Sample Problem
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Transcript of Sample Problem
Sample Problem
Chapter 12
Computing adjustments for accrued and prepaid expense items.
For each of the following independent situations, indicate the adjusting entry that must be made on the December 31, 2007, worksheet. Omit descriptions.
a. During the year 2007, Sam & Sons Company had net credit sales of $920,000. Past experience shows that 0.9 percent of the firm’s net credit sales result in uncollectible accounts.
b. Equipment purchased by One Stop Shops for $28,700 on January 2, 2007, has an estimated useful life of nine years and an estimated salvage value of $1,700. What adjustment for depreciation should be recorded on the firm’s worksheet for the year ended December 31, 2007?
c. On December 31, 2007, Parrish Plumbing Supply owed wages of $6,400 to its factory employees, who are paid weekly.
d. On December 31, 2007, Parrish Plumbing Supply owed the employer’s social security (6.2%) and Medicare (1.45%) taxes on the entire $6,400 of accrued wages for its factory employees.
e. On December 31, 2007, Parrish Plumbing Supply owed federal (0.8%) and state (5.4%) unemployment taxes on the entire $6,400 of accrued wages for its factory employees.
a) During the year 2007, Sam & Sons Co. had net credit sales of $920,000. Past experience shows that 0.9% of the firm’s net credit
sales result in uncollectible accounts.
Journal entry:
Uncollectible Accounts Expense $8,280
Allowance for Doubtful Accounts $8,280
b) Equipment purchased by One Stop Shops for $28,700 on January 2 ,2007 has an estimated useful life of nine years and an estimated salvage value of $1,700. What adjustment for depreciation should be recorded on the firm’s
worksheet for the year ended December 31, 2007
28,700 – 1,700 = 27,000 27,000/9= 3,000
Journal entry:
Depreciation expense (equipment) $3,000
Accumulated depreciation (equipment) $3,000
c) On December 31, 2007, Parrish Plumbing Supply owed wages of $6,400 to its factory employees, who are paid weekly.
Journal entry:
Wages expense $6,400
Wages payable $6,400
d) On December 31, 2007, Parrish Plumbing supply owed the employer’s social security (6.2%) and Medicare (1.45%) taxes on the
entire $6,400 of accrued wages.
Journal entry:
Payroll tax expense $489.60
Social security tax payable $396.80
Medicare tax payable $92.80
e) On December 31, 2007, Parrish Plumbing Supply owed federal (0.8%) and state (5.4%) unemployment taxes on the entire $6,400 of
accrued wages.
Journal entry:
Payroll tax expense $396.80
Federal unemployment tax payable $51.20
State unemployment tax payable $345.60