ACCT 220

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Problem 3: 15% points:

The following items were taken from the post adjusted trial balance of Flop Company. (All balances are normal.)

 

      Mortgage payable                          $  1,443           Accumulated depreciation      3,655

      Prepaid expenses                                  880           Accounts payable                    1,200

      Equipment                                       11,000           Notes payable after 2016        1,444

      Long-term investments                      1,100           Flop’s capital                         10,480

      Short-term investments                     1,756           Accounts receivable                2,690

      Notes payable in 2015                       1,000           Inventories                              2,100

      Cash                                                   1,696           Service Revenue                     9,000

      Rent Expense                                    1,000           Wages Expense                       5,000

      Utilities Expense                               1,000

Instructions: Prepare a classified balance sheet in good form as of December 31, 2014.

 

 

 Problem 4: 10% points:

 

Prepare journal entries to record the following transactions entered into by Flip Company:

 

  2012   

June    1     Accepted a $10,000, 12%, 1-year note from Flop as full payment on her account.

 

Nov.    1     Sold merchandise on account to Flap, Inc. for $12,000, terms 2/10, n/30.

 

Nov.    5     Flap, Inc. returned merchandise worth $500.

 

Nov.    9     Received payment in full from Flap, Inc.

 

Dec.  31     Accrued interest on Flop’s note.

 

  2013   

June    1     Flop honored her promissory note by sending the face amount plus interest. No interest has been accrued in 2013

 

Problem 5: 10% points:

 

Flip Company purchased equipment on July 1, 2011 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 125,000 units over its 5-year life.

Instructions

Answer the following independent questions.

1.   Compute the amount of depreciation expense for the year ended December 31, 2011, using the straight-line method of depreciation.

2.   If 14,000 units of product are produced in 2011 and 26,000 units are produced in 2012, what is the book value of the equipment at December 31, 2012? The company uses the units-of-activity depreciation method.

3.   If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation—Equipment account at December 31, 2013?

 

 

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Problem 6: 10% points:

 

Flip earns a salary of $7,500 per month during the year. FICA taxes are 8% on the first $100,000 of gross earnings. Federal unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During the year, $25,600 was withheld for federal income taxes and $5,700 was withheld for state income taxes.

 

Instructions

(a)    Prepare a journal entry summarizing the payment of Flip’s total salary during the year.

(b)    Prepare a journal entry summarizing the employer payroll tax expense on Flip’s salary for the year.

(c)    Determine the cost of employing Flip for the year.

 

 

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