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Chapter 11: Q1RQ (page 603)
What are the three main characteristics of liabilities?
Liability is amonetary burdenon an individual or a business entity that will be paid in the future.
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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.
Curtis Company is facing a potential lawsuit. Curtis’s lawyers think that it is reasonably possible that it will lose the lawsuit. How should Curtis report this lawsuit?
Samuel Industries has three employees. Each employee earns two vacation days a month. Samuel pays each employee a weekly salary of $1,250 for a five-day workweek. Requirements
1. Determine the amount of vacation expense for one month.
2. Journalize the entry to accrue the vacation expense for the month.
What is the difference between gross pay and net pay?
The following transactions of Philadelphia Pharmacies occurred during 2017 and 2018:
2017
Jan. 9 Purchased computer equipment at a cost of \(7,000, signing a six-month, 8% note payable for that amount.
29 Recorded the week’s sales of \)68,000, three-fourths on credit and one-fourth for cash. Sales amounts are subject to a 6% state sales tax. Ignore cost of goods sold.
Feb. 5 Sent the last week’s sales tax to the state.
Jul. 9 Paid the six-month, 8% note, plus interest, at maturity.
Aug. 31 Purchased merchandise inventory for \(3,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system.
Dec. 31 Accrued warranty expense, which is estimated at 2% of sales of \)609,000.
31 Accrued interest on all outstanding notes payable.
2018
Feb. 28 Paid the six-month 10% note, plus interest, at maturity.
Journalize the transactions in Plymouth’s general journal. Explanations are not required.
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