Solution manual accounting 25th editon warren chapter 11

CHAPTER 11
CURRENT LIABILITIES AND PAYROLL
DISCUSSION QUESTIONS
1.

No. A discounted note payable has no stated interest rate, but provides interest by discounting the
note proceeds. The discount, which is the difference between the proceeds and the face of the
note, is the interest and is accounted for as such.

2.

a.

Employee’s federal income taxes, social security, and Medicare

b.

Employees Federal Income Tax Payable, Social Security Tax Payable, and Medicare Tax
Payable

3.
4.

The deductions from employees’ earnings are for amounts owed (liabilities) to others for
such items as federal taxes, state and local income taxes, and contributions to pension plans.
1.
2.
3.
4.
5.

a
c
c
b
b

5.

An advantage of using a separate payroll bank account is that reconciling the bank statements
is simplified. In addition, a payroll bank account establishes control over payroll checks
and, thus, prevents their theft or misuse.

6.

a.

b.

Constants are data that remain unchanged from payroll to payroll. These include employee
names, social security numbers, marital status, number of income tax withholding
allowances, rates of pay, tax rates, and withholding tables.
Variables are data that change from payroll to payroll. These include number of hours or
days worked for each employee, accrued days of sick leave, vacation credits, total earnings
to date, and total taxes withheld.

7.

The vacation pay expense should be recorded during the period in which the vacation privilege
is earned.

8.

In a defined contribution plan, the company invests contributions on behalf of the employee
during the employee’s working years. Normally, the employee and employer contribute to the
plan. The employee’s pension depends on the total contributions and the investment returns
earned on those contributions.

9.

To match revenues and expenses properly, the liability to cover product warranties should be
recorded in the period during which the sale of the product is recorded.

10.

When the defective product is repaired, the repair costs would be recorded by debiting
Product Warranty Payable and crediting Cash, Supplies, or another appropriate account.

11-1
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CHAPTER 11

Current Liabilities and Payroll

PRACTICE EXERCISES
PE 11–1A
a.

$70,000

b.

$69,650 [$70,000 – ($70,000 × 30/360 × 6%)]

PE 11–1B
a.

$150,000

b.

$148,125 [$150,000 – ($150,000 × 45/360 × 10%)]

PE 11–2A
Total wage payment………………………………………………………………
One allowance (provided by IRS)…………………………………………… $70.00
Multiplied by allowances claimed on Form W-4…………………………… ×
2
Amount subject to withholding………………………………………………
Initial withholding from wage bracket in Exhibit 3………………………
Plus additional withholding: 28% of excess over $1,648*………………
Federal income tax withholding………………………………………………

$2,600.00
140.00
$2,460.00
$ 327.40
227.36
$ 554.76

*($2,460 – $1,648) × 28%

PE 11–2B
Total wage payment……………………………………………………………
One allowance (provided by IRS)……………………………………………… $70.00
Multiplied by allowances claimed on Form W-4…………………………… ×
1
Amount subject to withholding………………………………………………
Initial withholding from wage bracket in Exhibit 3………………………
Plus additional withholding: 25% of excess over $704*…………………
Federal income tax withholding………………………………………………
*($1,330 – $704) × 25%

$1,400.00
70.00
$1,330.00
$

91.40
156.50

$ 247.90


PE 11–3A
Total wage payment……………………………………………
Less:
Federal income tax withholding…………………
Social security tax ($2,600 × 6%)…………………

Medicare tax ($2,600 × 1.5%)……………………
Net pay…………………………………………………………

$2,600.00
$554.76
156.00
39.00

749.76
$1,850.24

PE 11–3B
Total wage payment…………………………………………
Less:
Federal income tax withholding…………………
Social security tax ($1,400 × 6%)………………
Medicare tax ($1,400 × 1.5%)………………………
Net pay……………………………………………………………

$1,400.00
$247.90
84.00
21.00

352.90
$1,047.10

PE 11–4A
Salaries Expense
Social Security Tax Payable

Medicare Tax Payable
Employees Federal Income Tax Payable
Salaries Payable

220,000
13,200
3,300
43,560
159,940

PE 11–4B
Salaries Expense
Social Security Tax Payable
Medicare Tax Payable
Employees Federal Income Tax Payable
Retirement Savings Deductions Payable
Salaries Payable

90,000
5,400
1,350
17,820
5,400
60,030


PE 11–5A
Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable

State Unemployment Tax Payable*
Federal Unemployment Tax Payable**

18,670
13,200
3,300
1,890
280

* $35,000 × 5.4%
** $35,000 × 0.8%

PE 11–5B
Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
State Unemployment Tax Payable*
Federal Unemployment Tax Payable**

7,370
5,400
1,350
540
80

* $10,000 × 5.4%
** $10,000 × 0.8%

PE 11–6A
a.

b.

Vacation Pay Expense
Vacation Pay Payable
Vacation pay accrued for the period.

19,500

Pension Expense
Cash
To record pension contribution,
6% × $260,000.

15,600

19,500

15,600

PE 11–6B
a.

b.

Vacation Pay Expense
Vacation Pay Payable
Vacation pay accrued for the period.

35,000

Pension Expense
Cash
Unfunded Pension Liability
To record pension cost and funding.

201,250

35,000

175,000
26,250


PE 11–7A
a.

b.

Feb.

July

28 Product Warranty Expense
Product Warranty Payable
To record warranty expense for February,
6% × $200,000.
24 Product Warranty Payable
Supplies
Wages Payable

12,000
12,000

92
60
32

PE 11–7B
a.

b.

July

Nov.

31 Product Warranty Expense
Product Warranty Payable
To record warranty expense for July,
4.5% × $325,000.
11 Product Warranty Payable
Cash

14,625
14,625

220
220

PE 11–8A
a.

December 31, 2014
Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = ($650 + $1,500 + $700) ÷ $2,375
Quick Ratio = 1.2
December 31, 2013
Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = ($680 + $1,550 + $770) ÷ $2,000
Quick Ratio = 1.5

b.

The quick ratio of Nabors Company has declined from 1.5 in 2013 to 1.2 in 2014. This
decrease is the result of a large increase in accounts payable compared to decreases
in the three types of quick assets (cash, temporary investments, and accounts
receivable).


PE 11–8B
a.

December 31, 2014
Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = ($1,000 + $1,200 + $800) ÷ $1,875
Quick Ratio = 1.6
December 31, 2013
Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = ($1,140 + $1,400 + $910) ÷ $2,300

Quick Ratio = 1.5

b.

The quick ratio of Adieu Company has improved from 1.5 in 2013 to 1.6 in
2014. This increase is the result of a small decrease in the three types of quick
assets (cash, temporary investments, and accounts receivable) compared to
the larger decrease in the current liability, accounts payable.


EXERCISES
Ex. 11–1
Current liabilities:
Federal income taxes payable*………………………………………………………
Advances on magazine subscriptions**……………………………………………
Total current liabilities………………………………………………………………

$ 336,000
1,593,750
$1,929,750

* $840,000 × 40%
** 25,000 × $85 × 9/12 = $1,593,750
The nine months of unfilled subscriptions are a current liability because Bon Nebo
received payment prior to providing the magazines.
Ex. 11–2
a.

1.

2.

b.

2.

1.

Merchandise Inventory
Interest Expense*
Notes Payable

792,000
8,000

Notes Payable
Cash

800,000

Notes Receivable
Sales
Interest Revenue*

800,000

Cash
Notes Receivable

800,000

* $800,000 × 6% × 60/360

800,000

800,000

792,000
8,000

800,000


Ex. 11–3
a.

$240,000 × 8% × 60/360 = $3,200 for each alternative.

b.

(1) $240,000 simple-interest note: $240,000 proceeds
(2) $240,000 discounted note: $240,000 – $3,200 interest = $236,800 proceeds

c.

Alternative (1) is more favorable to the borrower. This can be verified by
comparing the effective interest rates for each loan as follows:
Situation (1): 8% effective interest rate
($3,200 × 360/60) ÷ $240,000 = 8%
Situation (2): 8.11% effective interest rate

($3,200 × 360/60) ÷ $236,800 = 8.11%
The effective interest rate is higher for the discounted note because the creditor
lent only $236,800 in return for $3,200 interest over 60 days. In the undiscounted
note, the creditor must lend $240,000 for 60 days to earn the same $3,200 interest.

Ex. 11–4
a.

b.

Accounts Payable
Notes Payable

150,000

Notes Payable
Interest Expense*
Cash

150,000
875

150,000

150,875

* $150,000 × 7% × 30/360

Ex. 11–5
a.

b.

Accounts Payable
Interest Expense*
Notes Payable

89,100
900

Notes Payable
Cash

90,000

* $90,000 × 8% × 45/360

90,000

90,000


Ex. 11–6
a.

b.

c.

June

Dec.

June

30 Building
Land
Note Payable
Cash

450,000
350,000
400,000
400,000

31 Note Payable
Interest Expense ($400,000 × 6% × 1/2)
Cash

20,000
12,000

30 Note Payable
Interest Expense ($380,000 × 6% × 1/2)
Cash

20,000
11,400

32,000

31,400

Ex. 11–7
a.

$1,276 is the amount disclosed as the current portion of long-term debt.

b.

The current liabilities increased by $1,225 ($1,276 – $51).

c.

$14,041 ($15,317 – $1,276)

Ex. 11–8
a.

Regular pay (40 hrs. × $50)……………………………………………
Overtime pay (10 hrs. × $100)…………………………………………
Gross pay………………………………………………………………

$2,000
1,000
$3,000

b.

Gross pay………………………………………………………………

Less: Social security tax (6% × $3,000)……………………………
Medicare tax (1.5% × $3,000)………………………………
Federal withholding…………………………………………
Net pay……………………………………………………………………

$3,000
$180
45
686

911
$2,089


Ex. 11–9
Consultant
Regular earnings………………………………
Overtime earnings………………………………
Gross pay…………………………………………

$3,800.00

Less: Social security tax……………………
Medicare tax……………………………

$ 228.001
57.004

$3,800.00

Computer
Programmer

Administrator

$1,600.00
1,200.00
$2,800.00
$ 168.00 2
42.00 5

$1,760.00
880.00
$2,640.00
$ 158.40 3
39.60 6


904.06
$1,189.06

610.76
$ 820.76

585.56
$ 783.56

$2,610.94

$1,979.24

$1,856.44

Consultant

Computer
Programmer

Gross weekly pay………………………………

$3,800.00

$2,800.00

$2,640.00

Number of withholding allowances…………
Multiplied by: Value of one allowance………
Amount to be deducted………………………
Amount subject to withholding……………
Initial withholding from wage bracket
in Exhibit 3……………………………………
Plus: Bracket percentage over
bracket excess………………………………
Amount withheld………………………………

2
× $70.00
$ 140.00
$3,660.00

2
× $70.00
$ 140.00
$2,660.00

1
× $70.00
$ 70.00
$2,570.00

$ 816.28

$ 327.40

$ 327.40

Federal income tax withheld………
Net pay……………………………………………
1
2
3
4
5
6

6.0% × $3,800.00 = $228.00
6.0% × $2,800.00 = $168.00
6.0% × $2,640.00 = $158.40
1.5% × $3,800.00 = $57.00

1.5% × $2,800.00 = $42.00
1.5% × $2,640.00 = $39.60

Withholding supporting calculations:

7
8

9

33% × ($3,660 – $3,394)
28% × ($2,660 – $1,648)
28% × ($2,570 – $1,648)

87.78 7
$ 904.06

283.36 8
$ 610.76

Administrator

258.16
$ 585.56

9


Ex. 11–10
a.

b.

c.

Summary: (1) $460,000; (3) $540,000; (8) $6,750; (12) $135,000
Net amount paid……………………………………………………
Total deductions…………………………………………………
(3) Total earnings………………………………………………………
Overtime……………………………………………………………
(1) Regular……………………………………………………………

$338,850
201,150

Total deductions…………………………………………………
Social security tax………………………………………………
$ 32,400
Medicare tax………………………………………………………
8,100
Income tax withheld……………………………………………… 135,000
18,900
Medical insurance………………………………………………
(8) Union dues…………………………………………………………

$201,150

Total earnings……………………………………………………
Factory wages……………………………………………………… $285,000
120,000

Office salaries……………………………………………………
(12) Sales salaries………………………………………………………

$540,000

$540,000
80,000
$460,000

Factory Wages Expense
Sales Salaries Expense
Office Salaries Expense
Social Security Tax Payable
Medicare Tax Payable
Employees Income Tax Payable
Medical Insurance Payable
Union Dues Payable
Salaries Payable

285,000
135,000
120,000

Salaries Payable
Cash

338,850

194,400
$

6,750

405,000
$135,000

32,400
8,100
135,000
18,900
6,750
338,850

338,850


Ex. 11–11
a.

Social security tax (6% × $880,000)…………………………………………………
Medicare tax (1.5% × $880,000)………………………………………………………
State unemployment tax (5.4% × $40,000)…………………………………………
Federal unemployment (0.8% × $40,000)…………………………………………

$52,800
13,200
2,160
320
$68,480

b.

Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
State Unemployment Tax Payable
Federal Unemployment Tax Payable

68,480
52,800
13,200
2,160
320

Ex. 11–12
a.

b.

Salaries Expense
Social Security Tax Payable
Medicare Tax Payable
Employees Federal Income Tax Payable
Salaries Payable
Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
State Unemployment Tax Payable*
Federal Unemployment Tax Payable**
* 5.4% × $225,000

** 0.8% × $225,000

1,250,000
58,750
18,750
250,000
922,500
91,450
58,750
18,750
12,150
1,800


Ex. 11–13
a.

Wages Expense
Social Security Tax Payable*
Medicare Tax Payable**
Employees Federal Income Tax Payable
Wages Payable

240,000
14,400
3,600
48,000
174,000

* 6.0% × $240,000

** 1.5% × $240,000
b.

Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
State Unemployment Tax Payable*
Federal Unemployment Tax Payable**

20,170
14,400
3,600
1,890
280

* 5.4% × $35,000
** 0.8% × $35,000

Ex. 11–14
Big Howie’s Hot Dog Stand does have an internal control procedure that should detect the
payroll error. Before funds are transferred from the regular bank account to the payroll
account, the owner authorizes the total amount of the week’s payroll. The owner should
catch the error, since the extra 60 hours will cause the weekly payroll to be substantially
higher than usual. The owner should sign the paychecks, thereby restricting access to
cash by employees who are responsible for record keeping.

Ex. 11–15
a.

Appropriate. All changes to the payroll system, including wage rate increases,

should be authorized by someone outside the Payroll Department.

b.

Inappropriate. Each employee should record his or her own time out for lunch.
Under the current procedures, one employee could clock in several employees
who are still out to lunch. The company would be paying employees for more
time than they actually worked.

c.

Inappropriate. Payroll should be informed when any employee is terminated.
A supervisor or other individual could continue to clock in and out for the
terminated employee and collect the extra paycheck.

d.

Inappropriate. Access to the check-signing machine should be restricted.

e.

Appropriate. The use of a special payroll account assists in preventing fraud
and makes it easier to reconcile the company’s bank accounts.


Ex. 11–16
a.

b.

Vacation Pay Expense
Vacation Pay Payable
Vacation pay accrued for January, $42,000 × 1/12.

3,500
3,500

Vacation pay is reported as a current liability on the balance sheet. If
employees are allowed to accumulate their vacation pay, then the estimated
vacation pay that will not be taken in the current year will be reported as a
long-term liability. When employees take vacations, the liability for vacation
pay is decreased.

Ex. 11–17
a.

Dec.

Jan.
b.

31 Pension Expense
Unfunded Pension Liability
To record quarterly pension cost.

365,000

15 Unfunded Pension Liability
Cash

365,000

365,000

365,000

In a defined contribution plan, the company invests contributions on behalf of
the employee during the employee’s working years. Normally, the employee
and employer contribute to the plan. The employee’s pension depends on the
total contributions and the investment return on those contributions. In a
defined benefit plan, the company pays the employee a fixed annual
amount based on a formula. The employer is obligated to pay for (fund)
the employee’s future pension benefits.

Ex. 11–18
The $4,267 million unfunded pension liability is the approximate amount of the
pension obligation that exceeds the value of the net assets of the pension plan.
Apparently, Procter & Gamble has underfunded its plan relative to the obligation
that has accrued over time. This can occur when the company contributes less to
the plan than the annual pension cost.
The obligation grows yearly by the amount of the periodic pension cost. Thus, the
$538 million periodic pension cost is a measure of the amount of pension earned by
employees during the year. The annual pension cost is determined by making
assumptions about employee life expectancies, employee turnover, expected
compensation levels, and interest.


Ex. 11–19
a.

Product Warranty Expense
Product Warranty Payable
To record warranty expense for June,
4% × $560,000.

22,400
22,400

Product Warranty Payable
Supplies
Wages Payable

235
140
95

Ex. 11–20
a.

b.

The warranty liability represents estimated outstanding automobile warranty
claims. Of these claims, $2,965 million is estimated to be due during Year 2,
while the remainder ($4,065 million) is expected to be paid after Year 2. The
distinction between short- and long-term liabilities is important to creditors in
order to accurately evaluate the near-term cash demands on the business,
relative to the quick current assets and other longer-term demands.
Product Warranty Expense
Product Warranty Payable

2,759,000,000
2,759,000,000

$7,030 + X – $3,000 = $6,789
X = $6,789 – $7,030 + $3,000
X = $2,759 million
c.

In order for a product warranty to be reported as a liability in the financial
statements, it must qualify as a contingent liability. Contingent liabilities are
only reported as liabilities on the balance sheet if it is probable that the liability
will occur and the amount of the liability is reasonably estimable .


CHAPTER 11

Current Liabilities and Payroll

Ex. 11–21
a.

Damage Awards and Fines
EPA Fines Payable
Litigation Claims Payable

365,000
240,000
125,000

Note to Instructors: The “damage awards and fines” would be disclosed on the

income statement under “Other expenses.”
b.

The company experienced a hazardous materials spill at one of its plants during
the previous period. This spill has resulted in a number of lawsuits to which the
company is a party. The Environmental Protection Agency (EPA) has fined the
company $240,000, which the company is contesting in court. Although the
company does not admit fault, legal counsel believes that the fine payment is
probable. In addition, an employee has sued the company. A $125,000 out-ofcourt settlement has been reached with the employee. The EPA fine and out-ofcourt settlement have been recognized as an expense for the period. There is
one other outstanding lawsuit related to this incident. Counsel does not believe
that the lawsuit has merit. Other lawsuits and unknown liabilities may arise from
this incident.

Ex. 11–22
a.

b.

Quick Ratio =

Quick Assets
Current Liabilities

December 31, 2013:

$500,000 + $200,000
$500,000

= 1.4

December 31, 2014:

$486,000 + $210,000
$580,000

= 1.2

The quick ratio decreased between the two balance sheet dates. The major
reason is a significant increase in inventory which likely drove the increase in
accounts payable. Cash also declined, possibly to purchase the inventory. As
a result, quick assets actually declined, while the current liabilities increased.
The quick ratio for December 31, 2014, is not yet at an alarming level. However,
the trend suggests that the firm’s current asset (working capital) management
should be watched closely.


CHAPTER 11

Current Liabilities and Payroll

Ex. 11–23
a.
Quick Ratio
Quick Ratio =
Apple Inc. (in millions):
Quick Ratio =
Dell, Inc. (in millions):
Quick Ratio =
b.

Apple Inc.

Dell, Inc.

1.8

1.3

Quick Assets
Current Liabilities

$11,261 + $14,359 + $11,560
$20,722

=

1.8

$13,913 + $452 + $10,136
$19,483

=

1.3

It is clear that Apple Inc.’s short-term liquidity is stronger than Dell’s.
Apple’s quick ratio is 38% [(1.8 – 1.3) ÷ 1.3] higher. Apple has a much stronger
relative cash and short-term investment position than does Dell. Apple’s cash,
accounts receivable, and short-term investments are over 89% of total current
assets (180% of current liabilities), compared to Dell’s 84% of total current assets

130% of current liabilities). In addition, Dell’s relative accounts payable position is
larger than Apple’s, indicating the possibility that Dell has longer supplier
payment terms than does Apple. A quick ratio of 1.8 for Apple suggests ample
flexibility to make strategic investments with its excess cash, while a quick
ratio of 1.3 for Dell indicates an efficient, but tight, quick asset management
policy.


PROBLEMS
Prob. 11–1A
1.

Feb.

Mar.

Apr.

June

July

Aug.

Sept.

Dec.

3 Merchandise Inventory
Accounts Payable—Onifade Co.

410,000

3 Accounts Payable—Onifade Co.
Notes Payable

410,000

17 Notes Payable
Interest Expense ($410,000 × 45/360 × 6%)
Cash
1 Cash
Notes Payable

410,000

410,000
410,000
3,075
413,075
250,000
250,000

21 Tools
Interest Expense ($300,000 × 60/360 × 8%)
Notes Payable

296,000
4,000

31 Notes Payable
Interest Expense ($250,000 × 60/360 × 7.5%)
Notes Payable
Cash

250,000
3,125

30 Notes Payable
Interest Expense ($250,000 × 30/360 × 9%)
Cash

250,000
1,875

19 Notes Payable
Cash

300,000

1 Office Equipment
Notes Payable
Cash
12 Litigation Loss
Litigation Claims Payable
31 Notes Payable
Interest Expense ($30,000 × 30/360 × 8%)
Cash

300,000

250,000
3,125

251,875

300,000
340,000
300,000
40,000
165,000
165,000
30,000
200
30,200


Prob. 11–1A (Concluded)
2.

b.

a.

Product Warranty Expense
Product Warranty Payable
Warranty expense for the current year.
Interest Expense
Interest Payable
Interest on notes, $30,000 × 8.0% × 30/360 × 9.

32,500
32,500

1,800
1,800


CHAPTER 11

Current Liabilities and Payroll

Prob. 11–2A
1.

Dec.

a.

Dec.

b.

1
2

2.

1
2

3
4

118,800
40,500
10,125
14,850
12,150
478,575
52,795
40,500
10,125
1,890
280

$35,000 × 0.8%

30 Sales Salaries Expense
Warehouse Salaries Expense
Office Salaries Expense
Employees Income Tax Payable
1
Social Security Tax Payable
2
Medicare Tax Payable
Bond Deductions Payable
Group Insurance Payable
Salaries Payable

350,000
180,000
145,000
118,800
40,500
10,125
14,850
12,150
478,575

$675,000 × 6%
$675,000 × 1.5%

Jan.

b.

30 Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
1
State Unemployment Tax Payable
2
Federal Unemployment Tax Payable

350,000
180,000
145,000

$35,000 × 5.4%

Dec.

a.

30 Sales Salaries Expense
Warehouse Salaries Expense
Office Salaries Expense
Employees Income Tax Payable
Social Security Tax Payable
Medicare Tax Payable
Bond Deductions Payable
Group Insurance Payable
Salaries Payable

5 Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
3
State Unemployment Tax Payable
4
Federal Unemployment Tax Payable

$675,000 × 5.4%
$675,000 × 0.8%

92,475
40,500
10,125
36,450

5,400


CHAPTER 11

Current Liabilities and Payroll

Prob. 11–3A
1.

Gross
Employee

Arnett…………………
Cruz……………………
Edwards………………
Harvin…………………
Nicks…………………
Shiancoe………………
Ward…………………

2.

Federal Income

Social Security

Medicare

Earnings

$ 8,250.00

Tax Withheld
$ 1,512.00

Tax Withheld
$ 495.00

Tax Withheld
$ 123.75

57,600.00
24,000.00
6,000.00
110,000.00
116,000.00
7,830.00

9,996.00
4,977.00
1,133.00
24,409.00
26,670.00
1,407.00

3,456.00
1,440.00
360.00
6,600.00
6,960.00

469.80

864.00
360.00
90.00
1,650.00
1,740.00
117.45

$19,780.80

$4,945.20

a.

Social security tax paid by employer........................................................

$19,780.80

b.

Medicare tax paid by employer..................................................................

4,945.20

c.

Earnings subject to unemployment compensation tax,
$10,000 for all employees except Arnett, Harvin, and Ward.
Thus, total earnings subject to SUTA and FUTA are

$62,080 [(4 × $10,000) + $8,250 + $6,000 + $7,830].
State unemployment compensation tax: $62,080 × 5.4%........................

3,352.32

d.

Federal unemployment compensation tax: $62,080 × 0.8%…………………

e.

Total payroll tax expense............................................................................

496.64
$28,574.96


CHAPTER 11

Current Liabilities and Payroll

PAYROLL FOR WEEK ENDING

Prob. 11–4A
1.
EARNINGS

Employee

Total

Hours

Regular

Overtime

Social
Security
Tax

Total

Medicare
Tax

December 7, 2014

DEDUCTIONS
Federal
Income
Tax

PAID
U.S.
Savings
Bonds

Total

Net

Pay

ACCOUNT DEBITED
Ck.
No.

Sales
Salaries
Expense

Aaron
Cobb
Clemente

46
41
48

2,720.00
2,480.00
2,800.00

612.00
93.00
840.00

3,332.00
2,573.00
3,640.00

199.92
154.38
218.40

49.98
38.60
54.60

766.36
553.20
691.60

100.00
110.00
120.00

1,116.26
856.18
1,084.60

2,215.74
1,716.82
2,555.40

901
902
903

3,332.00
2,573.00

3,640.00

DiMaggio
Griffey, Jr.
Mantle

35
45

1,960.00
2,480.00

465.00

1,960.00
2,945.00
1,800.00

117.60
176.70
108.00

29.40
44.18
27.00

411.60
618.45
432.00

130.00
120.00

558.60
969.33
687.00

1,401.40
1,975.67
1,113.00

904
905
906

1,960.00
2,945.00

Robinson
Williams
Vaughn

36

1,944.00
2,480.00
16,864.00

116.64
120.00

159.96
1,371.60

29.16
30.00
39.99
342.91

291.60
440.00
533.20
4,738.01

130.00
125.00
50.00
885.00

567.40
715.00
783.15
7,337.52

1,376.60
1,285.00
1,882.85
15,522.48

907
908

909

1,944.00

42

1,944.00
2,000.00
2,666.00
22,860.00

186.00
2,196.00

2.
Sales Salaries Expense
Office Salaries Expense
Social Security Tax Payable
Medicare Tax Payable
Employees Federal Income Tax Payable
Bond Deductions Payable
Salaries Payable

19,060.00
3,800.00
1,371.60
342.91
4,738.01
885.00
15,522.48

11-22
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Office
Salaries
Expense

1,800.00
2,000.00
2,666.00
19,060.00

3,800.00


CHAPTER 11

Current Liabilities and Payroll

Prob. 11–5A
1.

Dec.

2 Bond Deductions Payable
Cash

3,400
3,400

2 Social Security Tax Payable
Medicare Tax Payable
Employees Federal Income Tax Payable
Cash

9,273
2,318
15,455
27,046

13 Operations Salaries Expense
Officers Salaries Expense
Office Salaries Expense
Social Security Tax Payable
Medicare Tax Payable
Employees Federal Income Tax Payable
Employees State Income Tax Payable
Bond Deductions Payable
Medical Insurance Payable
Salaries Payable

43,200
27,200
6,800

13 Salaries Payable
Cash

46,296

4,632
1,158
15,440
3,474
1,700
4,500
46,296

46,296

13 Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
State Unemployment Tax Payable
Federal Unemployment Tax Payable

6,265

16 Social Security Tax Payable
Medicare Tax Payable
Employees Federal Income Tax Payable
Cash

9,264
2,316
15,440

19 Medical Insurance Payable
Cash

31,500

4,632
1,158
350
125

27,020

31,500

11-24
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


CHAPTER 11

Current Liabilities and Payroll

Prob. 11–5A (Concluded)
Dec.

27 Operations Salaries Expense
Officers Salaries Expense
Office Salaries Expense
Social Security Tax Payable
Medicare Tax Payable
Employees Federal Income Tax Payable
Employees State Income Tax Payable

Bond Deductions Payable
Salaries Payable

42,800
28,000
7,000

27 Salaries Payable
Cash

51,360

27 Payroll Tax Expense
Social Security Tax Payable
Medicare Tax Payable
State Unemployment Tax Payable
Federal Unemployment Tax Payable
27 Employees State Income Tax Payable
Cash
31 Bond Deductions Payable
Cash
31 Pension Expense
Cash
Unfunded Pension Liability
To record pension cost and unfunded
liability.
2. a.

b.

Dec.

31 Operations Salaries Expense
Officers Salaries Expense
Office Salaries Expense
Salaries Payable
Accrued wages for the period.
31 Vacation Pay Expense
Vacation Pay Payable
Vacation pay accrued for the period.

4,668
1,167
15,404
3,501
1,700
51,360

51,360
6,135
4,668
1,167
225
75
20,884
20,884
3,400
3,400
60,000
45,000

15,000

8,560
5,600
1,400
15,560

15,000
15,000