Need answers for 4 accounting questions dealing with journal


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Need answers for 4 accounting questions dealing with journal entries, pay roll expenses, depreciations, dividends, pars and stocks. ACCtest.doc Question 1 Louis Welch is general manager of United Tanning Salons. During 2012, Welch worked for the company all year at a $6,200 monthly salary. He also earned a year-end bonus equal to 10% of his salary. Welch’s federal income tax withheld during 2012 was $850 per month, plus $974 on his bonus check. State income tax withheld came to $70 per month, plus $40 on the bonus. The FICA tax withheld was 7.65% of the first $106,800 in annual earnings. Welch authorized the following payroll deductions: Charity Fund contribution of 1% of total (gross) earnings and life insurance of $5 per month. United incurred payroll tax expense on Welch for FICA tax of 7.65% of the first $106,800 in annual earnings. The company also paid state unemployment tax of 5.4% and federal unemployment tax of 0.8% on the first $7,000 in annual earnings. In addition, United provides Welch with health insurance at a cost of $150 per month (to the company). During 2012, United paid $4,000 into Welch’s retirement plan. Requirements 1. Compute Welch’s gross pay (including bonus), payroll deductions, and net pay for the full year 2012. Round all amounts to the nearest dollar. (Example $21.43 will be $21.00 and $21.51 will be $22.00). 2. Compute United’s total 2012 payroll expense for Welch. 3. Make the journal entry to record United’s expense for Welch’s total earnings for the year, the payroll deductions, and net pay. The net pay was paid in cash to Welch, all other withholdings are payable and have not yet been paid. (You need to make the employee and employer entries). . Question 2 On January 3, 2012, Trusty Delivery Service purchased a truck at a cost of $90,000. Before placing the truck in service, Trusty spent $3,000 painting it, $1,500 replacing the tires, and $4,500 overhauling the engine (the costs are all part of the purchase costs of the truck). The truck should remain in service for five years and have a residual value of $9,000. The truck’s annual mileage is expected to be 22,500 miles in each of the first four years and 10,000 miles in the fifth year- 100,000 miles in total. In deciding which depreciation method to use, Mikail Johnson, the general manager, requests a depreciation schedule for each of the depreciation methods (straightline, units of production, and double-declining balance). Requirements 1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. 2. Assume that Trusty prepares financial statements using the depreciation method that reports the highest net income in the early years of asset use. Identify the depreciation method that meets this objective and show the journal entry that Trusty would make in the first year. 3. Assume that the tax authorities allow Trusty to use any depreciation method and that Trusty uses the depreciation method that minimizes income taxes in the early years of asset use. Identify the depreciation method that meets this objective and show the journal entry that Trusty would make in the first year. Question 3 The following selected accounts appear in the ledger of Patton Environmental Inc. on July 1, 2012, the beginning of the current fiscal year: Preferred 2% stock, $75 par (40,000 shares authorized, 20,000 shares issued) Paid-In Capital In Excess of Par- Preferred Stock $1,500,000 240,000 Common Stock, $15 par (500,000 shares authorized, 260,000 shares issued) 3,900,000 Paid-In Capital In Excess of Par- Common Stock Retained Earnings 400,000 12,750,000 During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized below. Journalize the entries to record the transactions. (1) Issued 50,000 shares of common stock at $20, receiving cash. (2) Issued 10,000 shares of preferre

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