service Revenue
6,000
Sales Tax Payable
5,800
Interest Payable
40
Total Current Liabilities
81,840
P10-6A On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-yearbonds at $2,271,813. This price resulted in an effective-interest rate of 8% on the bonds. Atwater uses the effective-interest method to amortize bond premium or discount. The bonds pay semi-annual interest July 1 and January 1.
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2011.
Cash
2,271,813
Bonds Payable
2,000,000 Premium on Bonds Payable
271,813
(b) Prepare an amortization table through December 31, 2012 (3 interest periods) for this bon issue.
Semi Annual Interest Periods
Interest to be Paid
Interest Expense
Premium Amortization
Unamortized Premium
Bond Carrying Value
271,813
2,271,813
1
100,000
90,873
9,127
262,686
2,262,686
2
100,000
90,507
9,493
253,193
2.253,193
3
100,000
90,128
9,872
243,321
2,243,321
(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2011.
Bond Interest Expense
90,873
Premium on Bonds Payable
9,127
Bond Interest Payable
100,000
(d) Prepare the journal entry to record the payment of interest and the amortization of the premium on July 1, 2012, assuming no accrual of interest on June 30.
Bond Interest Expense
90,507
Premium on Bonds Payable
9,493
Cash
100,000
(e) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2012.
Bond Interest Expense
90,128
Premium on Bonds Payable
9,872
Bond Interest Payable
100,000
BYP 10-7 As indicated in the “All About You” feature in this chapter (page 468), medical costs are substantial and rising. But will medical costs be your most substantial expense over your lifetime?
Not likely. Will it be housing or food? Again, not likely. The answer is in the Accounting Across the Organization box on page 450. On average, Americans work 74 days to afford their federal taxes. Companies, too, have large tax burdens. They look very hard at tax issues in deciding where to build their plants and where to locate their administrative headquarters.
Instructions
(a) Determine what your state income taxes are if your taxable income is $60,000 and you file as a single taxpayer in the state in which you live.
1043 + (60,000 – 19,400) * 0.065 = $3,682
(b) Assume that you own a home worth $200,000 in your community and the tax rate is 2.1%. Compute the property taxes you would pay.
200,000 x .021 = $4,200
(c) Assume that the total gasoline bill for your automobile is $1,200 a year (400 gallons at $3 per gallon).
What are the amounts of state and federal taxes that you pay on the $1,200?
Federal Tax Rate = 0.184 per gallon
State Tax Rate = 0.329
400 x (0.184 + 0.329) = $205.20
(d) Assume that your purchases for the year total $9,000. Of this amount, $5,000 was for food and prescription drugs. What is the amount of sales tax you would pay on these purchases? (Note that many states do not have a sales tax for food or prescription drug purchases. Does yours?).
4000 x .05 = $200
(e) Determine what your Social Security taxes are if your income is $60,000.
60,000 x 0.0765 = $4,590
(f) Determine what your federal income taxes are if your taxable income is $60,000 and you fileas a single taxpayer.
4,481 + (60,000 – 32,550) *0.25 = $11,343.50
(g) Determine your total taxes paid based on the above calculations, and determine the percentage of income that you would pay in taxes based on the following formula: Total taxes paid (divided y) Total Income.
Total Tax = 11343.50 + 4950 + 200 +205.20 + 4200 + 3682 = 24580.70
Total Tax = 24580.7 / 60000 = 0.40967
40.97%
Accounts Payable $52,000 Sales Taxes Payable 7,700
Unearned Service Revenue 16,000
During January the following selected transactions occurred.
Jan. 5 Sold merchandise for cash totaling $22,680, which includes 8% sales taxes. 12 Provided services for customers who had made advance payments of $10,000. (Credit Service Revenue.) 14 Paid state revenue department for sales taxes collected in December 2010 ($7,700). 20 Sold 800 units of a new product on credit at $50 per unit, plus 8% sales tax. 21 Borrowed $18,000 from UCLA Bank on a 3-month, 8%, $18,000 note. 25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.
Instructions
(a) Journalize the January transactions. …show more content…
Jan 5th
Cash
22,680
Sales
21,000
Sales Tax Payable
1,680
Jan 12th
Unearned Revenue
10,000
Service Revenue
10,000
Jan 14th
Sales Tax Payable
7,700
Cash
7,700
Jan 20th
Cash
43,200
Sales
40,000
Sales Tax Payable
3,200
Jan 21th
Cash
18,000
Notes Payable
40,000
Jan 25th
Cash
12,420
Sales
11,500
Sales Tax Payable
920
(b) Journalize the adjusting entries at January 31 for the outstanding notes payable. (Hint: Use one-third of a month for the UCLA Bank note.)
Jan 31th
Interest Expense
40
Interest Payable
40
18000 x .08 x [(1/12) * (1/3)]
(c) Prepare the current liabilities section of the balance sheet at January 31, 2011. Assume no change in accounts payable.
Notes Payable
18,000
Accounts Payable
52,000
Unearned Service Revenue
6,000
Sales Tax Payable
5,800
Interest Payable
40
Total Current Liabilities
81,840
P10-6A On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-yearbonds at $2,271,813. This price resulted in an effective-interest rate of 8% on the bonds. Atwater uses the effective-interest method to amortize bond premium or discount. The bonds pay semi-annual interest July 1 and January 1.
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2011.
Cash
2,271,813
Bonds Payable
2,000,000 Premium on Bonds Payable
271,813
(b) Prepare an amortization table through December 31, 2012 (3 interest periods) for this bon issue.
Semi Annual Interest Periods
Interest to be Paid
Interest Expense
Premium Amortization
Unamortized Premium
Bond Carrying Value
271,813
2,271,813
1
100,000
90,873
9,127
262,686
2,262,686
2
100,000
90,507
9,493
253,193
2.253,193
3
100,000
90,128
9,872
243,321
2,243,321
(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2011.
Bond Interest Expense
90,873
Premium on Bonds Payable
9,127
Bond Interest Payable
100,000
(d) Prepare the journal entry to record the payment of interest and the amortization of the premium on July 1, 2012, assuming no accrual of interest on June 30.
Bond Interest Expense
90,507
Premium on Bonds Payable
9,493
Cash
100,000
(e) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2012.
Bond Interest Expense
90,128
Premium on Bonds Payable
9,872
Bond Interest Payable
100,000
BYP 10-7 As indicated in the “All About You” feature in this chapter (page 468), medical costs are substantial and rising. But will medical costs be your most substantial expense over your lifetime?
Not likely. Will it be housing or food? Again, not likely. The answer is in the Accounting Across the Organization box on page 450. On average, Americans work 74 days to afford their federal taxes. Companies, too, have large tax burdens. They look very hard at tax issues in deciding where to build their plants and where to locate their administrative headquarters.
Instructions
(a) Determine what your state income taxes are if your taxable income is $60,000 and you file as a single taxpayer in the state in which you live.
1043 + (60,000 – 19,400) * 0.065 = $3,682
(b) Assume that you own a home worth $200,000 in your community and the tax rate is 2.1%. Compute the property taxes you would pay.
200,000 x .021 = $4,200
(c) Assume that the total gasoline bill for your automobile is $1,200 a year (400 gallons at $3 per gallon).
What are the amounts of state and federal taxes that you pay on the $1,200?
Federal Tax Rate = 0.184 per gallon
State Tax Rate = 0.329
400 x (0.184 + 0.329) = $205.20
(d) Assume that your purchases for the year total $9,000. Of this amount, $5,000 was for food and prescription drugs. What is the amount of sales tax you would pay on these purchases? (Note that many states do not have a sales tax for food or prescription drug purchases. Does yours?).
4000 x .05 = $200
(e) Determine what your Social Security taxes are if your income is $60,000.
60,000 x 0.0765 = $4,590
(f) Determine what your federal income taxes are if your taxable income is $60,000 and you fileas a single taxpayer.
4,481 + (60,000 – 32,550) *0.25 = $11,343.50
(g) Determine your total taxes paid based on the above calculations, and determine the percentage of income that you would pay in taxes based on the following formula: Total taxes paid (divided y) Total Income.
Total Tax = 11343.50 + 4950 + 200 +205.20 + 4200 + 3682 = 24580.70
Total Tax = 24580.7 / 60000 = 0.40967
40.97%