SI – Accounting 284

Chapter 10 - November 9, 2009

  1. ______are short-term obligations that will be paid with current assets within the current operating cycle, or one year, whichever is longer.
  1. What are six examples of current liabilities? (slide in the notes)
  1. What are two examples of long-term liabilities?
  1. What is a contingent liability?
  1. Which of the following best describes accrued liabilities?
  2. Long-term liabilities
  3. Current amounts owed to suppliers of inventory
  4. Expenses incurred, but no paid at the end of the accounting period
  5. Revenues that have been collected, but not earned.
  1. As of February 28, 2006, American Greetings Corporation had 9.700 full-time and 19,800 part-time employees. Assume that in the last pay period of the year, the company paid $8,000,000 to employees after deducting $2,000,000 for employee income taxes, $612,000 for FICA taxes, and $700,000 for other payroll taxes. No payments have been made to the government relating to these taxes. Which of the following statement is true regarding the pay period?
  2. FICA taxes payable is $612,000
  3. FICA taxes payable is $1,224,000
  4. Salaries and wages expense is $6,000,000
  5. None of the above is true
  1. (Unearned Revenue)

A local theater company sells 1,500 season ticket packages at a price of $250 per package. The fist show in the five-show season starts this week. Show the accounting equation effects and prepare the journal entries related to (a) the sale of the season tickets before the first show and (b) the revenue earned after putting on the first show.

  1. (Sales and State Tax)

Ahlers Clocks is a retailer of wall, mantle, and grandfather clocks and is located in the Empire Mall in Sioux Falls, South Dakota. Assume that a grandfather clock was sold for $5,000 cash plus 4 percent sales tax. The clock had originally cost Ahlers $3,000. Show the accounting equation effects and prepare the journal entry related to his transaction. Assume Ahlers uses a perpetual inventory system.

  1. (Payroll Tax liabilities)

Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1-14 pay period show that employees earned wages totaling $100,000 but that employee income taxes totaling $14,000 and FICA taxes totaling $5,250 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts. What was the amount of net pay? What amount would be reported as the total payroll costs for this pay period? Consider both employee and employer payroll taxes.

  1. (Use question 6) Prepare journal entry or entries that Lightning would use to record the payroll. Include both employee and employer payroll taxes.
  1. Greener Pastures Corporation borrowed $1,000,000 on November 1, 2007. The note carried a 6 percent interest rate with the principal and interest payable on June 1, 2008. Show the accounting equation effects and prepare the journal entries for (a) the note issued on November 1, and (b) the interest accrual on December 31.

Recording and Reporting Current Liabilities

During 2007, Riverside Company completed the following two transactions. The annual accounting period ends December 331.

  1. Paid and recorded wages of $130,000 during 2007; however, at the end of December 2007, three day’s wages are unpaid and unrecorded because the weekly payroll will not be paid until January 6, 2008. Wages for the three days total $3,800.
  2. Collected rent revenue of $3,600 on December 10, 2007, for office space that Riverside rented to another business. The rent collected was for 30 days from December 11, 2007, to January 10, 2008, and was credited in full to Rent Revenue.
  1. Give the adjusting entry required on December 31, 2007, for unpaid wages from December 2007.
  1. Give the journal entry for the collection of rent on December 10, 2007, and the adjusting journal entry on December 31, 2007.