EP-2015 -(1. Organization and proper indication of answers will be taken into account in the grade)

| June 1, 2016

Question
Due Date: June 22nd, 2015

Due Hour: 6:00 p.m.

General Guidelines:

1. Organization and proper indication of answers will be taken into account in the grade.

2. No digital answers will be taken into account.

3. All calculations must be provided

Total Worth: 5 points

1. Design borrowed $700,000 on a 90-day note from CorpOne Funding Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for interest calculations.)

Required:

(1) Journalize Roseland’s entries to record:

a. The issuance of the note.

b. The payment of the note at maturity.

(2) Journalize CorpOne’s entries to record:

a. The receipt of the note.

b. The receipt of the payment of the note at maturity.

2. Dixon Sales has seven sales employees which receive weekly paychecks. Each earns $10.25 per hour and each has worked 40 hours in the pay period. Each employee pays 12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in Social Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability Insurance. Journalize the recognition of the pay period ending January 19th which will be paid to the employees January 26th. (Keep in mind that none of the employees is subject to a ceiling amount for social security.)

3. An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 7.0% (on earnings up to $100,000), the Medicare tax rate was 1.5%, and the federal income tax to be withheld was $614.

(1) Determine the gross pay for the week.

(2) Determine the net pay for the week.

4. An employee receives an hourly rate of $45, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $950; Social security tax rate, 6.5% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, .8% on the first $7,000.

Calculate the employer’s payroll tax expense if:

a. This is the first payroll of the year and the employee has no cumulative earnings for the year to date.

b. The employee’s cumulative earnings for the year prior to this week equal $6,200.

c. The employee’s cumulative earnings for the year prior to this week equal $98,700.

5. Journalize the following transactions for Riley Corporation:

Dec. 31 The accrued product warranty for the year is estimated to be 2.5% of net sales. Sales for the year totaled $9,000,000, and sales returns and allowances were $150,000.

31 The accrued vacation pay for the year is estimated to be $75,000.

31 Paid First Insurance Co. $55,000 as fund trustee for the pension plan. The annual pension cost is $87,000.

6. A company has 10,000 shares of $10 par common stock outstanding. Prepare entries to record the following:

(a) Purchased 1,500 shares of treasury stock at $16. The treasury stock is accounted for by the cost method.

(b) Sold 1,000 shares of treasury stock at $19.

(c) Purchased equipment for $80,000, paying $25,000 in cash and issuing 4,000 shares of common stock for the remaining.

(d) Sold 500 shares of treasury stock at $14.

7. A company has 10,000 shares of $10 par common stock outstanding. Prepare entries to record the following:

(a) Purchased 1,000 shares of treasury stock at $12. The treasury stock is accounted for by the cost method.

(b) Sold 500 shares of treasury stock at $15.

(c) in cash and issuing 4,000 shares of common stock for the remaining.

(d) Sold 500 shares of treasury stock at $11.

8. On January 1, 2011 a company had the following data:

– issued 10,000 shares of $2.00 par value common stock for $12.00 per share

– issued 3,000 shares of $50 par value 6% cumulative preferred stock for $70 per share

– purchased 1,000 shares of previously issued common stock for $15.00 per

share

The company had the following dividend information available:

2011 – No dividend paid

2012 – Paid a $2,000 total dividend

2013 – Paid a $17,000 total dividend

2014 – paid a $32,000 total dividend

Using the following format, fill in the correct values for each year;

2011 2012 2013 2014

Common stock dividend Preferred stock dividend Dividends in arrears

9. Selected transactions completed by Breezeway Construction during the current fiscal year are as follows:

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February 3

Split the common stock 2 for 1 and reduced the par from

$40 to $20 per share. After the split there were 250,000

common shares outstanding.

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April 10

Declared semiannual dividends of $1.50 on 18,000 shares

of preferred stock and $0.08 on the common stock to

stockholders of record on May 10, payable on June 9.

June 9

Paid the cash dividends.

October 10

Declared semiannual dividends of $1.50 on the preferred

stock and $0.04 on the common stock (before the stock

dividend). In addition, a 2% common stock dividend was

declared on the common stock outstanding. The fair

market value of the common stock is estimated at $36.

December 9

Paid the cash dividends and issued the certificates for the

common stock dividend.

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10. Calculate the total amount of interest expense over the life of the bonds for the following independent situations.

a) $100,000 face value, 10%, 10-year bonds issued at 101.

b) $240,000 face value, 5%, 5-year bonds issued at 100.

c) $300,000 face value, 9%, 6-year bonds issued at 98.

Total Worth: 2 points

1. Two members of each group will be called to the board in order to complete one of the exercises.

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