FINANCE

The following are selected 2017 transactions of Sandhill Corporation.

Sept. 1 Purchased inventory from Encino Company on account for $44,800. Sandhill records purchases gross and uses a periodic inventory system.
Oct. 1 Issued a $44,800, 12-month, 8% note to Encino in payment of account.
Oct. 1 Borrowed $44,800 from the Shore Bank by signing a 12-month, zero-interest-bearing $49,760 note.

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(a)

Prepare journal entries for the selected transactions above. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record entries in the order displayed in the problem statement.)

Date Account Titles and Explanation Debit Credit
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October 1 https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
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Sarasota Hardware Company’s payroll for November 2017 is summarized below.

Amount Subject to Payroll Taxes
Unemployment Tax
Payroll Wages Due FICA Federal State
Factory $131,500 $131,500 $41,500 $41,500
Sales 31,100 31,100 4,100 4,100
Administrative 37,400 37,400    
   Total $200,000 $200,000 $45,600 $45,600

At this point in the year, some employees have already received wages in excess of those to which payroll taxes apply. Assume that the state unemployment tax is 2.5%. The FICA rate is 7.65% on an employee’s wages to $118,500 and 1.45% in excess of $118,500. Of the $200,000 wages subject to FICA tax, $20,700 of the sales wages is in excess of $118,500. Federal unemployment tax rate is 0.8% after credits. Income tax withheld amounts to $17,300 for factory, $6,600 for sales, and $5,500 for administrative.

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(a)

Prepare a schedule showing the employer’s total cost of wages for November by function. (Round answers to 0 decimal places, e.g. 5,275.)

Factory Sales Administrative Total
Salaries and Wages $

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$

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$

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$

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FICA Taxes https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
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SUTA Taxes https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
Total Cost $

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$

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$

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$

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Presented below is a list of possible transactions. Analyze the effect of the 18 transactions on the financial statement categories indicated.

Transactions Assets Liabilities Owners’ Equity Net Income
1. Purchased inventory for $80,000 on account (assume perpetual system is used). https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
 
2. Issued an $80,000 note payable in payment on account (see item 1 above). https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
 
3. Recorded accrued interest on the note from item 2 above. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
 
4. Borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
 
5. Recognized 4 months’ interest expense on the note from item 4 above. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
 
6. Recorded cash sales of $75,260, which includes 6% sales tax. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
 
7. Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various amounts withheld. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif

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