Quiz 10: Current Liabilities and Payroll

Business

In this case, Kennedy and Kennedy, who is a local CPA firm which has reduced holiday bonus from two weeks' salary to 1 week's salary, which firm were paying for last 10 years as a policy.Now, Tonya, who is an old employee thought this unfair as she planned it as a 2 week bonus and she decides to make up this by doing Working overtime which is 150% of straight time. And as per supervisor it was not necessary to do overtime. Evaluation of case Firm position The new management changed bonus from 2 weeks' salary to 1 week's salary in the month of November. Bonus depends on various factors which could be employee performance and company performance, etc. Consecutively management can decide to change bonus depending on these factors even it was paying at a consistent rate from a long time. Tonya Position In this case, Tonya thought reducing bonus is not fair and worked on an overtime basis to make up for gone bonus. The rate for overtime is 150% of normal rate; however as per supervisor it was not required. As per above facts, Tonya was unethical as to make up for gone bonus, she worked overtime, which was 150% and was not required to do on an overtime basis.

As there will be no stated interest rate, the discounted notes payable will provide the interest by discounting the note proceeds only. The interest that should be recognized and accounted in the case would be the difference between the proceeds from note and the face value of the note.

Prepare the current liabilities section of the balance sheet: The current liabilities section of the balance sheet includes all the obligations that will be payable in the next 12 months. Both the payments due or accrue will be considered as current liability. In the given case, annual subscriptions that relate to nine months will be considered as current liability. Further the federal tax payable on business income at 40% should be included as current liability in the balance sheet. Prepare the current liabilities section of the balance sheet as below: img Notes: (1) Subscriptions: img (2) Federal income tax: img

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