Question 1
I need this assignment work: Week Four Exercise Assignment Liability 1. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing: ? Social Security taxes: 6% on the first $55,000 earned per employee ? Medicare taxes: 1.5% on the first $130,000 earned per employee ? Federal income taxes withheld from wages: $7,500 ? State income taxes: 5% of gross earnings ? Insurance withholdings: 1% of gross earnings ? State unemployment taxes: 5.4% on the first $7,000 earned per employee ? Federal unemployment taxes: 0.8% on the first $7,000 earned per employee The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end. a. Prepare the necessary entry to record Brookhaven?s February payroll. The entry will include deductions for the following: ? Social Security taxes ? Medicare taxes ? Federal income taxes withheld ? State income taxes ? Insurance withholdings b. Prepare the journal entry to record Brookhaven?s payroll tax expense. The entry will include the following: ? Matching Social Security taxes ? Matching Medicare taxes ? State unemployment taxes ? Federal unemployment taxes 2. Current liabilities: entries and disclosure. A review of selected financial activities of Visconti?s during 20XX disclosed the following: 12/1 Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable. Interest and principal are due at maturity. 12/10 Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Past experience with similar products indicates that 2% of the units will require repair, with warranty costs averaging $27 per unit (parts only). 12/22 Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30. 12/26 Borrowed $5,000 from First City Bank; signed a 15% note payable due in 60 days. (Assume 360 days for daily interest calculation) 12/31 Repaired six XY-80s during the month at a total cost of $162. 12/31 Accrued 3 days of salaries at a total cost of $1,400. Instructions a. Prepare journal entries to record the transactions. b. Prepare adjusting entries on December 31 to record accrued interest for each of the notes payable. 3. Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31: 8/2: Borrowed $75,000 from the Bank of Kingsville by signing a 120-day, 12% note. 8/20: Issued a $40,000 note to Harris Motors for the purchase of a $40,000 de?livery truck. The note is due in 180 days and carries a 12% interest rate. 9/10: Purchased inventory from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed. 9/11: Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and car?ries a 14% interest rate. 10/10: The note to Pans Enterprises was paid in full. 10/11: The note to Datatex Equipment was paid in full. 11/30: Paid note to Bank of Kingsville Instructions a. Prepare journal entries to record the transactions. b. Prepare adjusting entries on December 31 to record accrued interest (daily interest is calculated utilizing the 360 day method). c. Prepare the Current Liability section of Red Bank?s balance sheet as of December 31. Assume that the Accounts Payable account totals $203,600 on this date. Due July: 18th, 2013
Question 2
(Five Differences, Compute Taxable Income and Deferred Taxes, Draft Income Statement) Wise Company began operations at the beginning of 2011. The following information pertains to this company. 1. Pretax financial income for 2011 is $100,000. 2. The tax rate enacted for 2011 and future years is 40%. 3. Differences between the 2011 income statement and tax return are listed below: a. Warranty expense accrued for financial reporting purposes amounts to $7,000. Warranty deductions per the tax return amount to $2,000. b. Gross profit on construction contracts using the percentage-of-completion method per books amounts to $92,000. Gross profit on construction contracts for tax purposes amounts to $67,000. c. Depreciation of property, plant, and equipment for financial reporting purposes amounts to $60,000. Depreciation of these assets amounts to $80,000 for the tax return. d. A $3,500 fine paid for violation of pollution laws was deducted in computing pretax financial income. e. Interest revenue earned on an investment in tax-exempt municipal bonds amounts to $1,500. (Assume (a) is short-term in nature; assume (b) and (c) are long-term in nature.) 4. Taxable income is expected for the next few years. Instructions: b. Compute the deferred taxes at December 31, 2011, that relate to the temporary differences described above. Clearly label them as deferred tax asset or liability.,P19-9 (Five Differences, Compute Taxable Income and Deferred Taxes, Draft Income Statement) Wise Company began operations at the beginning of 2011. The following information pertains to this company. 1. Pretax financial income for 2011 is $100,000. 2. The tax rate enacted for 2011 and future years is 40%. 3. Differences between the 2011 income statement and tax return are listed below: a. Warranty expense accrued for financial reporting purposes amounts to $7,000. Warranty deductions per the tax return amount to $2,000. b. Gross profit on construction contracts using the percentage-of-completion method per books amounts to $92,000. Gross profit on construction contracts for tax purposes amounts to $67,000. c. Depreciation of property, plant, and equipment for financial reporting purposes amounts to $60,000. Depreciation of these assets amounts to $80,000 for the tax return. d. A $3,500 fine paid for violation of pollution laws was deducted in computing pretax financial income. e. Interest revenue earned on an investment in tax-exempt municipal bonds amounts to $1,500. (Assume (a) is short-term in nature; assume (b) and (c) are long-term in nature.) 4. Taxable income is expected for the next few years. Instructions:c. Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2011.,I entered that in the wrong box, just the first part. I broke the second part out into another question.
Question 3
"Cost Plus Inc.'s portfolio of marketable securities was as follows (all securities were purchased in the current year): Securities Purchase Price Year-end Fair Market Value A One 10-year bond $1,500 $1,400 (face value$1,000) (carrying value $1,450) B 100 shares common stock $30 per share $28 per share C 50 shares preferred stock $100 per share $105 per share Cost Plus intends to keep the A bond until maturity and to sell one half of its investment in B common stock next year. It is unsure of its intention for the remaining 50 shares of B common stock and its 50 shares of C preferred stock. At what amount should Cost Plus report investment securities (in total) on its year-end balance sheet? (Points: 10) $9,500 $9,450 $9,550 $9,400 2. Cost Plus Inc.'s portfolio of marketable securities was as follows: (all securities were purchased this year) Securities Purchase Price Year-End Fair Market Value A One 10-year Bond $1,500 $1,400 (face value $1,000) (carrying value $1,450) B 100 shares common stock $30 per share $28 per share C 50 shares preferred stock $100 per share $105 per share Cost Plus intends to keep the A bond until maturity and to sell one half of its B common stock investment next year. It is unsure of its intention for the remaining 50 shares of B common stock and its 50 shares of C preferred stock. What amount of unrealized gain/loss should be reported on this year's income statement as part of income from continuing operations? (Points: 10) $100 loss. $200 loss. $150 loss. $ 50 gain. 3. Louis, Inc. acquired 40% of the outstanding non-voting preferred stock of Rich Co. What method for recording the investment should Louis use? (Points: 10) The equity method since significant influence must be assumed. The equity method if no other investor has more than a 40% interest. The equity method if it can acquire an additional 11% by year-end. The cost method. 4. On 12/31/Year 1, Passey Co. acquired a 100% interest in Solomon Co. by exchanging 10,000 shares of its common stock for 100,000 shares of Solomon's common stock. The fair market value of Passey's common stock on December 31, Year 1, was $9 per share, and the fair value of Solomon's was $3.50 per share. Additional information as of December 31, Year 1, is as follows: Solomon Co. Book Values Fair Values Current assets $115,000 $115,000 Plant assets 200,000 255,000 Liabilities 10,000 10,000 Passey Co. Plant assets $1,700,000 $1,800,000 Passey Co.'s consolidated financial statements as of December 31, Year 1, would report: (Points: 10) Gain of $235,000. Gain of $270,000. A deferred credit (negative goodwill) of $235,000. A deferred credit (negative goodwill) of $270,000. 5. On 12/31/Year 1, Passey Co. acquired a 100% interest in Solomon Co. by exchanging 10,000 shares of its common stock for 100,000 shares of Solomon's common stock. The fair market value of Passey's common stock on December 31, Year 1, was $9 per share, and the fair value of Solomon's was $3.50 per share. Additional information as of December 31, Year 1, is as follows: Solomon Co. Book Values Fair Values Current assets $115,000 $115,000 Plant assets 200,000 255,000 Liabilities 10,000 10,000 Passey Co. Plant assets $1,700,000 $1,800,000 Passey's consolidated financial statements as of December 31, Year 1, would report plant assets at: (Points: 10) $1,700,000 $1,800,000 $1,955,000 $2,055,000 6. On January 1, Year 1, Pepper Company acquired 30% of the voting common stock of Salt, Inc. for $60 per share. Pepper was able to exercise significant influence over the affairs of Salt. Salt had 50,000 common shares outstanding on January 1, Year 1. On July 1, Year 1, Pepper sold all but 500 shares of its investment in Salt, Inc. Pepper held all 500 shares through year-end Year 1. Salt declared and paid a $1 per share common stock dividend on March 31, Year 1, and a $1.50 per share dividend on September 30, Year 1. Salt's net income was exactly $50,000 each quarter. What amount of revenue should Pepper record for the Year 1 from this investment? (Points: 10) $15,250 $15,750 $30,750 $31,000 7. Palmetto Inc. is currently using the equity method to account for its 30% investment in Royal Company. In the acquisition last year of Royal Co. common stock, Palmetto calculated $1,000,000 of goodwill. The correct accounting for this goodwill during the current year is: (Points: 10) Amortization over 40 years. Amortization over the anticipated holding period of the Royal Company stock. Test for impairment at year-end. No accounting necessary. 8. On December 31, Year 1, Starlight Enterprises acquired a 90% ownership interest in Lunar Importers by purchasing 90,000 of Lunar's 100,000 voting common shares outstanding for $900,000 cash. Additional information regarding Lunar as of December 31, Year 1, follows: Book value Fair value Net assets $600,000 $800,000 Under U.S. GAAP, the consolidated balance sheet of Starlight Enterprises and Subsidiary would report goodwill in the amount of: (Points: 10) $200,000 $280,000 $400,000 $460,000 9. On December 31, Year 1, Starlight Enterprises acquired a 90% ownership interest in Lunar Importers by purchasing 90,000 of Lunar's 100,000 voting common shares outstanding for $900,000 cash. Additional information regarding Lunar as of December 31, Year 1, follows: Book Value Fair Value Net assets $600,000 $800,000 Under the IFRS partial goodwill method, the consolidated balance sheet of Starlight Enterprises and subsidiary would report goodwill in the amount of: (Points: 10) $180,000 $200,000 $280,000 $360,000 10. During Year 1, Abaco Co., the 100% owned subsidiary of Walker Inc., sold merchandise to Walker at a 25% markup over its cost. Intercompany sales to Walker totaled $800,000 during Year 1. On December 31, Year 1, Walker held $200,000 of the inventory purchased from Abaco in its ending inventory. In Walker's December 31, Year 1 elimination of the intercompany sales transaction, the intercompany profit that must be eliminated from ending inventory is: (Points: 10) $40,000 $120,000 $160,000 $200,000
