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Cardinal Company

Brief Exercise 11-1

Cardinal Company has the following obligations at December 31: (a) a note payable
for $100,000 due in 2 years, (b) a 10-year mortgage payable of $300,000 payable in ten $30,000
annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts payable of
$60,000. For each obligation, indicate whether it should be classified as a current liability.
(Assume an operating cycle of less than one year.)

ED-1 Betty Williams' regular hourly wage rate is $14.00, and she receives a wage of 1 1⁄2 times
the regular hourly rate for work in excess of 40 hours. During a March weekly pay period Betty
worked 42 hours. Her gross earnings prior to the current week were $6,000. Betty is married
and claims three withholding allowances. Her only voluntary deduction is for group hospitalization
insurance at $15.00 per week.

Exercise D-3 (from Appendix D)
Canseco Company has the following data for the weekly payroll ending January, 31:

Hours
Employee M T W T F S Hourly rate "Fed Inc
Tax W/H" "Health
Ins"
M. Hindi 8 8 9 8 10 3 $11.00 $34.00 $10.00
E. Benson 8 8 8 8 8 2 13.00 37.00 15.00
K. Estes 9 10 8 8 9 0 14.00 58.00 15.00

Employees are paid 1 1/2 times the regular hourly rate for all hours worked in excess of 40 hours per week. FICA
taxes are 8% on the first $87,900 of gross earnings. Canseco Company is subject to 5.4% state unemployment taxes
on the first $9,800 and 0.8% federal unemployment taxes on the first $7,000 of gross earnings.

Instructions:
(a) Prepare the payroll register for the weekly payroll by completing the data matrix presented below.

Problem P11-1A

On January 1, 2006, the ledger of Shumway Software Company contains the following liability accounts:

Accounts Payable $42,500
Sales Taxes Payable 5,800
Unearned Service Revenue 15,000

During January the following selected transactions occurred.

Jan. 1 Borrowed $15,000 in cash from Amsterdam Bank on a 4-month, 8%, $15,000 note.
Jan. 5 Sold merchandise for cash totaling $10,400, which includes 4% sales taxes.
Jan. 12 Provided services for customers who had made advance payments of $9,000. (Credit
Service Revenue.)
Jan. 14 Paid state treasurer's department for sales taxes collected in December 2005, $5,800.
Jan. 20 Sold 700 units of a new product on credit at $52 per unit, plus 4% sales tax.
Jan. 25 Sold merchandise for cash totaling $12,480, which includes 4% sales taxes.

Instructions

(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, 2006. Assume no
change in accounts payable.

Attachments

Solution Preview

Brief Exercise 11-1

Cardinal Company has the following obligations at December 31: (a) a note payable
for $100,000 due in 2 years, (b) a 10-year mortgage payable of $300,000 payable in ten $30,000
annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts payable of
$60,000. For each obligation, indicate whether it should be classified as a current liability.
(Assume an operating cycle of less than one year.)

ED-1 Betty Williams' regular hourly wage rate is $14.00, and she receives a wage of 1 1⁄2 times
the regular hourly rate for work in excess of 40 hours. During a March weekly pay period Betty
worked 42 hours. Her gross earnings ...

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