Please answer questions E9-18A, E9-19A, and E9-20A E9-18A. (Learning Objective 1
ID: 2454408 • Letter: P
Question
Please answer questions E9-18A, E9-19A, and E9-20A E9-18A. (Learning Objective 1: Account for payroll expense and liabilities) Southwest Talent Search has an annual payroll of $125,000. In addition, the company incurs payroll tax expense of 8%. At December 31, Southwest owes salaries of $9,500 and FICA and other payroll tax of $920. The company will pay these amounts early next year. Show what Southwest will report for the foregoing on its income statement for the year and on its year-end balance sheet. E9-19A. (Learning Objective 1: Record note-payable transactions) Assume that Fallon Sales Company completed the following note-payable transactions: 2014 Apr 1 Purchased delivery truck costing $58,000 by issuing a one-year, 4% note payable. Accrued interest on the note Dec 31 Accred interest on theote payable Dec 31 2015 Apr 1 Paid the note payable at maturity Apr 1 Paid the note
Explanation / Answer
E9. 18-A:
Total expense for the year = annual payroll of $125,000+8% payroll tax expense
= 125,000+8% of 125,000
= 125,000+10,000 = $135,000. This is the amount that will be shown in the current year's income statement as expenses.
In the balance sheet, the unpaid amount will be shown as liabilities. The unpaid amount are $9,500 in salaries and $920 in taxes. Total = 9500+920 = $10,420. This amount will have to be cleared in the next year, and hence will be shown as current liabilities in the balance sheet as on December 31st.
E9-19A:
1. Interest expense accrued at December 31: Number of months from april to december = 9 months. Interest amount for the 9 months = 9/12*rate*amount of the note
= 9/12*4%*58,000 = $1,740
2. Final payment on April 1, 2015 = amount of the note+4% interest
= 58,000+4% of 58,000 = $60,320
3. Total interest = 4% of 58,000 = 2320
interest for 2014: period = 9 months. interest = 9/12*2320 = $1,740
interest for 2015: January 1 to March 31 = 3 months.
amount = 3/12*2320 = $580.