Practice Problems
Jingle Company signs a 6-month, $20,000 note. Stated interest rate is 8% payable at the maturity date. Interest incurred on the note is calculated as
$20,000 x 0.08 x 6/12
Rhodes borrowed $5,000 by signing a 5-year note with an interest rate of 8%. On the date the note is signed, Rhodes should
credit notes payable $5,000.
Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700, Medicare $1,450, federal income tax $18,000 and state income tax $3,850. The journal entry to record wages paid includes a ______.
$100,000 debit to Salaries expense Reason: The credit to Cash is $70,000. Gross pay of $100,000 less $30,000 withholdings (6,700 + 1,450 + 18,000 + 3,850).
On October 1, 2018, Perry Corporation signed a 12-month, 8% interest-bearing promissory note for $10,000. Assume that all appropriate adjusting journal entries were made at 12/31. The journal entry required when the note matures on October 1, 2019 would include a debit to interest expense for
$600
Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. What is the net pay to employees?
$70,000 Reason: Net pay=$70,000=$100,000-6,700-1,450-18,000-3,850
West Company pays health insurance for its employees of $2,000 for the pay period. The journal entry to record this fringe benefit includes which of the following?
Credit accounts payable $2,000 Debit Salaries Expense $2,000 Payroll tax expense is FUTA and/or SUTA, which are required taxes & The amount is not paid to employees, but is paid directly to the insurance company.
On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required March 1, 2019 at the maturity date includes which of the following entries?
Debit interest expense $2,000 Credit cash $106,000 Debit note payable $100,000 Debit interest payable $4,000
On October 1, 2018, Logan Corporation signed a 6-month, 8% interest-bearing promissory note for $10,000. The journal entry required at December 31, 2018 would include which of the following?
Debit interest expense $200 Reason: $10,000 x 8% (annual rate) x 3/12
On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required at December 31, 2018 would include which of the following?
Debit interest expense $4,000
Lambert Corporation has employee salary expense of $100,000 on May 31. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following entries?
Debit payroll tax expense $13,850 Credit FICA payable $7,650 Credit FUTA payable $6,200
On November 1, 2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following?
Debit to Cash $100,000 Credit to Note Payable $100,000 Reason: Interest expense is not recorded until time has elapsed
On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $21 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 9% promissory note. Interest is payable at maturity. Trico's year-end is December 31.
a. Record Issuance of the note b. Record the adjusting entry for interest c. Record the repayment of the note at maturity
John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal Income tax $58, and state income tax $10. What is John's net pay?
$486.10 Reason: Net pay=$600-$37.20-$8.70-$58-$10=$468.10.
Lester Corp. sells merchandise to a customer for $1,000. The company also collects state and local sales taxes of 6% and 4%, respectively. At the time of sale, Lester should record the following credit amounts.
Debit
John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal income tax $58, and state income tax $10. Assuming that John gets paid in cash, ABC would record a journal entry that includes a ______.
credit to State and Federal Income Tax Payable of $68 credit to FICA (Social Security and Medicare) Payable of $45.90 credit to Cash of $486.10 debit to Wages Expense of $600
On September 1, ABC Company borrowed $50,000 on a 6%, 9-month note payable to XYZ National Bank. Given no previous adjusting entries have been recorded, ABC's adjusting entry at December 31 would include a ______.
debit to Interest expense of $1,000 Reason: Interest expense=$50,000 x 0.06 x (4/12)=$1,000. The interest rate, 6%, is an annual rate, not a 9-month rate. In the current year, 4/12 of 6% will be expensed and the remaining 5/12 (for a total of 9/12) will be expensed in the following year.