Question 1
1. In a general partnership all the partners are classified as ?general partners?, each of whom has unlimited liability for the debts of the partnership. True or False 2. The co-ownership of business property, where minimal services are provided by the owners for their tenants, constitutes a partnership for federal income tax purposes. True or False 3. The tax laws allow partners to include as part of the tax basis in their partnership interests their respective shares of partnership liabilities. True or False 4. When contributed property is sold by the partnership, the recognized gain or loss is allocated among the partners in accordance with the terms in the partnership agreement. True or False 5. As a general rule, when a person obtains an interest in partnership capital through rendition of services, ordinary income is recognized to the extent of the fair market value of the interest received. True or False 6. Neither the partner nor the partnership recognize gain or loss on the contribution of property to the partnership in exchange for an interest in the partnership?s capital and profits. True or False 7. Only a cash basis partnership is concerned with the problem of ?unrealized receivables?. True or False 8. A partner?s interest in a partnership is a capital asset. True or False 9. As a general rule, property distributed to a partner, not in liquidation of an interest in the partnership, takes the same basis in the hands of the partner as it had in the hands of the partnership. True or False 10. To qualify as an S corporation there is no limit to the number of shareholders. True or False 11. If a corporation fails to make a timely S election, an extension of time to make the election may be granted. True or False 12. An S corporation cannot be subject to an income tax. True or False 13. In a general partnership, each partner: a. has unlimited liability for the debts of the partnership. b. must contribute the same amount to the partnership. c. must agree in writing to the terms of the partnership agreement. d. b. and c. 14. Limited partners are partners that: a. have limited liability for the debts of the partnership. b. have some, but limited, participation in the management of the partnership. c. take part in the partnership for a limited amount of time. d. All of the above. 15. A partners tax basis is: a. increased as partnership income and gain is allocated to the partner. b. increased as partnership income and gain is distributed to the partner. c. unaffected as partnership income and gain is allocated to the partner. d. decreased as partnership income and gain is distributed to the partner. 16. Which of the following do not increase a partners basis in the partnership interest? a. additional contributions the partner makes during the year. b. the partners share of tax-exempt income. c. the partners distributive share of partnership items of income and gain. d. All of the above increase a partner?s basis in the partnership interest. 17. Rachael and Ray form an equal partnership R&R on January 1, 20X1. Rachael contributes $100,000 in exchange for her one-half interest; Ray contributes land worth $100,000. Rays adjusted basis in the land is $30,000. Which of the following statements is accurate with respect to this exchange? a. Neither Rachael, Ray, nor R&R recognize any gain or loss on the transfer. b. Ray recognizes $70,000 gain on the transfer. c. R&R recognizes $70,000 gain on the transfer. d. b. and c. 18. Wayne owns 60 percent and Larry owns 40 percent of the profits and losses of the WL partnership. On January 1, 20X4, the basis in their respective partnership interests is $60,000 and $10,000. During 20X4, WL reports taxable ordinary income of $50,000 and has the following separately stated items: qualified dividend income of $1,000; taxable interest income of $2,600; charitable contributions of $3,000; and Sec. 179 expense of $20,000. During the year, partnership liabilities decreased by $25,000 and there were no distributions made to either partner. On December 31, 20X4, which of the following correctly states the basis in each partners interest in WL? a. Wayne: $63,360 and Larry: $12,240 b. Wayne: $65,520 and Larry: $12,680 c. Wayne: $90,360 and Larry: $30,240 d. Wayne: $92,160 and Larry: $31,440 19. On January 1, 2008, Henry, Cabot, and Lodge formed a three-man equal partnership with Henry and Cabot each contributing $100,000 and Lodge contributing securities with a basis to him of $60,000 and a fair market value of $100,000. On September 30 the partnership sold the securities for $130,000. The amount of the gain to be allocated to Lodge is: a. $70,000 b. $50,000 c. $30,000 d. $23,333 20. On April 1, George Hart, Jr. acquired a 25 percent interest in the Wilson, Hart, and Company partnership by gift from his father. The 25 percent partnership interest had been acquired by a $50,000 cash investment by Hart, Sr. 10 years ago. The fair market value of Hart, Sr.?s partnership interest was $60,000 at the time of the gift. Hart, Jr. sold the 25 percent interest for $85,000 on December 17. What type and amount of capital gain should Hart, Jr. report on his tax return? a. Long-term capital gain of $25,000 b. Short-term capital gain of $25,000 c. Long-term capital gain of $35,000 d. Short-term capital gain of $35,000 21. Ralph Elin contributed a plot of land to the partnership of Anduz and Elin. Elin?s adjusted basis for this land was $50,000, and its fair market value was $75,000. Under the partnership agreement, Elin?s capital account was credited with the full fair market value of the land. Anduz matched Elin?s contribution with a $75,000 cash contribution to the partnership. Thus, each partner?s capital account was credited with $75,000. Elin and Anduz share profits and losses equally. What is the adjusted basis of Elin?s interest in the partnership? a. $25,000 b. $37,500 c. $50,000 d. $75,000 22. Wilbur Wallace had an adjusted basis in his partnership interest of $35,000 when the partnership made a distribution to him, not in complete termination of his interest, of $30,000 cash and a parcel of real estate which the partnership held as an investment. The real estate had a basis to the partnership of $10,000 and a fair market value of $15,000. As a result of this distribution: a. Wilbur has ordinary income of $30,000, a capital gain of $15,000, and the real estate has a basis to him of $15,000. b. Wilbur has ordinary income of $5,000, no capital gain and the real estate has a basis to him of $10,000. c. Wilbur has no ordinary income, no capital gain, and the real estate has a basis to him of $5,000. d. Wilbur has no ordinary income, a capital gain of $5,000, and the real estate has a basis of $10,000. 23. Magda Shaw?s adjusted basis for her partnership interest in Shaw & Zack was $60,000. In complete liquidation of her interest in Shaw & Zack, Shaw received cash of $44,000 plus the following assets: Adjusted Basis to Shaw & Zack Fair Market Value to Shaw & Zack Land?Tract A $24,000 $10,000 Land?Tract B 8,000 8,000 How much is Shaw?s basis for Tract B? a. $16,000 b. $8,000 c. $ 7,111 d. $ 4,000 24. John Albin is a retired partner of Brill & Crum, a personal service partnership. Albin has not rendered any services to Brill & Crum since his retirement over 10 years ago. Under the provisions of Albin?s retirement agreement, Brill & Crum is obligated to pay Albin 10 percent of the partnership?s net income each year. In compliance with this agreement, Brill & Crum paid Albin $25,000 this year. How should Albin treat this $25,000? a. Not taxable b. Ordinary income c. Short-term capital gain d. Long-term capital gain 25. Martha is a 30 percent partner in a partnership, and has a basis in her partnership interest of $20,000. Assume that the partnership has a Sec. 754 election in effect, and that Martha receives a cash distribution of $35,000 from the partnership. Which of the following statements is true? a. The partnership will step up the basis of its assets by $15,000. b. The partnership will step down the basis of its assets by $15,000. c. Martha will recognize no income since the Sec. 754 election is in effect. d. The partnership will not adjust the basis of its assets. 26. Ellen is a 25 percent partner in Heartland Partners. Her tax basis in her partnership interest is $18,000. She received a non-liquidating distribution of land with a tax basis of $23,000 and a fair market value of $45,000. The partnership has no liabilities. What will be Ellen?s tax basis in the land received in the non-liquidating distribution? a. $18,000 b. $23,000 c. $45,000 d. zero 27. Who pays tax on the income of an S corporation? a. The S corporation b. The shareholders c. The customers d. There is no tax imposed on S corporation income 28. What is the maximum number of shareholders that an S corporation may have? a. 10 b. 25 c. 35 d. 100 29. Which of the following is not an eligible shareholder for an S corporation? a. Nonresident alien b. Qualified Subchapter S Trust c. An estate d. None of the above 30. Which corporation will qualify for S corporation status? a. Corporation owning a subsidiary b. DISC corporation c. Possession corporation d. None of the above 31. Which of the following taxes is not imposed on an S corporation? a. Built-in gains tax b. Excessive passive investment income tax c. Corporate tax d. Tax on early disposition of property on which the investment credit was claimed by the corporation as a previous C corporation 32. Michael Moore owns stock in an S corporation. The corporation sustained a net operating loss during the year. Michael?s share of the loss is $5,000. His adjusted basis in the stock is $1,000. In addition, he has a loan outstanding to the corporation in the amount of $2,000. What amount, if any, is Michael entitled to deduct with respect to the loss? a. $5,000 b. $3,000 c. $2,000 d. $1,000 33. Passive investment income includes all except: a. Interest b. Sales or exchanges of stock or securities c. Rents d. Interest on deferred payment sales of property held for sale to customers,1. In a general partnership all the partners are classified as ?general partners?, each of whom has unlimited liability for the debts of the partnership. True or False 2. The co-ownership of business property, where minimal services are provided by the owners for their tenants, constitutes a partnership for federal income tax purposes. True or False 3. The tax laws allow partners to include as part of the tax basis in their partnership interests their respective shares of partnership liabilities. True or False 4. When contributed property is sold by the partnership, the recognized gain or loss is allocated among the partners in accordance with the terms in the partnership agreement. True or False 5. As a general rule, when a person obtains an interest in partnership capital through rendition of services, ordinary income is recognized to the extent of the fair market value of the interest received. True or False 6. Neither the partner nor the partnership recognize gain or loss on the contribution of property to the partnership in exchange for an interest in the partnership?s capital and profits. True or False 7. Only a cash basis partnership is concerned with the problem of ?unrealized receivables?. True or False 8. A partner?s interest in a partnership is a capital asset. True or False 9. As a general rule, property distributed to a partner, not in liquidation of an interest in the partnership, takes the same basis in the hands of the partner as it had in the hands of the partnership. True or False 10. To qualify as an S corporation there is no limit to the number of shareholders. True or False 11. If a corporation fails to make a timely S election, an extension of time to make the election may be granted. True or False 12. An S corporation cannot be subject to an income tax. True or False 13. In a general partnership, each partner: a. has unlimited liability for the debts of the partnership. b. must contribute the same amount to the partnership. c. must agree in writing to the terms of the partnership agreement. d. b. and c. 14. Limited partners are partners that: a. have limited liability for the debts of the partnership. b. have some, but limited, participation in the management of the partnership. c. take part in the partnership for a limited amount of time. d. All of the above. 15. A partners tax basis is: a. increased as partnership income and gain is allocated to the partner. b. increased as partnership income and gain is distributed to the partner. c. unaffected as partnership income and gain is allocated to the partner. d. decreased as partnership income and gain is distributed to the partner. 16. Which of the following do not increase a partners basis in the partnership interest? a. additional contributions the partner makes during the year. b. the partners share of tax-exempt income. c. the partners distributive share of partnership items of income and gain. d. All of the above increase a partner?s basis in the partnership interest. 17. Rachael and Ray form an equal partnership R&R on January 1, 20X1. Rachael contributes $100,000 in exchange for her one-half interest; Ray contributes land worth $100,000. Rays adjusted basis in the land is $30,000. Which of the following statements is accurate with respect to this exchange? a. Neither Rachael, Ray, nor R&R recognize any gain or loss on the transfer. b. Ray recognizes $70,000 gain on the transfer. c. R&R recognizes $70,000 gain on the transfer. d. b. and c. 18. Wayne owns 60 percent and Larry owns 40 percent of the profits and losses of the WL partnership. On January 1, 20X4, the basis in their respective partnership interests is $60,000 and $10,000. During 20X4, WL reports taxable ordinary income of $50,000 and has the following separately stated items: qualified dividend income of $1,000; taxable interest income of $2,600; charitable contributions of $3,000; and Sec. 179 expense of $20,000. During the year, partnership liabilities decreased by $25,000 and there were no distributions made to either partner. On December 31, 20X4, which of the following correctly states the basis in each partners interest in WL? a. Wayne: $63,360 and Larry: $12,240 b. Wayne: $65,520 and Larry: $12,680 c. Wayne: $90,360 and Larry: $30,240 d. Wayne: $92,160 and Larry: $31,440 19. On January 1, 2008, Henry, Cabot, and Lodge formed a three-man equal partnership with Henry and Cabot each contributing $100,000 and Lodge contributing securities with a basis to him of $60,000 and a fair market value of $100,000. On September 30 the partnership sold the securities for $130,000. The amount of the gain to be allocated to Lodge is: a. $70,000 b. $50,000 c. $30,000 d. $23,333 20. On April 1, George Hart, Jr. acquired a 25 percent interest in the Wilson, Hart, and Company partnership by gift from his father. The 25 percent partnership interest had been acquired by a $50,000 cash investment by Hart, Sr. 10 years ago. The fair market value of Hart, Sr.?s partnership interest was $60,000 at the time of the gift. Hart, Jr. sold the 25 percent interest for $85,000 on December 17. What type and amount of capital gain should Hart, Jr. report on his tax return? a. Long-term capital gain of $25,000 b. Short-term capital gain of $25,000 c. Long-term capital gain of $35,000 d. Short-term capital gain of $35,000 21. Ralph Elin contributed a plot of land to the partnership of Anduz and Elin. Elin?s adjusted basis for this land was $50,000, and its fair market value was $75,000. Under the partnership agreement, Elin?s capital account was credited with the full fair market value of the land. Anduz matched Elin?s contribution with a $75,000 cash contribution to the partnership. Thus, each partner?s capital account was credited with $75,000. Elin and Anduz share profits and losses equally. What is the adjusted basis of Elin?s interest in the partnership? a. $25,000 b. $37,500 c. $50,000 d. $75,000 22. Wilbur Wallace had an adjusted basis in his partnership interest of $35,000 when the partnership made a distribution to him, not in complete termination of his interest, of $30,000 cash and a parcel of real estate which the partnership held as an investment. The real estate had a basis to the partnership of $10,000 and a fair market value of $15,000. As a result of this distribution: a. Wilbur has ordinary income of $30,000, a capital gain of $15,000, and the real estate has a basis to him of $15,000. b. Wilbur has ordinary income of $5,000, no capital gain and the real estate has a basis to him of $10,000. c. Wilbur has no ordinary income, no capital gain, and the real estate has a basis to him of $5,000. d. Wilbur has no ordinary income, a capital gain of $5,000, and the real estate has a basis of $10,000. 23. Magda Shaw?s adjusted basis for her partnership interest in Shaw & Zack was $60,000. In complete liquidation of her interest in Shaw & Zack, Shaw received cash of $44,000 plus the following assets: Adjusted Basis to Shaw & Zack Fair Market Value to Shaw & Zack Land?Tract A $24,000 $10,000 Land?Tract B 8,000 8,000 How much is Shaw?s basis for Tract B? a. $16,000 b. $8,000 c. $ 7,111 d. $ 4,000 24. John Albin is a retired partner of Brill & Crum, a personal service partnership. Albin has not rendered any services to Brill & Crum since his retirement over 10 years ago. Under the provisions of Albin?s retirement agreement, Brill & Crum is obligated to pay Albin 10 percent of the partnership?s net income each year. In compliance with this agreement, Brill & Crum paid Albin $25,000 this year. How should Albin treat this $25,000? a. Not taxable b. Ordinary income c. Short-term capital gain d. Long-term capital gain 25. Martha is a 30 percent partner in a partnership, and has a basis in her partnership interest of $20,000. Assume that the partnership has a Sec. 754 election in effect, and that Martha receives a cash distribution of $35,000 from the partnership. Which of the following statements is true? a. The partnership will step up the basis of its assets by $15,000. b. The partnership will step down the basis of its assets by $15,000. c. Martha will recognize no income since the Sec. 754 election is in effect. d. The partnership will not adjust the basis of its assets. 26. Ellen is a 25 percent partner in Heartland Partners. Her tax basis in her partnership interest is $18,000. She received a non-liquidating distribution of land with a tax basis of $23,000 and a fair market value of $45,000. The partnership has no liabilities. What will be Ellen?s tax basis in the land received in the non-liquidating distribution? a. $18,000 b. $23,000 c. $45,000 d. zero 27. Who pays tax on the income of an S corporation? a. The S corporation b. The shareholders c. The customers d. There is no tax imposed on S corporation income 28. What is the maximum number of shareholders that an S corporation may have? a. 10 b. 25 c. 35 d. 100 29. Which of the following is not an eligible shareholder for an S corporation? a. Nonresident alien b. Qualified Subchapter S Trust c. An estate d. None of the above 30. Which corporation will qualify for S corporation status? a. Corporation owning a subsidiary b. DISC corporation c. Possession corporation d. None of the above 31. Which of the following taxes is not imposed on an S corporation? a. Built-in gains tax b. Excessive passive investment income tax c. Corporate tax d. Tax on early disposition of property on which the investment credit was claimed by the corporation as a previous C corporation 32. Michael Moore owns stock in an S corporation. The corporation sustained a net operating loss during the year. Michael?s share of the loss is $5,000. His adjusted basis in the stock is $1,000. In addition, he has a loan outstanding to the corporation in the amount of $2,000. What amount, if any, is Michael entitled to deduct with respect to the loss? a. $5,000 b. $3,000 c. $2,000 d. $1,000 33. Passive investment income includes all except: a. Interest b. Sales or exchanges of stock or securities c. Rents d. Interest on deferred payment sales of property held for sale to customers
Question 2
PART I ? MULTIPLE CHOICE (7.5 points) Instructions: Designate the best answer for each of the following questions. 1. A corporation issued $600,000 of 8%, 5-year bonds on January 1, at 102. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization, the amount of bond interest expense to be recognized on July 1 is a. $48,000. b. $24,000. c. $25,200. d. $22,800. 2. A prior period adjustment a. appears on the income statement as an extraordinary item. b. is a correction of an error, made directly to retained earnings. c. is made when preferred dividends in arrears are finally paid. d. is made to reverse an adjusting entry. 3. Fenway Company sells 1,000 shares of treasury stock for $32,000. The shares had been previously acquired for $24,000. The $8,000 received over cost should be credited to a. an asset account. b. a paid-in capital account. c. a revenue account. d. retained earnings. 4. Equipment was purchased for $100,000 and has a book value of $44,000 and a depreciable cost of $76,000. The estimated salvage value is a. $44,000. b. $56,000. c. $32,000. d. $24,000. 5. Inventory turnover is computed by dividing the average inventory into a. net sales. b. total assets. c. cost of goods sold. d. stockholders' equity. 6. Appier Company reported net income of $40,000 for the year ended December 31, 2003. During the year, inventories decreased by $14,000, accounts payable decreased by $16,000, depreciation expense was $20,000 and a gain on disposal of equipment of $13,000 was recorded. Net cash provided by operations in 2003 using the indirect method was a. $103,000. b. $21,000. c. $77,000. d. $45,000. 7. Which one of the following transactions does not affect cash? a. Acquisition and retirement of bonds payable b. Write-off of an uncollectible accounts receivable c. Acquisition of treasury stock d. Payment of cash dividend 8. The purchase of office equipment for $15,000 cash a. is a cash outflow from financing activities. b. is a cash outflow from operating activities. c. is a cash outflow from investing activities. d. does not affect cash flows. 9. Which one of the following payroll taxes does not result in a payroll tax expense for the employer? a. FICA tax b. Federal income tax c. Federal unemployment tax d. State unemployment tax 10. Lisa Ball's regular rate of pay is $12 per hour with one and one-half times her regular rate for any hours which exceed 40 hours per week. She worked 48 hours last week. Therefore, her gross wages were a. $576. b. $480. c. $624. d. $864. 11. The tax that is paid equally by the employer and employee is the a. federal income tax. b. federal unemployment tax. c. state unemployment tax. d. FICA tax. 12. All of the following are necessary to compute the future value of a single amount except the a. interest rate. b. number of periods. c. principal. d. maturity value. 13. If $4,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years? a. $6,515.57 b. $42,000.00 c. $50,311.57 d. $60,000.00 14. A subsidiary ledger is a. used in place of the general ledger if the general ledger is destroyed or stolen. b. a group of accounts used by branches and subsidiaries of a corporate business. c. a group of accounts with a common characteristic that provides detailed information about a control account in the general ledger. d. used to post excess transactions if a general ledger account becomes full during an accounting period. 15. Which of the following is not a special journal? a. Sales journal b. Purchases journal c. General journal d. Cash receipts journal PART II -COMPLETION STATEMENTS (5.0 points) 1. A current liability is a debt that can be expected to be paid within ____________ year(s) or the ______________, whichever is longer. 2. Liabilities are classified on the balance sheet as being short term liabilities or long term liabilities. 3. The relationship between current liabilities and ______________ is useful in evaluating a company's liquidity. 4. The three primary accounting problems associated with accounts receivable are (1) ______________, (2) _______________, and (3) ______________ of accounts receivable. 5. In order to encourage prompt payment of a trade receivable, companies often offer a ______________ to customers. 6. The two methods of accounting for uncollectible accounts are the ____________ method and the ______________ method. 7. A finance company or bank that purchases receivables from businesses is known as a ______________. 8. Equipment with an invoice price of $20,000 was purchased and freight costs were $900. The cost of the equipment would be $______________. 9. ______________ is the process of allocating the cost of a plant asset to expense over its service life in a rational and systematic manner. 10. The book value of a plant asset is obtained by subtracting ______________ from the ______________ of the plant asset. PART III ? Stockholders? Equity Entries (4 points) Catt Corporation stockholders' equity consisted of the following on January 1, 2003: Stockholders' Equity Paid-in capital Capital stock 5% Preferred stock, $100 par value, cumulative, 50,000 shares authorized, 30,000 shares issued and outstanding $ 3,000,000 Common stock, no par, $25 stated value, 1,000,000 shares authorized, 400,000 shares issued and outstanding 10,000,000 Total capital stock 13,000,000 Additional paid-in capital In excess of par value?preferred $300,000 In excess of stated value?common 600,000 900,000 Total paid-in capital 13,900,000 Retained earnings (Note A) 4,100,000 Total stockholders' equity $18,000,000 Note A: Preferred dividends are in arrears for 2002. Instructions Prepare the appropriate journal entries, if any, for the following transactions in 2003. You may omit journal entry explanations but you should show computations. 1/25/03 Issued 60,000 shares of common stock for $42 per share. 2/18/03 The Board of Directors declared a cash dividend on preferred and common stock totaling $700,000, payable on March 15, to stockholders of record on February 28. (Record dividends payable on preferred and common stock in separate accounts.) 2/28/03 Date of record for cash dividends on preferred and common stock. 3/15/03 Paid the cash dividend to preferred and common stockholders. 5/20/03 Declared a 10% stock dividend on the common stock, payable on June 15, to stockholders of record on May 31. The market value of Catt Corporation's common stock was $45 per share. 7/10/03 Purchased 50,000 shares of Catt Corporation's common stock for $49 per share to be held in the company's treasury. 8/13/03 Sold 12,000 shares of treasury stock for $52 per share. 11/12/03 Sold 20,000 shares of treasury stock for $25 per share. PART IV ? Statement of Cash Flows (5 points) The comparative balance sheets for Logan Company appear below: LOGAN COMPANY Comparative Balance Sheet Dec. 31, 2003 Dec. 31, 2002 Assets Cash $61,000 $12,000 Accounts receivable 5,000 8,000 Inventory 11,000 7,000 Prepaid expenses 2,000 3,000 Equipment 20,000 20,000 Accumulated depreciation?equipment (3,000) (2,000) Total assets $96,000 $48,000 Liabilities and Stockholders' Equity Accounts payable $ 2,000 $ 4,000 Long-term note payable 13,000 14,000 Common stock 38,000 18,000 Retained earnings 43,000 12,000 Total liabilities and stockholders' equity $96,000 $48,000 The income statement for the year is as follows: LOGAN COMPANY Income Statement For the Year Ended December 31, 2003 Sales (all on credit) $310,000 Expenses and losses Cost of goods sold $202,000 Operating expenses, exclusive of depreciation 44,300 Depreciation expense 1,000 Interest expense 1,200 Loss on sale of land 2,500 Income taxes 9,000 Total expenses and loss 260,000 Net income $ 50,000 Cash dividends of $19,000 were paid during the year. Land costing $20,000 was acquired by the issuance of common stock. The property was subsequently sold for $17,500 cash. Instructions Prepare a statement of cash flows for the year ended December 31, 2003 using the indirect method. PART V ? PAYROLL (2 points) Oates Company's payroll for the week ending January 15 amounted to $50,000 for Office Salaries and $100,000 for Store Wages. None of the employees has reached the earnings limits specified for federal or state employer payroll taxes. The following deductions were withheld from employees' salaries and wages: Federal Income Tax $30,300 State Income Tax 6,600 FICA Taxes 12,000 Union Dues 1,800 United Fund 1,200 Federal unemployment tax (FUTA) rate is 6.2% less a credit equal to the rate paid for state unemployment taxes. The state unemployment tax (SUTA) rate is 5.4%. Instructions Prepare the journal entries to record the weekly payroll ending January 15 and also the employer?s payroll tax expense on the payroll. PART VI ? DEPRECIATION (1.5 Points) Wichita Clinic purchased a new surgical laser for $84,000. The estimated salvage value is $4,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,100 hours in year 2; 2,400 hours in year 3; 1,900 hours in year 4; 2,000 hours in year 5. Instructions (a) Compute the annual depreciation for each of the five years under each of the following methods: (1) straight-line. (2) units-of-activity.
