Financial Accounting: An Integrated Statements Approach, 2nd Edition

In the following summary of data for a payroll period, some amounts have been intentionally

omitted:

Earnings:

1. At regular rate?


2. At overtime rate $ 32,500


3. Total earnings?
   Deductions:


4. FICA tax 15,165


5. Income tax withheld 29,500


6. Medical insurance 3,150


7. Union dues?


8. Total deductions 50,000


9. Net amount paid 161,000
   Accounts debited:


10. Factory Wages 121,600


11. Sales Salaries?


12. Office Salaries 34,300

a. Calculate the amounts omitted in lines (1), (3), (7), and (11).

b. Record the entry for the payroll accrual.

c. Record the entry for paying the payroll.

According to a summary of the payroll of Pendant Publishing Co., $800,000 of payroll was sub-

ject to the 7.5% FICA tax. Also, $17,500 was subject to state and federal unemployment taxes.

a. Calculate the employer’s payroll taxes using the following rates: state unemployment, 4.3%;

federal unemployment, 0.8%.

b. Record the entry for the accrual of payroll taxes.

Tower Controls Co. had a gross salary payroll of $750,000 for the month ending March 31. The

complete payroll is subject to a FICA tax rate of 7.5%. Only $30,000 of this payroll is subject to

state and federal unemployment taxes of 4% and 0.5%, respectively. The employees’ income tax

withholding is $142,500.

a. Record the March 31 payroll.

b. Record the March 31 payroll taxes.

A business provides its employees with varying amounts of vacation per year, depending on

the length of employment. The estimated amount of the current year’s vacation pay is $325,600.

Record the adjusting entry required on January 31, the end of the first month of the current year,

to accrue the vacation pay.

Using the present value tables in Appendix A, calculate the present value of the following:

1. $250,000 to be received three years from today, assuming an annual interest rate of 6%.


2. $2,500 to be received annually at the end of each of 10 periods, discounted at 8%.


3. $4,000 receivable at the end of each of the next five periods when the market rate of interest
   is 5%.

General Motors’ 8.375% bonds due in 2033 were reported in The Wall Street Journalas selling for

100.245 on February 18, 2005.

Were the bonds selling at a premium or at a discount on February 18, 2005? Explain.

476 Chapter 10 Liabilities

Exercise 10-8

Summary payroll data

Goal 1

a. (3) Total earnings, $211,000

Exercise 10-9

Payroll tax entries

Goal 1

a. Payroll Taxes, $60,892.50

Exercise 10-10

Recording payroll and payroll

taxes

Goal 1

Exercise 10-11

Accrued vacation pay

Goal 1

Exercise 10-12

Present value

Goal 2

2. $16,775.20

Exercise 10-13

Bond price

Goal 2