Corporate Financial Accounting Study Set 3

Business

Quiz 10 :

Liabilities: Current, Installment Notes, and Contingencies

Quiz 10 :

Liabilities: Current, Installment Notes, and Contingencies

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Liability transactions The following items were selected from among the transactions completed by Sherwood Co. during the current year: img 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, $80,000. B. Interest on the nine remaining notes owed to Greenwood Co.
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1. In the given problem, transactions of S Co. are given for which journal entries can be prepared as follows:
S Company purchased merchandise from at $175,000, terms n/30 from K Company.
img This will increase the inventory of S by $175,000 which will be debited. On the other hand accounts payable will be credited by same amount.
S Co a note of $175,000 for 30-day at 6% to K Company.
img For the purchased merchandise, S has issued 30 day note. For this, accounts payable will be debited and notes payable will be credited.
Note amount is paid by K. Company.
img The note issued by S to K is matured after 30 days. Hence S will repay amount of note with interest. With 6% interest rate, interest paid for this cash will be credited.Calculation of Interest
img Issued a 45 day, 5% note and borrowed $400,000 from T Bank :
img This will bring cash to S which will be debited. In return, notes payable will be credited with same amount.
Issued discounted note of $45,000 of 5%, for 60 days to purchase tools from P Co:
.
img With the discount rate of 7%, discount amount will of $525 which will be debited as interest expense. Thus, S will receive tools of only $44,475. In return, $45,000 will be credited as notes payable
Calculation of discount
img img Issued New Note of $400,000 at 6% for 30 days to renew the loan and due bank interest is paid on Note issued on 1 June to T bank.
img img Interest paid on note at the rate 5% will be $2,500 For this, cash will be credited by the same amount. After renewing the loan with new interest rate, the old notes payable will be debited and new notes payable will be credited.Amount due on Note of 30 day, 6%is paid to T bank.
img Notes payable will be debited of the amount $400,000 and interest paid of $2000. This whole amount will be credited from cash.
img Amount due on 60 day, discounted note is paid to P bank.
img As it is discounted note, only face amount of note i.e. $45,000 will be paid without any interest.
Paid cash $40,000 and issued ten 9% note of $22,000 each, to purchase the equipment of G Company. Every note will mature after the interval of 30 days.
img Equipment account will be debited of amount $260,000, while cash of $ 40,000 will be credited. Also, notes payable will be debited of amount $220,000.
Settled a product liability lawsuit with customer for $50,000. This loss will be accrued in a litigation claims payable account.
img Litigation claims payable account will be debited for $50,000.
Paid amount due to G Co. on the first note in the series.
img First note is of 30 day maturity. Hence, notes payable account will be debited by the amount $22,000 and interest paid will be $165. This whole amount will be credited from cash.
img 2.Entries for accrued expenses are as follows:
A. Cost of product warranty $80,000.
img For this, Product warranty expense account will be debited by $80,000. On the other side, Product warranty payable account will be credited.B. Interest on 9 remaining notes issued to G Co.
The remaining 9 notes will have maturity of 60 days, 90 days, and 120 days and so on.
Calculation for interest expenses
img Similarly, we can compute it for other notes.

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Entries for notes payable Bennett Enterprises issues a $400,000, 90-day, 5% note to Spectrum Industries for merchandise inventory. A. Journalize Bennett Enterprises' entries to record: 1. the issuance of the note. 2. the payment of the note at maturity. B. Journalize Spectrum Industries' entries to record: 1. the receipt of the note. 2. the receipt of the payment of the note at maturity.
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Note Payable is issued by thedebtors to their creditors for compensating the accounts payable which they previously issued to creditors. Notes payable includes loan from bank accounts. These are generally issued for purchasing merchandise or any assets
B Enterprises issues 90-day, 5 % note payable of $400,000 to S Enterprises.
a.Journal Entries in Books of B Enterprises
1. Issue of Notes Payable for purchase of merchandise.
img Accounts Payable is debited as this liability is reduced and compensated against the notes payable, therefore Notes Payable are credited.2. Maturity of Notes Payable
img Notes payable and interest expenses are debited as theit represents liabilities paid of and expenses respectively.
b.Journal Entries in Books of S Enterprises
1.Note Receivable Received
img Notes Receivable is debited as this asset reduced, and compensated against the notes receivable, thereforeAccount Receivable are credited.2. Note Receivable Matured
img Cash and interest revenue are debited as theit represents payment and revenue respectively. Notes Receivable is credited as asset is realized
Working Notes
Calculation of Interest
img Where FA is face amount, R represents rate of interest and n is time period.

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Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 20Y5, were as follows: img img Instructions 1. Journalize the selected transactions. 2. Based on the following data, prepare a bank reconciliation for December of the current year: ? Balance according to the bank statement at December 31, $283,000. ? Balance according to the ledger at December 31, $245,410. ? Checks outstanding at December 31, $68,540. ? Deposit in transit, not recorded by bank, $29,500. ? Bank debit memo for service charges, $750. ? 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. Use the Miscellaneous Administrative Expense account to record bank service charges. 4. Based on the following selected data, journalize the adjusting entries as of December 31 of the current year: A. Estimate 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: img 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 8 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 that follows, prepare a balance sheet in report form at December 31 of the current year: img img
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In the present case, company K has provided the list of transactions at year ended on December 31, 20Y5.1.The following journal entries to record its transactions occurred during the first accounting year.
First journal entry is shown below for the creation and transferring the amount to the petty cash fund of $4,500.
img In the above entry, the amount of petty cash amounts to $4,500 is introduced for the year by the company and the same amount is credited which indicates the cash receipts because of the double-entry system.
The following entry records the payment from petty cash fund for office supplies, miscellaneous selling expenses and administrative expenses.
img Above integrated entry shows debit accounts of all expenses with their respective amounts. The credit balance of $3,130 indicates the total payment made fromthe petty cash fund.
The following entry records the merchandise bought by company on account value of $31,300.
img The entry shows the debit balance of inventory that records the increased value of assets. As the amount of credit purchase needs to pay after a certain period, recorded now as raised liability credited with accounts payable account.
The following entry records the payment to accounts payable for the credit purchase of inventory amounts to $31,300
img The entry shows the debit balance of accounts payable and being a liability, its value has decreased on making payment of inventory. On the other hand, the decreased value of cash has recorded on credit side with the same amount.
The following entry records the cash short as difference between the cash sales of $21,200 and amount shown in register as $21,240.
img The difference between cash sales recorded in register and cash sales receipts is the amount of cash short which is computed as under.
img The journal entry shows the debit balance of $40 with cash shortage amount that is included in the income statement under the miscellaneous expense. And it is allowed as an incentive for faster cash recovery. The debit amount of $21,200 indicates the amount actually received from sales.
On the other hand, the credit balance of $21,240 indicates the amount of sales recorded in the register that is also shown in the income statement.
The following entry records the received note of $180,000 at 8% rate payable after 60 days from R on account.
img The entry debits the received note of $180,000which indicates the increased value of assetsand accounts receivable will be credited as it has issued on account of R.
The following entry records the amount received from respective note with interest.
img The interest expense has computed for 60 days at 8% by using given formula. img The entry shows the debit balance of the cash as
img that is the total of principal and interest amount. And the note receivable is credited with its value along with interest revenue of $2,400.
The following entry records the received amount of $7,600 from F and using allowance method the remaining has written off.
img The entry debits the amount of cash received from F. To write off whole balance of accounts receivables, $9,000 is credited. And the balancing figure of
img is debited as allowance for doubtful accounts.
The following entries recordthe amount received in cash and amount that has written off on account of F. This transaction involves two entries.
img Firstly, the above reverse entry of written off amount need to debit accounts receivable and allowance for doubtful accounts is credited. img And in the second entry, cash is debited with the received amount and accounts receivable is credited to record the deduction of asset value.
The following entry records the note issued in regard to land acquisition cost of $670,000 to Z Company.
img The interest expense has computed for 90 days at 9%discount rate by using given formula. img The entry shows the interest value of $15,075 and the issued note of $670,000 that includes the same value of interest. Therefore, the balancing figure of
img which indicates the cost of land. As per the rule, the increase in asset value needs to debit always.
The following entry records the integrated transactions of cash receivedfrom sale with the note receivable and depreciation on such equipment.
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img The entry shows the debit balance of cash received as $135,000 and for remaining balance a Noteof $100,000 has been received by way of sale of equipment. The accumulated depreciation of $64,000 is also debited being an expense charged over it. On the other side, the equipment account has credited that indicates the decrease in the book-value of assets from $320,000.
The debit balance of loss on the equipment sale has derived as balancing figure from the entry, which is computed as:
img The following entry records the transactions of payroll of the November month.
img The entry shows the debit balance of sales salary expense and office salary expense that would be deducted in the books of company as they are expenses to company. In return, all taxes and saving funds are deducted from salaries of employees and thus, they are credited. Therefore, the amount of total deductions has computed as under:
img So, the amount of salaries payable can be computed as balancing figure, shown as under:
img Hence, the credit amount of salaries payable is $157,065.The following Journal entry recordsthe employer's payroll taxes of the November month.
img The entry shows the debit balance of $16,229 asthe total of all taxes that is debited as Payroll tax expenses. It includes following taxes:
Social security tax: For the given company the social security tax for the year is $12,735.Medicare tax: For the given company the Medicare tax for the year is $3,184.State Unemployment Tax: It is $270 (5.4% of $5,000) for the company K.
Federal unemployment compensation: It is $40 (0.8% of $5,000) for the company K.
The following entryrecords the payment of September 15 note to Z Company that was issued in exchange of the purchased land. img The entry indicates the debit balance with the face value of the note which amounts to $670,000 without any interest. On the other side, cash is credited which shows the decreased value of asset after payment in favor of note payable to Z company.
The following entry records the payment to the pension plan trustee of $139,700.
img The entry indicates the debit balance of $190,400 being pension expense of business. On the other side, cash is credited with theamount of $139,700as the payment made to pension trustee and the remaining balance indicates unfunded liability of pension.
2.Bank reconciliation statement (BRS): The statement which helps in reconciling the amounts of cash account of ledger and the cash balance of bank statement. After the analysis of both amounts the adjusted balance is reported via this statement with stated reasons of differences.
img Above BRS is prepared by using the given steps.
In the first step, the balance of cash shown in bank records is stated in the column of cash balance as per bank statement that is $283,000 in this case. In the next step, the deposits in transit that are not yet recognized by the bank added with the changed value arose due to errors of non- recording or recorded wrongly items.
Further the deductions from the above addition need to make regarding the checks that has remained outstanding till the end of period. These outstanding checks are issued by the company but not yet paid by the bank to the payer which creates the difference in the amounts. Lastly the adjusted balance value can be computed by subtracting above calculated amounts from the cash balance as per bank records.
Similarly, the ledger balance of cash account is stated in the column of cash balance as per company account that is $245,410 in this case. In the next step, the values of credit memo like notes receivables needs to add and values of debit memos like bank charges need to deduct that has not verified by the company although the bank has recorded the transaction for the same. In the present case, the incorrect entry amounts to
img .
Then the adjusted balance value would be determined from the above adjustments in the cash accounts balancethat must be matched with the above adjusted balance value of bank section that is $243,960 in this case.
3.
In the present case, the company K has not recorded the transactions of bank charges and the error occurred in to recording of invoice amount on account payment. Therefore, to rectify the same followingintegrated journal entry need to record in the books of the company.
img The debit balance of $750 is the expense for the business paid as bank charges to bank.And the amount of $700 indicates the error of recording the accounts payable. And the credit balance of cash account indicates the collective amount to rectify the same that is $1,450.
4.
Adjusting Entries: The journal entries need to record the necessary adjustments prior to the preparation of the final statements of the company can be termed as adjusting entries. These entries record the updated amounts of necessary accounts in the balance sheet.
Following are the adjusting entries for the transactions of current year end at Dec 31.
A. At the end of year, uncollectible accounts receivable amounts to $16,000 and the allowance for doubtful accounts has debit balance of $2,000.
img The amount of the adjusting entry would be the amount estimated for the expenses of bad debt. Therefore, the debit balance of bad debt expenses has recorded with the amount of the estimated uncollectible accounts. And the credit balance with the same amount of $16,000 to adjust the debit balance of allowance of doubtful accounts.
B. Inventory shrinkage indicates shortage of actual inventory as compared to inventory recorded in the books of accounts. The shrinkage of inventory assessedof $3,300 indicated by physical inventory valuation.
img This amount indicates inventory loss which could not be recovered. Thus, it should be debited. On the other hand, inventory account should be credited by same amount which is $3,300 in this case.
C. Prepaid insurance is current asset, it arises when the payment of future expenses has made in advance. But when it becomes due, it is considered as expense.
img Hence, insurance expense account will be debited and prepaid insurance account will be credited with the same amount of $22,820.
D. Office supplies are also prepaid expenses. It will be realized, when it is used during the year which is $3,920.
img Hence, office supplies expense account will be debited to record the expenses incurred during the year.The office supplies will be credited to record the deduction in the asset of the company.
E. Depreciation: It is the expense charged on each asset which needs tocompute and transferred to respective accumulated depreciation account at the year ending. Due to this, depreciation account will become zero at the beginning of next year.
The formula for computing the depreciation expense as per the Straight Line Method (SLM) is:
img Depreciation on building: It is calculated on the basis of Double-Declining Balance (DDB) method
Firstly, the expenses of depreciation need to compute as per SLM by putting the values.
img Under the methodof, the computed depreciation value needs to multiply by 2.
img Hence, it is concluded that depreciation for the year by this method is $36,000. The depreciation will be calculated on
img instead of $900,000.
The following entry records the depreciation expense of building.
img The depreciation on building will be debited as being an expense of the company and accumulated depreciation account will be credited with the same amount.
Depreciation on office equipment: It is calculated on the basis of SLM by putting the values in the given formula. img Hence, depreciation expense of office equipment would be amounts to $44,000.
The following entry records the depreciation expense of office equipment.
img The depreciation on office equipment will be debited as being an expense of the company and accumulated depreciation account will be credited with the same amount.
Depreciation on store equipment: As the office building had acquired on July 1, the amount of depreciation would be calculated for the next 6 months (1July-31Dec) of year shown as below.
img Hence, itamounts to $5,000 for depreciation by using the SLM.
The following entry records the depreciation expense of store equipment.
img The depreciation on store equipment will be debited as being an expense of the company and accumulated depreciation account will be credited with the same amount.
F.In the present case, the cost of patent is $48,000 with its remaining legal life of 10 years and 8 years of expected life.Expected life should be considered onlyfor the computation of amortization expenses. Thus, amortization for this year will be
img .
img The amortization account has debited with the amount of $6,000. The patent account has credited to record the deducted value of the patents being an asset.
G. The mineral rights wereacquired at cost of $546,000. From total deposit of 910,000 tons of ore, 50,000 tons were mined and sold.The depletion expense of 50,000 tons which will be debited and accumulated depletion account will be credited. Due to this, depletion expense account will become zero at the beginning of next year.
Firstly, calculation to determine the rate of depletion is given as under.
img Now, the expense of depletion is given as under.
img Hence, it can be concluded that the depletion expense is $30,000.
The following entry records the expense of depletion of minerals.
img The entry records the debit balance of depletion expense and credit balance of accumulated depletion with the same amount to recognize the reduction in the value of asset.
H. The payment of the Vacation expense is $10,500. To record such expenses the journal entry has shown below.
img This amount will be transferred to wages payable account by crediting it and debiting wages expense account as all the expenses being a nominal account.
I. The warranty cost of the product A was estimated as 4% of the sales that is $1,900,000. The journal entry has shown below to record such warranty expenses.
img The debit balance of the entry indicates the warranty expense account with the amount of $76,000. And the same amount has transferred to estimated liability under warranty account.
J. The accrued interest has receivedon the note receivable.
img The computation of the accrued interestissued for the period of 90 days.
img The debit balance of the entry records the accrued interest of $2,250 on the note receivable that indicates the increased value of expense. And the interest revenue to be received in future has credited.5.The balance sheet of company K on December 31 has prepared on the basis of given information and the closing balances of trial balance as shown under.
img img The above balance sheet consists of the three main portions which are derived from the post-closing trial balance and other information.
Current assets : It consists of the following items
Cash and cash equivalent: It is the total of petty cash fund and cash.
Accounts receivable: It is net total of accounts receivable after deducting allowance for doubtful accounts.
Prepaid expenses: It includes prepaid insurance and office supplies.
Other current assets: It includes notes receivable and interest receivable.
Inventory: It represents the value of closing merchandise of the company.
The total of these items result in to the total current assets.
Long term assets : It consists of the following items
Fixed assets: It includes land, building, office equipment and store equipment. Fromwhich the accumulated depreciation needs to deduct.
Mineral rights: It is the net amount of mineral rights after deducting accumulated depletion.
Patents: It represents the value provided in the trial balance.
The total of these items result in to the total long term assets.
Hence, the total assets can be calculated by adding total current assets and total long term assets.
Current liabilities : It consists of the following items
Salaries and accounts payable: bothrepresent the values provided in the trial balance.
Tax payable: It is the total of Social security tax. Medicare tax, Employee federal income tax, State unemployment tax and Federal unemployment tax.
Other current liability: It is the total of Interest payable, Product warranty payable, current vacation pay payable and current notes payable.
The total of these items results in to the total current liabilities.
Long term liability : It is the total of long term vacation pay payable, long term notes payable and unfunded pension liability.
Stockholders' equity : It is the total of retained earnings and common stock.
Lastly, the total liabilities and stockholders' equity can be calculated by adding total current liabilities, total long term liabilities and stockholders'equity.

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Wage and tax statement data on employer FICA tax Ehrlich Co. began business on January 2. 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 the following year, 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: img Instructions 1. Compute the amounts to be reported for the year on each employee's Wage and Tax Statement (Form W-2), arranging the data as follows (round to the nearest cent): img 2. Compute 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.
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Does a discounted note payable provide credit without interest? Discuss.
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Entries for payroll and payroll taxes The following information about the payroll for the week ended December 30 was obtained from the records of Boltz Co.: img Tax rates assumed: img 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 $48,000 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 $780,000 in salaries is subject to unemployment compensation taxes.
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Liability transactions The following items were selected from among the transactions completed by Aston Martin Inc. during the current year: img img 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.
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Evaluating alternative notes A borrower has two alternative for a loan: (1) issue a $150,000, 45-day, 4% note or (2) issue a $150,000, 45-day note that the creditor discounts at 4%. 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.
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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.: img img 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. Because it is a new fiscal year, all $1,185,000 in salaries is subject to unemployment compensation taxes.
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Hershey: Short-term liquidity analysis The Hershey Company is the largest producer of chocolate in North America under the Hershey's and Reese's brend names. The following balance sheet information is provided at the end of three recent years(in thousands). img A. Compute the working capital for the three years. B. Compute the current ratio for three years. (Round to one decimal place.) C. Compute the quick ratio for the three years. (Round to one decimal place.) D. Interpret the short-term liquidity for the three years from (C). E. Are the other two measures in (A) and (B) consistent with your analysis in (D)?
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Neiman Marcus and Kohl's: Short-term liquidity analysis Neiman Marcus Group is one of he larges, luxury fashion retailers in the world. Kohl's Corporation sells moderately priced private and national branded products through more than 1,100 department stores located throughout the United States. The current assets and current liabilities at the end of a recent year for both companies ore as follows in millions): img A. Would an analysis of working capital between the two companies be meaningful? Explain. B. Compute the quick ratio for both companies. (Round to the nearest decimal.) C. Interpret your results.
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Current liabilities Bon Nebo Co. sold 25,000 annual subscriptions of Bjorn for $85 during December 20Y5. These new subscribers will receive monthly issues, beginning in January 20Y6. In addition, the business had taxable income of $840,000 during the first calendar quarter of 20Y6. The federal tax rate is 40%. A quarterly tax payment will be made on April 12, 20Y6. Prepare the current liabilities section of the balance sheet for Bon Nebo Co. on March 31, 20Y6.
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Team Activity In teams, select a public company that interests you. Obtain the company's most recent annual report on Form 10-K. The Form 10-K is a company's annually required filing with the Securities and Exchange Commission (SEC). It includes the company's financial statements and accompanying notes. The Form 10-K can be obtained either (A) from the investor relations section of the company's Web site or (B) by using the company search feature of the SEC's EDGAR database service found at www.sec.gov/edgar/searchedgar/companysearch.html. Based on the information in the company's annual report answer the following questions: 1. What amount of current liabilities does the company report on its balance sheet at the end of the most recent year? What types of current liabilities does the company report? 2. Have current liabilities increased or decreased from the prior year? By what amount? 3. Does the company disclose any contingent liablities in the notes to the financial statements? If so, briefly describe the nature of these contingent liablilities. 4. How much of the company's long-term debt will come due in the coming year?
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Continuing Company Analysis-Amazon: Short-term liquidity analysis Amazon.com, Inc. is one of the largest Internet retailers in the world. Best Buy, Inc. is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Current asset and current liability information from recent financial statements are as follows (in millions): img A. Compute working capital for each company B. Compute the current ratio for each company. (Round to one decimal place.) C. Compute the quick ratio for each company. (Round to one decimal place.) D Can the working capital be usefully compared between the two companies. Explain. E. Which company has the greater debt-paying ability according to the current ratio? F. Which company has the greater short-term debt-paying ability according to the quick ratio? G. Why are the results different between (E) and (F)? ( Hint: Perform a vertical analysis of the current assets.)
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Employee net pay Lindsey Vater's weekly gross earnings for the week ended March 9 were $1,000, and her federal income tax withholding was $161.20. Assuming the social security tax rate is 6% and Medicare tax is 1.5% of all earnings, what is Lindsey's net pay?
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Why are deductions from employees' earnings classified as liabilities for the employer?
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Proceeds from notes payable 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%.
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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.
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Ethic in Action Tonya Latirno is a staff accountant for Cannally and Kennedy, a local CPA firm. For the past 10 years, the firm has given employees a year-end bonus equal to two weeks' salary. On November 15, the firm's management team announced that there would be no annual bonus this year. Because of the firm's long history of giving a year-end bonus, Tonya and her co-workers had come to expect the bonus and felt that Cannally and Kennedy had breached an implicit agreement by discontinuing the bonus. As a result, Tonya decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. Cannally and Kennedy's policy is to pay overtime at 150% of straight time. Tonya's supervisor was surprised to see overtime being reported, because there is generally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the "honor system" in reporting their work hours. 1. Is Cannally and Kennedy acting in an ethical manner by eliminating the bonus? Explain your answer. 2. Is Tonya behaving ethically by making up the bonus with unnecessary overtime? Why?
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Journalize period payroll The payroll register of Heritage Co. indicates $3,900 of social security withheld and $975 of Medicare tax withheld on total salaries of $65,000 for the period. Federal withholding for the period totaled $14,250. Retirement savings withheld from employee paychecks were $2,600 for the period. Journalize the entry to record the period's payroll.
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