Becky Sherrick's regular hourly wage rate is $14, and she receives an hourly rate of
$21 for work in excess of 40 hours. During a January pay period, Becky works 45 hours. Becky's federal income tax withholding is $95, her FICA tax withheld is $53.20, and she has no voluntary deductions. Compute Becky Sherrick's gross earnings and net pay for the pay period.
During January the following selected transactions occurred.
Jan. 5 Sold merchandise for cash totaling $16,632, which includes 8% sales taxes.
12 Provided services for customers who had made advance payments of $9,000.
(Credit Service Revenue)
14 Paid state revenue department for sales taxes collected in December 2001
20 Sold 500 units of a new product on credit at $50 per unit, plus 8% sales
21 Borrowed $18,000 from Castle Bank on a 3-month, 10%, $18,000 note.
25 Sold merchandise for cash totaling $11,340, which includes 8% sales taxes.
(a) Journalize the January transactions.
(b) Journalize the adjusting entry at January 31 for the outstanding notes payable.
(c) Prepare the current liabilities section of the balance sheet at January 31, 2002. Assume
no change in accounts payable.
P11-8A - Excel Problem
Prepare entries to record issuance of bonds, payment of interest, and amortization of premium using effective interest method, answer questions
On July 1, 2002, Imperial Oil Company issued $2,000,000 face value, 12%, 10-year bonds at $2,249,245. This price resulted in a 10% effective-interest rate on the bonds. Imperial Oil uses the effective-interest method to amortize bond premium of discount. The bonds pay semiannual interest on each July 1 and January 1.
(a) Prepare the journal entries to record the following transactions:
(1) The issuance of the bonds on July 1, 2002
(2) The accrual of interest and the amortization of the premium on December 31, 2002.
(3) The payment of interest and the amortization of premium on July 1, 2003.
(4) The accrual of interest and the amortization of the premium on December 31, 2003
(b) Show the proper balance sheet presentation for the liability for bonds payable on
the December 31, 2003 balance sheet date.
(c) Provide the answer to the following questions in letter form, addressed to the
comptroller of Imperial Oil:
(1) What amount of interest expense is reported for 2003?
(2) Would the bond interest reported in 2003 be the same as, greater than, or
less than the amount that would be reported if the straight-line method of
amortization were used?
(3) Determine the total cost of borrowing over the life of the bond.
(4) Would the total bond interest expense be greater than, the same as, or less than the total interest expense if the straight-lime method of amortization were used?
The solution has various accounting problems relating to current and long term liabilities.