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The following items were taken from the post adjusted trial balance of Flop Company. (All balances are normal.)
Mortgage payable $ 1,443 Accumulated depreciation 3,655
Prepaid expenses 880 Accounts payable 1,200
Equipment 11,000 Notes payable after 2016 1,444
Long-term investments 1,100 Flopâ€™s capital 10,480
Short-term investments 1,756 Accounts receivable 2,690
Notes payable in 2015 1,000 Inventories 2,100
Cash 1,696 Service Revenue 9,000
Rent Expense 1,000 Wages Expense 5,000
Utilities Expense 1,000
Instructions: Prepare a classified balance sheet in good form as of December 31, 2014.
Problem 4: 10% points:
Prepare journal entries to record the following transactions entered into by Flip Company:
June 1 Accepted a $10,000, 12%, 1-year note from Flop as full payment on her account.
Nov. 1 Sold merchandise on account to Flap, Inc. for $12,000, terms 2/10, n/30.
Nov. 5 Flap, Inc. returned merchandise worth $500.
Nov. 9 Received payment in full from Flap, Inc.
Dec. 31 Accrued interest on Flop’s note.
June 1 Flop honored her promissory note by sending the face amount plus interest. No interest has been accrued in 2013
Problem 5: 10% points:
Flip Company purchased equipment on July 1, 2011 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 125,000 units over its 5-year life.
Answer the following independent questions.
1. Compute the amount of depreciation expense for the year ended December 31, 2011, using the straight-line method of depreciation.
2. If 14,000 units of product are produced in 2011 and 26,000 units are produced in 2012, what is the book value of the equipment at December 31, 2012? The company uses the units-of-activity depreciation method.
3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciationâ€”Equipment account at December 31, 2013?
Problem 6: 10% points:
Flip earns a salary of $7,500 per month during the year. FICA taxes are 8% on the first $100,000 of gross earnings. Federal unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During the year, $25,600 was withheld for federal income taxes and $5,700 was withheld for state income taxes.
(a) Prepare a journal entry summarizing the payment of Flipâ€™s total salary during the year.
(b) Prepare a journal entry summarizing the employer payroll tax expense on Flipâ€™s salary for the year.
(c) Determine the cost of employing Flip for the year.