Quiz 11: Current Liabiities Payro L

Ethics and professional conduct in business Tonya Latirno is a certified public accountant (CPA) and staff accountant for Kennedy and Kennedy, a local CPA firm. It had been the policy of the firm to provide a holiday bonus equal to two weeks' salary to all employees. The firm's new management team announced on November 15 that a bonus equal to only one week's salary would be made available to employees this year. Tonya thought that this policy was unfair because she and her coworkers planned on the full two-week bonus. The two-week bonus had been given for 10 straight years, so it seemed as though the firm had breached an implied commitment. Thus, Tonya decided that she would make up the lost bonus week by working an extra six hours of overtime per week over the next five weeks until the end of the year. Kennedy and Kennedy's policy is to pay overtime at 150% of straight time. Tonya's supervisor was surprised to see overtime being reported, since there is generally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, since firm employees are on the "honor system" in reporting their overtime. Discuss whether the firm is acting in an ethical manner by changing the bonus.

Does a discounted note payable provide credit without interest Discuss.

Current liabilities Bon Nebo Co. sold 25,000 annual subscriptions of Bjorn 20XX for $85 during December 2014. These new subscribers will receive monthly issues, beginning in January 2015. In addition, the business had taxable income of $840,000 during the first calendar quarter of 2015. The federal tax rate is 40%. A quarterly tax payment will be made on April 12, 2015. Prepare the Current Liabilities section of the balance sheet for Bon Nebo Co. on March 31, 2015.

Proceeds from notes payable On October 12, Belleville Co. borrowed cash from Texas Bank by issuing a 30-day note with a face amount of $70,000. a. Determine the proceeds of the note, assuming the note carries an interest rate of 6%. b. Determine the proceeds of the note, assuming the note is discounted at 6%. On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 45-day note with a face amount of $150,000. a. Determine the proceeds of the note, assuming the note carries an interest rate of 10%. b. Determine the proceeds of the note, assuming the note is discounted at 10%.

Liability transactions The following items were selected from among the transactions completed by Warwick Co. during the current year: Instructions 1. Journalize the transactions. 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: a. Product warranty cost, $32,500. b. Interest on the nine remaining notes owed to Oso Co.

Liability transactions The following items were selected from among the transactions completed by Aston Martin Inc. during the current year: Instructions 1. Journalize the transactions. 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: a. Product warranty cost, $26,800. b. Interest on the 19 remaining notes owed to Gallardo Co.

Recognizing pension expense The annual examination of Felton Company's financial statements by its external public accounting firm (auditors) is nearing completion. The following conversation took place between the controller of Felton Company (Francie) and the audit manager from the public accounting firm (Sumana). Sumana: You know, Francie, we are about to wrap up our audit for this fiscal year. Yet, there is one item still to be resolved. Francie: What's that Sumana: Well, as you know, at the beginning of the year, Felton began a defined benefit pension plan. This plan promises your employees an annual payment when they retire, using a formula based on their salaries at retirement and their years of service. I believe that a pension expense should be recognized this year, equal to the amount of pension earned by your employees. Francie: Wait a minute. I think you have it all wrong. The company doesn't have a pension expense until it actually pays the pension in cash when the employee retires. After all, some of these employees may not reach retirement, and if they don't, the company doesn't owe them anything. Sumana: You're not really seeing this the right way. The pension is earned by your employees during their working years. You actually make the payment much later-when they retire. It's like one long accrual-much like incurring wages in one period and paying them in the next. Thus, I think that you should recognize the expense in the period the pension is earned by the employees. Francie: Let me see if I've got this straight. I should recognize an expense this period for something that may or may not be paid to the employees in 20 or 30 years, when they finally retire. How am I supposed to determine what the expense is for the current year The amount of the final retirement depends on many uncertainties: salary levels, employee longevity, mortality rates, and interest earned on investments to fund the pension. I don't think that an amount can be determined, even if I accepted your arguments. Evaluate Sumana's position. Is she right or is Francie correct

Employees are subject to taxes withheld from their paychecks. a. List the federal taxes withheld from most employee paychecks. b. Give the title of the accounts credited by amounts withheld.

Entries for discounting notes payable Swain Enterprises issues a 60-day note for $800,000 to Hill Industries for merchandise inventory. Hill Industries discounts the note at 6%. a. Journalize Swain Enterprises' entries to record: 1. the issuance of the note. 2. the payment of the note at maturity. b. Journalize Hill Industries' entries to record: 1. the receipt of the note. 2. the receipt of the payment of the note at maturity.

Federal income tax withholding Bella Chen's weekly gross earnings for the present week were $2,600. Chen has two exemptions. Using the wage bracket withholding table in Exhibit 3 with a $70 standard withholding allowance for each exemption, what is Chen's federal income tax withholding Todd Thompson's weekly gross earnings for the present week were $1,400. Thompson has one exemption. Using the wage bracket withholding table in Exhibit 3 with a $70 standard withholding allowance for each exemption, what is Thompson's federal income tax withholding

Entries for payroll and payroll taxes. The following information about the payroll for the week ended December 30 was obtained from the records of Qualitech Co: Instructions 1. Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries: a. December 30, to record the payroll. b. December 30, to record the employer's payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $35,000 is subject to unemployment compensation taxes. 2. Assuming that the payroll for the last week of the year is to be paid on January 5 of the following fiscal year, journalize the following entries: a. December 30, to record the payroll. b. January 5, to record the employer's payroll taxes on the payroll to be paid on January 5. Since it is a new fiscal year, all $675,000 in salaries is subject to unemployment compensation taxes.

Entries for payroll and payroll taxes. The following information about the payroll for the week ended December 30 was obtained from the records of Saine Co: Instructions 1. Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries: a. December 30, to record the payroll. b. December 30, to record the employer's payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $30,000 is subject to unemployment compensation taxes. 2. Assuming that the payroll for the last week of the year is to be paid on January 4 of the following fiscal year, journalize the following entries: a. December 30, to record the payroll. b. January 4, to record the employer's payroll taxes on the payroll to be paid on January 4. Since it is a new fiscal year, all $1,185,000 in salaries is subject to unemployment compensation taxes.

Ethics and professional conduct in business Marvin Turner was discussing summer employment with Tina Song, president of Motown Construction Service: Tina: I'm glad that you're thinking about joining us for the summer. We could certainly use the help. Marvin: Sounds good. I enjoy outdoor work, and I could use the money to help with next year's school expenses. Tina: I've got a plan that can help you out on that. As you know, I'll pay you $14 per hour, but in addition, I'd like to pay you with cash. Since you're only working for the summer, it really doesn't make sense for me to go to the trouble of formally putting you on our payroll system. In fact, I do some jobs for my clients on a strictly cash basis, so it would be easy to just pay you that way. Marvin: Well, that's a bit unusual, but I guess money is money. Tina: Yeah, not only that, it's tax-free! Marvin: What do you mean Tina: Didn't you know Any money that you receive in cash is not reported to the IRS on a W-2 form; therefore, the IRS doesn't know about the income-hence, it's the same as tax-free earnings. a. Why does Tina Song want to conduct business transactions using cash (not check or credit card) b. How should Marvin respond to Tina's suggestion

Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 2014, were as follows: Instructions 1. Journalize the selected transactions. 2. Based on the following data, prepare a bank reconciliation for December of the current year: a. Balance according to the bank statement at December 31, $283,000. b. Balance according to the ledger at December 31, $245,410. c. Checks outstanding at December 31, $68,540. d. Deposit in transit, not recorded by bank, $29,500. e. Bank debit memo for service charges, $750. f. A check for $12,700 in payment of an invoice was incorrectly recorded in the accounts as $12,000. 3. Based on the bank reconciliation prepared in (2), journalize the entry or entries to be made by Kornett Company. 4. Based on the following selected data, journalize the adjusting entries as of December 31 of the current year: a. Estimated uncollectible accounts at December 31, $16,000, based on an aging of accounts receivable. The balance of Allowance for Doubtful Accounts at December 31 was $2,000 (debit). b. The physical inventory on December 31 indicated an inventory shrinkage of $3,300. c. Prepaid insurance expired during the year, $22,820. d. Office supplies used during the year, $3,920. e. Depreciation is computed as follows: f. A patent costing $48,000 when acquired on January 2 has a remaining legal life of 10 years and is expected to have value for eight years. g. The cost of mineral rights was $546,000. Of the estimated deposit of 910,000 tons of ore, 50,000 tons were mined and sold during the year. h. Vacation pay expense for December, $10,500. i. A product warranty was granted beginning December 1 and covering a one-year period. The estimated cost is 4% of sales, which totaled $1,900,000 in December. j. Interest was accrued on the note receivable received on October 17. 5. Based on the following information and the post-closing trial balance shown below, prepare a balance sheet in report form at December 31 of the current year.

Why are deductions from employees' earnings classified as liabilities for the employer

Evaluating alternative notes A borrower has two alternatives for a loan: (1) issue a $240,000, 60-day, 8% note or (2) issue a $240,000, 60-day note that the creditor discounts at 8%. a. Calculate the amount of the interest expense for each option. b. Determine the proceeds received by the borrower in each situation. c. Which alternative is more favorable to the borrower Explain.

Employee net pay Bella Chen's weekly gross earnings for the week ended October 20 were $2,600, and her federal income tax withholding was $554.76. Assuming the social security rate is 6% and Medicare is 1.5% of all earnings, what is Chen's net pay Todd Thompson's weekly gross earnings for the week ended May 23 were $1,400, and his federal income tax withholding was $247.90. Assuming the social security rate is 6% and Medicare is 1.5% of all earnings, what is Thompson's net pay

Wage and tax statement data on employer FICA tax. Ehrlich Co. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 2014, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees' earnings records were inadvertently destroyed. None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees' income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records: Instructions 1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 2013, arranging the data in the following form: 2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee's earnings; (d) federal unemployment compensation at 0.8% on the first $10,000 of each employee's earnings; (e) total.

Wage and tax statement data and employer FICA tax. Jocame Inc. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 2014, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees' earnings records were inadvertently destroyed. None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5% on salary. Data on dates of employment, salary rates, and employees' income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records: Instructions 1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 2013, arranging the data in the following form: 2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee's earnings; (d) federal unemployment compensation at 0.8% on the first $10,000 of each employee's earnings; (e) total.

Payroll forms Group Project Payroll accounting involves the use of government-supplied forms to account for payroll taxes. Three common forms are the W-2, Form 940, and Form 941. Form a team with three of your classmates and retrieve copies of each of these forms. They may be obtained from a local IRS office, a library, or downloaded from the Internet at http://www.irs.gov (go to forms and publications). Briefly describe the purpose of each of the three forms.

For each of the following payroll-related taxes, indicate whether they generally apply to (a) employees only, (b) employers only, or (c) both employees and employers: 1. Federal income tax 2. Medicare tax 3. Social security tax 4. Federal unemployment compensation tax 5. State unemployment compensation tax

Entries for notes payable A business issued a 30-day, 7% note for $150,000 to a creditor on account. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity, including interest.

Journalize period payroll The payroll register of Konrath Co. indicates $13,200 of social security withheld and $3,300 of Medicare tax withheld on total salaries of $220,000 for the period. Federal withholding for the period totaled $43,560. Provide the journal entry for the period's payroll. The payroll register of Longboat Co. indicates $5,400 of social security withheld and $1,350 of Medicare tax withheld on total salaries of $90,000 for the period. Retirement savings withheld from employee paychecks were $5,400 for the period. Federal withholding for the period totaled $17,820. Provide the journal entry for the period's payroll.

Payroll register. The following data for Throwback Industries Inc. relate to the payroll for the week ended December 7, 2014: Employees Mantle and Williams are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1^ times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0%, and Medicare tax is 1.5% of each employee's annual earnings. The next payroll check to be used is No. 901. Instructions 1. Prepare a payroll register for Throwback Industries Inc. for the week ended December 7, 2014. Use the following columns for the payroll register: Employee, Total Hours, Regular Earnings, Overtime Earnings, Total Earnings, Social Security Tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No., Sales Salaries Expense, and Office Salaries Expense. 2. Journalize the entry to record the payroll for the week.

Payroll register. The following data for Flexco Inc. relate to the payroll for the week ended December 7, 2014: Employees Grove and Seaver are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1^ times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0% of each employee's annual earnings, and Medicare tax is 1.5% of each employee's annual earnings. The next payroll check to be used is No. 328. Instructions 1. Prepare a payroll register for Flexco Inc. for the week ended December 7, 2014. Use the following columns for the payroll register: Employee, Total Hours, Regular Earnings, Overtime Earnings, Total Earnings, Social Security Tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No., Sales Salaries Expense, and Office Salaries Expense. 2. Journalize the entry to record the payroll for the week.

Contingent liabilities Altria Group, Inc. , has over 12 pages dedicated to describing contingent liabilities in the notes to recent financial statements. These pages include extensive descriptions of multiple contingent liabilities. Use the Internet to research Altria Group, Inc., at http://www.altria.com. a. What are the major business units of Altria Group b. Based on your understanding of this company, why would Altria Group require 11 pages of contingency disclosure

What are the principal reasons for using a special payroll bank account

Entries for discounted note payable A business issued a 45-day note for $90,000 to a creditor on account. The note was discounted at 8%. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity.

Journalize payroll tax The payroll register of Konrath Co. indicates $13,200 of social security withheld and $3,300 of Medicare tax withheld on total salaries of $220,000 for the period. Earnings of $35,000 are subject to state and federal unemployment compensation taxes at the federal rate of 0.8% and the state rate of 5.4%. Provide the journal entry to record the payroll tax expense for the period. The payroll register of Longboat Co. indicates $5,400 of social security withheld and $1,350 of Medicare tax withheld on total salaries of $90,000 for the period. Earnings of $10,000 are subject to state and federal unemployment compensation taxes at the federal rate of 0.8% and the state rate of 5.4%. Provide the journal entry to record the payroll tax expense for the period.

Payroll accounts and year-end entries. The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year: The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December: Instructions 1. Journalize the transactions. 2. Journalize the following adjusting entries on December 31: a. Salaries accrued: operations salaries, $8,560; officers salaries, $5,600; office salaries, $1,400. The payroll taxes are immaterial and are not accrued. b. Vacation pay, $15,000.

Payroll accounts and year-end entries. The following accounts, with the balances indicated, appear in the ledger of Codigo Co. on December 1 of the current year: The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December: Instructions 1. Journalize the transactions. 2. Journalize the following adjusting entries on December 31: a. Salaries accrued: sales salaries, $4,275; officers salaries, $2,175; office salaries, $825. The payroll taxes are immaterial and are not accrued. b. Vacation pay, $13,350.

In a payroll system, what types of input data are referred to as (a) constants and (b) variables

Fixed asset purchases with note On June 30, Techcram Management Company purchased land for $350,000 and a building for $450,000, paying $400,000 cash and issuing a 6% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $20,000 on the principal plus the interest accrued from the date of the preceding payment. Journalize the entry to record (a) the transaction on June 30, (b) the payment of the first installment on December 31, and (c) the payment of the second installment the following June 30.

vacation pay and pension benefits Fukushima Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $19,500 for the period. The pension plan requires a contribution to the plan administrator equal to 6% of employee salaries. Salaries were $260,000 during the period. Provide the journal entry for the (a) vacation pay and (b) pension benefit. Regling Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $35,000 for the period. The pension formula calculated a pension cost of $201,250. Only $175,000 was contributed to the pension plan administrator. Provide the journal entry for the (a) vacation pay and (b) pension benefit.

To match revenues and expenses properly, should the expense for employee vacation pay be recorded in the period during which the vacation privilege is earned or during the period in which the vacation is taken Discuss.

Current portion of long-term debt The Coca-Cola Company reported the following information about its long-term debt in the notes to a recent financial statement (in millions): Long-term debt is comprised of the following: a. How much of the long-term debt was disclosed as a current liability on the current year's December 31 balance sheet b. How much did the total current liabilities change between the preceding year and the current year as a result of the current portion of long-term debt c. If Coca-Cola did not issue additional long-term debt next year, what would be the total long-term debt on December 31 of the upcoming year

Estimated warranty liability Kyrgyz Co. sold $200,000 of equipment during February under a one-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On July 24, a customer required a $60 part replacement, plus $32 of labor under the warranty. Provide the journal entry for (a) the estimated warranty expense on February 28 for February sales, and (b) the July 24 warranty work. Quantas Industries sold $325,000 of consumer electronics during July under a nine-month warranty. The cost to repair defects under the warranty is estimated at 4.5% of the sales price. On November 11, a customer was given $220 cash under terms of the warranty. Provide the journal entry for (a) the estimated warranty expense on July 31 for July sales, and (b) the November 11 cash payment.

Explain how a defined contribution pension plan works.

Calculate payroll An employee earns $50 per hour and 2 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 50 hours during the week. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and federal income tax to be withheld was $686. a. Determine the gross pay for the week. b. Determine the net pay for the week.

Quick ratio Nabors Company reported the following current assets and liabilities for December 31, 2014 and 2013: a. Compute the quick ratio for December 31, 2014 and 2013. b. Interpret the company's quick ratio. Is the quick ratio improving or declining Adieu Company reported the following current assets and liabilities for December 31, 2014 and 2013: a. Compute the quick ratio for December 31, 2014 and 2013. b. Interpret the company's quick ratio. Is the quick ratio improving or declining

When should the liability associated with a product warranty be recorded Discuss.

Calculate payroll Snyder Company has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee: For the current pay period, the computer programmer worked 60 hours and the administrator worked 50 hours. The federal income tax withheld for all three employees, who are single, can be determined from the wage bracket withholding table in Exhibit 3 in the chapter. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and one withholding allowance is $70. Determine the gross pay and the net pay for each of the three employees for the current pay period.

General Motors Corporation reported $2.6 billion of product warranties in the Current Liabilities section of a recent balance sheet. How would costs of repairing a defective product be recorded

Summary payroll data In the following summary of data for a payroll period, some amounts have been intentionally omitted: a. Calculate the amounts omitted in lines (1), (3), (8), and (12). b. Journalize the entry to record the payroll accrual. c. Journalize the entry to record the payment of the payroll.

Payroll tax entries According to a summary of the payroll of Bailik Co., $880,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax. Also, $40,000 was subject to state and federal unemployment taxes. a. Calculate the employer's payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.8%. b. Journalize the entry to record the accrual of payroll taxes.

Payroll entries The payroll register for Jaffrey Company for the week ended May 16 indicated the following. In addition, state and federal unemployment taxes were calculated at the rate of 5.4% and 0.8%, respectively, on $225,000 of salaries. a. Journalize the entry to record the payroll for the week of May 16. b. Journalize the entry to record the payroll tax expense incurred for the week of May 16.

Payroll entries Widmer Company had gross wages of $240,000 during the week ended June 17. The amount of wages subject to social security tax was $240,000, while the amount of wages subject to federal and state unemployment taxes was $35,000. Tax rates are as follows: The total amount withheld from employee wages for federal taxes was $48,000. a. Journalize the entry to record the payroll for the week of June 17. b. Journalize the entry to record the payroll tax expense incurred for the week of June 17.

Payroll internal control procedures Big Howie's Hot Dog Stand is a fast-food restaurant specializing in hot dogs and hamburgers. The store employs 8 full-time and 12 part-time workers. The store's weekly payroll averages $5,600 for all 20 workers. Big Howie's Hot Dog Stand uses a personal computer to assist in preparing paychecks. Each week, the store's accountant collects employee time cards and enters the hours worked into the payroll program. The payroll program calculates each employee's pay and prints a paycheck. The accountant uses a check-signing machine to sign the paychecks. Next, the restaurant's owner authorizes the transfer of funds from the restaurant's regular bank account to the payroll account. For the week of May 12, the accountant accidentally recorded 100 hours worked instead of 40 hours for one of the full-time employees. Does Big Howie's Hot Dog Stand have internal controls in place to catch this error If so, how will this error be detected

Internal control procedures Dave's Scooters is a small manufacturer of specialty scooters. The company employs 14 production workers and four administrative persons. The following procedures are used to process the company's weekly payroll: a. Whenever an employee receives a pay raise, the supervisor must fill out a wage adjustment form, which is signed by the company president. This form is used to change the employee's wage rate in the payroll system. b. All employees are required to record their hours worked by clocking in and out on a time clock. Employees must clock out for lunch break. Due to congestion around the time clock area at lunch time, management has not objected to having one employee clock in and out for an entire department. c. Whenever a salaried employee is terminated, Personnel authorizes Payroll to remove the employee from the payroll system. However, this procedure is not required when an hourly worker is terminated. Hourly employees only receive a paycheck if their time cards show hours worked. The computer automatically drops an employee from the payroll system when that employee has six consecutive weeks with no hours worked. d. Paychecks are signed by using a check-signing machine. This machine is located in the main office so that it can be easily accessed by anyone needing a check signed. e. Dave's Scooters maintains a separate checking account for payroll checks. Each week, the total net pay for all employees is transferred from the company's regular bank account to the payroll account. State whether each of the procedures is appropriate or inappropriate, after considering the principles of internal control. If a procedure is inappropriate, describe the appropriate procedure.

Accrued vacation pay A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation pay is $42,000. a. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record the accrued vacation pay. b. How is the vacation pay reported on the company's balance sheet When is this amount removed from the company's balance sheet

Pension plan entries Yuri Co. operates a chain of gift shops. The company maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Whims Funds, by the fifteenth of the month following the end of each quarter. Assume that the pension cost is $365,000 for the quarter ended December 31. a. Journalize the entries to record the accrued pension liability on December 31 and the payment to the funding agent on January 15. b. How does a defined contribution plan differ from a defined benefit plan

Defined benefit pension plan terms In a recent year's financial statements, Procter Gamble showed an unfunded pension liability of $4,267 million and a periodic pension cost of $538 million. Explain the meaning of the $4,267 million unfunded pension liability and the $538 million periodic pension cost.

Accrued product warranty Lowe Manufacturing Co. warrants its products for one year. The estimated product warranty is 4% of sales. Assume that sales were $560,000 for June. In July, a customer received warranty repairs requiring $140 of parts and $95 of labor. a. Journalize the adjusting entry required at June 30, the end of the first month of the current fiscal year, to record the accrued product warranty. b. Journalize the entry to record the warranty work provided in July.

Accrued product warranty General Motors Corporation (GM) disclosed estimated product warranty payable for comparative years as follows: GM's sales were $135,592 million in Year 2. Assume that the total paid on warranty claims during Year 2 was $3,000 million. a. Why are short- and long-term estimated warranty liabilities separately disclosed b. Provide the journal entry for the Year 2 product warranty expense. c. What two conditions must be met in order for a product warranty liability to be reported in the financial statements

Contingent liabilities Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $240,000. The company is contesting the fine. In addition, an employee is seeking $220,000 in damages related to the spill. Lastly, a homeowner has sued the company for $310,000. The homeowner lives 35 miles from the plant, but believes that the incident has reduced the home's resale value by $310,000. Ayers' legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settlement of $125,000 has recently been reached with the employee. The final papers will be signed next week. Counsel believes that the homeowner's case is much weaker and will be decided in favor of Ayers. Other litigation related to the spill is possible, but the damage amounts are uncertain. a. Journalize the contingent liabilities associated with the hazardous materials spill. Use the account "Damage Awards and Fines" to recognize the expense for the period. b. Prepare a note disclosure relating to this incident.

Quick ratio Gmeiner Co. had the following current assets and liabilities for two comparative years: a. Determine the quick ratio for December 31, 2014 and 2013. b. Interpret the change in the quick ratio between the two balance sheet dates.

Quick ratio The current assets and current liabilities for Apple Inc. and Dell, Inc. , are shown as follows at the end of a recent fiscal period: a. Determine the quick ratio for both companies. b. Interpret the quick ratio difference between the two companies.