2. Accrued liability: current portion of long-term debt. On July 1, 20X1, Hall Company borrowed $225,000 via a long-term loan. Terms of the loanrequire that Hall pay interest and $75,000 of principal on July 1, 20X2, 20X3, and 20X4. The unpaid balance of the loan accrues interest at therate of 10% per year. Hall has a December 31 year-end.
Chapter 7, Exercise 2:
- Accrued liability: current portion of long-term debt. On July 1, 20X1, Hall Company borrowed $225,000 via a long-term loan. Terms of the loanrequire that Hall pay interest and $75,000 of principal on July 1, 20X2, 20X3, and 20X4. The unpaid balance of the loan accrues interest at therate of 10% per year. Hall has a December 31 year-end.
- Compute Hall’s accrued interest as of December 31, 20X1.
- Present the appropriate balance sheet disclosure for the accrued interest and the current and long-term portion of the outstanding debt asof December 31, 20X1.
- Repeat parts (a) and (b) using a date of December 31, 20X2, rather than December 31, 20X1. Assume that Hall is in compliance with theterms of the loan agreement.
Chapter 7, Exercise 4:
- 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
- Medicare taxes: 1.5% on the first $130,000 earned
- 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
- Federal unemployment taxes: 0.8% on the first $7,000 earned
The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end.
- Prepare the necessary entry to record Brookhaven’s February payroll that will be paid on March 1.
- Prepare the journal entry to record Brookhaven’s payroll tax expense.
Chapter 7, Problem 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.
2/10: Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Pastexperience with similar products indicates that 2% of the units will require repair, with warranty costs averaging $27 per unit.
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 $5,120 note payable due in 60 days.
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.
12/31: Accrued vacation pay amounting to 6% of December’s $36,000 total wage and salary expense.
Instructions
- Prepare journal entries to record the preceding transactions and events.
- Determine accrued interest as of December 31, 20XX, and prepare the necessary adjusting entry or entries.
- Prepare the current liability section of Visconti’s December 31, 20XX balance sheet.
Chapter 8, Problem 1:
Issuance of stock: organization costs. Snowbound Corporation was incorporated in July. The firm’s charter authorized the sale of 200,000 sharesof $10 par-value common stock. The following transactions occurred during the year:
|
7/1: | Sold 45,000 shares of common stock to investors for $18 per share. Cash was collected and the shares were issued. |
| 7/7: | Issued 600 shares to Sharon Dale, attorney-at-law, for services rendered during the corporation’s organizational phase. Dale charged$12,600 for her work. |
| 8/11: | Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were issued. |
| 12/14: | Issued 30,000 shares to the MJB Company for land valued at $900,000. |
Instructions
Prepare journal entries to record each transaction.
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