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Notes Payable, Wages Payable and Journal Entries for State Mill Company

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Notes Payable and Wages Payable

P2. Part A: State Mill Company, whose fiscal year ends December 31, completed the following transaction involving notes payable:
2010
Nov. 25 purchased a new loading cart by issuing a 60-day 10 percent note for $86,400.
Dec 31 made the end-of-year adjusting entry to accrue interest expense.
Jan. 24 paid off the loading cart note.

Required
1- Prepare entries in journal form for State Mill Company's notes payable transactions.
2- When notes payable appears on the balance sheet, what other current liabilities would you look for to be associated with the notes?

What would it mean if this other current liability did not appear?
Part B: at the end of October, the pay roll register for State Mill Company contained the following totals: wages: $185,500; federal income taxes withheld, $47,442; state income taxes withheld, $7,818; social security withheld, $11,501; Medicare tax withheld, $ 2,690; medical insurance deductions, $6,400; and wages subject to unemployment taxes, $114,480.

Required
Prepare entries in journal form to record the (1) monthly payroll and (2) employer payroll expenses, assuming Social Security and Medicare taxes equal to the amount for employees, a federal unemployment insurance tax of 0.8 percent, a state unemployment tax of 5.4 percent, and medical insurance premiums for which the employer pays 80 percent of the cost.

Solution Preview

Notes Payable and Wages Payable

P2. Part A: State Mill Company, whose fiscal year ends December 31, completed the following transaction involving notes payable:
2010
Nov. 25 purchased a new loading cart by issuing a 60-day 10 percent note for $86,400.
Dec 31 made the end-of-year adjusting entry to accrue interest expense.
Jan. 24 paid off the loading cart note.

Required
1- Prepare entries in journal form for State Mill CompanyĆ¢??s notes payable transactions.
2- When notes payable appears on the balance sheet, what other current liabilities would you look for to be associated with the notes? What would it mean if this other current liability did not appear?
1 - ...

Solution Summary

This solution shows calculations and the journal entries for each requirement.

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