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Chapter 11: 3SE (page 578)

: On June 1, Hunting Man Magazine collected cash of $63,000 on future annual subscriptions starting on July 1. Requirements

1. Journalize the transaction to record the collection of cash on June 1.

2. Journalize the transaction required at December 31, the magazine’s year-end, assuming no revenue earned has been recorded. (Round adjustment to the nearest whole dollar.)

Short Answer

Expert verified
  1. On 1st June cash collection will be $63,000
  2. On 31st December the unearned revenue will be $31,500

Step by step solution

01

Benefits of Unearned Revenue

Receiving unearned money can provide a sizable cash income that may be applied to delivering the goods and services promised. This indicates that the business does not require a significant initial investment.

02

Journal Entries

Date

Particulars

Debit

Credit

June, 01

Cash

$63,000

Unearned revenue

$63,000

(To record collected cash for future services)

Dec, 31

Unearned revenue ($63,000*6/12)

$31,500

Service Revenue

$31.500

(To record service revenue earned that was collected in advance.)

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Most popular questions from this chapter

The general ledger of Seal-N-Ship at June 30, 2018, the end of the company’s fiscal year, includes the following account balances before payroll and adjusting entries.

Accounts Payable \( 114,000

Interest Payable 0

Salaries Payable 0

Employee Income Taxes Payable 0

FICA—OASDI Taxes Payable 0

FICA—Medicare Taxes Payable 0

Federal Unemployment Taxes Payable 0

State Unemployment Taxes Payable 0

Unearned Rent Revenue 7,200

Long-term Notes Payable 210,000

The additional data needed to develop the payroll and adjusting entries at June 30 are as follows:

a. The long-term debt is payable in annual installments of \)42,000, with the next installment due on July 31. On that date, Seal-N-Ship will also pay one year’s interest at 9%. Interest was paid on July 31 of the preceding year. Make the adjusting entry to accrue interest expense at year-end.

b. Gross unpaid salaries for the last payroll of the fiscal year were \(4,700. Assume that employee income taxes withheld are \)910 and that all earnings are subject to OASDI.

c. Record the associated employer taxes payable for the last payroll of the fiscal year, \(4,700. Assume that the earnings are not subject to unemployment compensation taxes

d. On February 1, the company collected one year’s rent of \)7,200 in advance.

Requirements

1. Using T-accounts, open the listed accounts and insert the unadjusted June 30 balances.

2. Journalize and post the June 30 payroll and adjusting entries to the accounts that you opened. Identify each adjusting entry by letter. Round to the nearest dollar.

3. Prepare the current liabilities section of the balance sheet at June 30, 2018.

Macintosh Company has monthly salaries of \(26,000. Assume Macintosh pays all the standard payroll taxes, no employees have reached the payroll tax limits, total income tax withheld is \)2,000, and the only payroll deductions are payroll taxes. Journalize the accrual of salaries expense, accrual of employer payroll taxes, and payment of employee and employer payroll taxes for Macintosh Company.

Hugh Stanley manages a Dairy House drive-in. His straight-time pay is \(12 per hour, with time-and-a-half for hours in excess of 40 per week. Stanley’s payroll deductions include withheld income tax of 20%, FICA tax, and a weekly deduction of \)5 for a charitable contribution to United Way. Stanley worked 58 hours during the week.

Requirements

  1. Compute Stanley’s gross pay and net pay for the week. Assume earnings to date are $18,000.
  2. Journalize Dairy Houses wages expense accrual for Stanley’s work. An explanation is not required.
  3. Journalize the subsequent payment of wages to Stanley.

Lily Carter works for JDK all year and earns a monthly salary of \(12,100. There is no overtime pay. Lily’s income tax withholding rate is 10% of gross pay. In addition to payroll taxes, Lily elects to contribute 5% monthly to United Way. JDK also deducts \)250 monthly for co-payment of the health insurance premium. As of September 30, Lily had $108,900 of cumulative earnings. Requirements

1. Compute Lily’s net pay for October.

2. Journalize the accrual of salaries expense and the payment related to the employment of Lily Carter.

How is the times-interest-earned ratio calculated, and what does it evaluate?
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