Examine the following items and prepare the current liabilities section of the Balance sheet

| March 31, 2017

Question
Examine the following items and prepare the current liabilities section of the Balance sheet for Annapolis Corporation as of December 31, 2015
The beginning of year accounts payable was $82,000. Purchases on trade accounts during the year were $452,000, and payments on account were $415,000.
The company incurs substantial costs in its manufacturing plant. As of December 31, 2015, it is estimated that $38,000 of electricity has been used. The monthly billing for December has not yet been received.
Annapolis Corporation has accepted deposits from customers in advance for product that will not ship until 2016 in the amount of $174,500.
Annapolis Corporation has collected sales tax totaling $6,800 from customers during the month of December, 2015. This tax must be remitted to the state by January 10, 2016.
Annapolis Corporation has $2,000,000 outstanding on a bank loan. The interest rate is 7.5% per annum and the interest is paid monthly on the first day of each month for the prior month.
The loan listed above has principle repayment obligations equally spread over eight years beginning in 2016.
Annapolis Corporation
Partial Balance Sheet as of December 31, 2015
Current Liabilities
Total Current Liabilities

Payroll problem. The facts and instructions are listed below:
1 Mike works for Baltimore Corp. Fact’s related to Mike’s paycheck are listed below. He is paid $5,000 once per month on the last day of the month. He has already been paid for January. You are computing February payroll.
2 Mike’s pay is subject to social security taxes at a 6.2% rate and Medicare at a 1.45% rate. He has not exceeded the annual base for social security taxes. Assume the company will remit this tax and any employer match on the 3rd business day after pay day.
3 Assume Mike’s income tax withholding to be equal to $15% for Federal and 5% for Maryland. Assume that both of these withheld taxes will be remitted on the 3rd business day after pay day.
4 Baltimore Corp. pays for workers’ compensation insurance at a 3.5% rate. None of this cost is paid by the employee.
5 Baltimore Corp provides its employees with health care insurance, and pays 80% of the $600 per employee monthly premium. The other 20% is paid by employees via payroll withholdings. The company has established a pre-tax plan for health insurance premiums.
6 Mike participates in a tax-sheltered deferred savings plan (401k plan) and has 6% of his gross pay withheld each month. Baltimore Corp provides a 100% matching contribution of the first 5% of worker pay. There is no match after 5%. This is sent to the investment company on the 10th of the following month.
7 Baltimore Corp’s payroll is subject to federal (FUTA) tax of 6.2% of the first $7,000 of employee pay per year. The payroll is also subject to Maryland unemployment tax (SUTA) of 4.0% of the first $8,500 of employee pay per year. Both taxes are paid by the employer and the employee does not have these taxes withheld.
8 Mike participates in the Charitable giving program to donate money to Baltimore Habitat for Humanity each month. $25 is withheld from his check and sent to the charity by Baltimore Corp on the 10th of the following month.
(a) Calculate Mikes net pay check in the space provided below.
(b) Prepare journal entries for Mike’s pay and the related payroll expenses.
(c) What is the total cost to Baltimore Corp for Mike’s services during February?
(a)
(b)

There are 3 problems this week. Click on the tabs at the bottom of the spreadsheet to view each problem.
Prepare the journal entries for the eight following transactions. Use dates but descriptions are not required.
On 10/1/15, Equipment was purchased for $10,000 cash down payment and a 10% per annum promissory note of $40,000.
Date
Particulars
DR
CR
10/1/2015 Equipment
50,000
Cash
10,000
10% promissary
40,000
On 12/31/15, the fiscal year ended and the accrued interest was recorded as an adjusting entry.
Date
Particulars
DR
CR
12/1/2015 Interests expense
1,000
Interests payable
On June 30, 2016 the note was paid in full. No interest has been accrued in 2016 yet.
Date
Particulars
DR
6/30/2016 10% Promissary Note
Cash

1,000

CR
40,000
40,000

There are 10,000 shares of $2 par common stock outstanding. The board of directors declares a 15 cent dividend per share on May 15, 2016.
Date
Particulars
DR
CR
5/15/2016 Retained Earnings
3,000
Dividend payable
3,000
On June 30, the above declared dividend is paid to holders of record as of June 20, 2016
Date
Particulars
DR
6/30/2016 10% Promissary
Cash

CR
3,000
3,000

There are 8,000 shares of $10 par common stock outstanding. On July 15, 2016 the market value of the stock is $72 per share and the board of directors declares a 10% stock divi
Date
Particulars
DR
CR
5/15/2016 Retained earnings
Divendend payable

On July 30, 2016 the above shown stock dividend is paid to holders of record as of July 20.
Date
Particulars
DR
Common Stock Dividend distributable

CR
8,000
8,000

On August 10, 2016 the board of directors declares a 2-for-1 stock split of 50,000 outstanding shares of $15 par value common stock.
No entry is made but just a disclosure that the number of shares oustanding has increased from 50,000 to 100, 000 and that the par vallue has decreased from $15 to $7.5.

vidend.

Examine the following items and prepare the current liabilities section of the
Balance sheet for Annapolis Corporation as of December 31, 2015
The beginning of year accounts payable was $82,000. Purchases on
trade accounts during the year were $452,000, and payments on
account were $415,000.
The company incurs substantial costs in its manufacturing plant. As of
December 31, 2015, it is estimated that $38,000 of electricity has
been used. The monthly billing for December has not yet been
received.
Annapolis Corporation has accepted deposits from customers in
advance for product that will not ship until 2016 in the amount of
$174,500.
Annapolis Corporation has collected sales tax totaling $6,800 from
customers during the month of December, 2015. This tax must be
remitted to the state by January 10, 2016.
Annapolis Corporation has $2,000,000 outstanding on a bank loan.
The interest rate is 7.5% per annum and the interest is paid monthly
on the first day of each month for the prior month.
The loan listed above has principle repayment obligations equally
spread over eight years beginning in 2016.

Annapolis Corporation
Partial Balance Sheet as of December 31, 2015
Current Liabilities

Total Current Liabilities

$

Payroll problem. The facts and instructions are listed below:
1

Mike works for Baltimore Corp. Fact’s related to Mike’s paycheck are listed below. He is paid $5,000 once per month on the last day of the month. He has already been pai
payroll.

2

Mike’s pay is subject to social security taxes at a 6.2% rate and Medicare at a 1.45% rate. He has not exceeded the annual base for social security taxes. Assume the compa
on the 3rd business day after pay day.

3
4

Assume Mike’s income tax withholding to be equal to $15% for Federal and 5% for Maryland. Assume that both of these withheld taxes will be remitted on the 3rd busines
Baltimore Corp. pays for workers’ compensation insurance at a 3.5% rate. None of this cost is paid by the employee.

5

Baltimore Corp provides its employees with health care insurance, and pays 80% of the $600 per employee monthly premium. The other 20% is paid by employees via pay
a pre-tax plan for health insurance premiums.

6

Mike participates in a tax-sheltered deferred savings plan (401k plan) and has 6% of his gross pay withheld each month. Baltimore Corp provides a 100% matching contribu
match after 5%. This is sent to the investment company on the 10th of the following month.

7

Baltimore Corp’s payroll is subject to federal (FUTA) tax of 6.2% of the first $7,000 of employee pay per year. The payroll is also subject to Maryland unemployment tax (SU
per year. Both taxes are paid by the employer and the employee does not have these taxes withheld.

8

Mike participates in the Charitable giving program to donate money to Baltimore Habitat for Humanity each month. $25 is withheld from his check and sent to the charity
month.

(a) Calculate Mikes net pay check in the space provided below.
(b) Prepare journal entries for Mike’s pay and the related payroll expenses.
(c) What is the total cost to Baltimore Corp for Mike’s services during
February?
(a)

(b)

(c)

een paid for January. You are computing February

company will remit this tax and any employer match

business day after pay day.

via payroll withholdings. The company has established

ontribution of the first 5% of worker pay. There is no

ax (SUTA) of 4.0% of the first $8,500 of employee pay

harity by Baltimore Corp on the 10th of the following

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