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Chapter 11: 12RQ (page 604)
When do businesses record warranty expenses, and why?
Warranty expense is recorded at the time of making sales. It is recorded at the time of sales due to the matching principle.
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Consider the following transactions of Sapphire Software: Mar. 31 Recorded cash sales of $230,000, plus sales tax of 7% collected for the state of New Jersey. Apr. 6 Sent March sales tax to the state. Journalize the transactions for the company. Ignore cost of goods sold.
Liam Wallace is general manager of Moonwalk Salons. During 2018, Wallace worked for the company all year at a \(13,400 monthly salary. He also earned a year-end bonus equal to 5% of his annual salary.
Wallace’s federal income tax withheld during 2018 was \)2,010 per month, plus \(1,608 on his bonus check. State income tax withheld came to \)110 per month, plus \(80 on the bonus. FICA tax was withheld on the annual earnings. Wallace authorized the following payroll deductions: Charity Fund contribution of 2% of total earnings and life insurance of \)15 per month.
Moonwalk incurred payroll tax expense on Wallace for FICA tax. The company also paid state unemployment tax and federal unemployment tax.
Requirements
1. Compute Wallace’s gross pay, payroll deductions, and net pay for the full year 2018. Round all amounts to the nearest dollar.
2. Compute Moonwalk’s total 2018 payroll tax expense for Wallace.
3. Make the journal entry to record Moonwalk’s expense for Wallace’s total earnings for the year, his payroll deductions, and net pay. Debit Salaries Expense and Bonus Expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.
4. Make the journal entry to record the accrual of Moonwalk’s payroll tax expense for Wallace’s total earnings.
5. Make the journal entry for the payment of the payroll withholdings and taxes.
Question: Recording employee and employer payroll taxes County Company had the following partially completed payroll register:
| Earnings | Withholdings | ||||||||||
Beginning Cumulative Earnings | Current Period Earnings | Ending Cumulative Earnings | OASDI | Medicare | Income tax | Health Insurance | United way | Total Withholding | Net pay | Check No. | Salaries and Wages Expense |
\( 77,000 | \) 4,500 | \( 900 | \) 90 | \(15 | 801 | ||||||
112,000 | 7,200 | 1,200 | 144 | 35 | 802 | ||||||
48,000 | 3,300 | 600 | 66 | 0 | 803 | ||||||
61,000 | 3,300 | 850 | 66 | 20 | 804 | ||||||
0 | 4,500 | 1,100 | 90 | 0 | 805 | ||||||
\)298,000 | \(22,800 | \)4,650 | \(456 | \)70 | |||||||
Requirements
What are the two main controls for payroll? Provide an example of each.
On January 1, Irving Company purchased equipment of \(280,000 with a long-term note payable. The debt is payable in annual installments of \)56,000 due on December 31 of each year. At the date of purchase, how will Irving Company report the note payable?
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