Cash 7) On December 31, Shug Jordan Co had $175,000 due to their employees as gr
ID: 2517058 • Letter: C
Question
Cash 7) On December 31, Shug Jordan Co had $175,000 due to their employees as gross pay. The amount of withholdine for Social Security and Medicare (Grouped together as FICA) is 10,500. The amount of Income Taxes withheld is $7,000. Federal Unemployment paid by Shug Jordan Co amounts to $233. What is the Net Pay Shug Jordan Co will pay to its employees? a. 157,500 b. 164,s00 c. 175,000 d. 157,267 8) True or False: Taxes included in the total selling price of an item will not be recorded as an addition to revenue. a. True b. False 9) bonds that are selling for 8% interest. Investors can only get 7% interest on similar bonds Shug Jordan Co has Shug Jordan Co's bonds are selling at: a. Par b. Discount c. Premium d. 99 10) War Eagle Co just sold its $100,000 bonds at 104. The stated interest rate on the on the bonds is 4%. The life of the bonds is 5 years and to record the initial issuance of the bonds. bonds is 6%. The market rate interest is paid semiannually. Prepare the journal entry a. Bonds Payable 100,000 4,000 Cash 104,000 b. Cash 104,000 4,000 100,000 Bonds Payable 2,960 40 c. Interest Expense Cash 3,000 d. Cash Bonds Payable 100,000 11) War Eagle Productions recently sold its $2,000,000 bonds for 1,940,000. The bonds have a 10 year life and carried an interest rate of 10% while the market rate was 12%, what is the carrying value of the bonds on the date of sale? a. 2,000,000 b. 200,000 c. 240,000 d. 1,940,000 12) Which of the following not true about bonds and long term liabilities: a. Selling bonds at a premium decreases the total cost of borrowing b. c. Selling bonds at a discount increases the total cost of borrowing Companies will book interest expense, but will not pay cash until maturity of the bonds d. Bonds selling at a discount have a lower interest rate than the marketExplanation / Answer
Solution 7:
Net Pay Shug Jordan Co will pay to its employees = Gross Pay - Withholding FICA - Withholding Income tax
= $175,000 - $10,500 - $7000 = $157,500
Hence option a is correct.
Solution 8:
True, taxes included in selling price of an item will be recorded separately as tax payable.
Solution 9:
As market rate of interest is lower than coupon rate of bonds, therefore bonds are selling at premium. hence option c is correct.
Solution 10:
Hence option b is correct.
Solution 11:
Carrying value of bond on date of sale will be equal to its issue price = $1,940,000
Hence option d is correct.
Solution 12:
The untrue statement is "Companies will book interest expense, but will not pay cash until maturity of bonds" . Generally bonds pay periodic interest, it is not necessary that cash will be paid at maturity only.
Hence option c is correct.
Adjusting Journal Entries - War Eagle Co Particulars Debit Credit Cash Dr $104,000.00 To Bond Payable $100,000.00 To Premium $4,000.00