Ex13-14 on the following screen deals with Contingent & Estimated Liabilities

E13-1 (Balance Sheet Classification of Various Liabilities

How would each of the following items be reported on the balance sheet?

a. Accrued Vacation Pay

b. Estimated Taxes Payable

c. Service Warranties on Appliance Sales

d. Bank Overdraft

e. Employee payroll deductions unremitted

f. Unpaid bonuses to officers

g. Deposit received from customer to guarantee contract performance

h. Sales tax payable

i. Gift certificates sold to customers but as yet unredeemed

E13-1 Continued: How to report these items on a Balance Sheet?

j. Premium offers outstanding

k. Discount on N/P

l. Personal Injury claim pending

m. Current maturities of long-term debts to be paid from current assets

n. Cash dividends declared but unpaid

o. Dividends in arrears on preferred stock

p. Loans from officers

E13-2 A/P & N/P

The following are selected 1998 transactions of Sean Astin Corp:

Sept 1 Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system.

Oct 1 Issued a $50,000, 12-month, 12% note to Encino in payment of account.

Oct 1 Borrowed $50,000 from the Shore Bank by signing a 12-month, noninterest bearing $56,000 note.

Required: 1. JE’s for transactions

2. ADJ JE’s for December 31

3. Net Liability reported on 12/31 Balance Sheet for the interest-bearing and non-interest bearing note

E13-7 (Adjusting Entry for Sales Tax)

During the month of June, R. Attenborough Boutique had cash sales of $233,200 and credit sales of $153,700, both of which include the 6% sales tax that must be remitted to the state by July 15.

Required:

Prepare the Adjusting JE that should be recorded to fairly present the June 30 financial statements

Sales + .06Sales = Cash Collected

How Much Tax was collected?

E13-8 (Payroll Tax Entries) The payroll of Rene Auber Company for September 1997 is as follows:

Total payroll was $480,000, of which $110,000 is exempt from social security tax because it represented amounts paid in excess of $65,400 to certain employees. The amount paid to employees in excess of $7,000 was $400,000. Income taxes in the amount of $90,000 were withheld, as was $9,000 in union dues. The state unemployment tax is 3.5%, but Auber Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current F.I.C.A. tax is 7.65% on an employee’s wages to $65,400 and 1.45% in excess of $65,400. No employee for Auber makes more than $125,000. The federal unemployment tax rate is .8% after state credit.

Required: Prepare the necessary JE’s if the wages and salaries paid and the employer payroll taxes are recorded separately.

E13-10 (Warranties)

Dookie Company sold 200 copymaking machines in 1998 for $4,000 each. Each unit included a one-year warranty. Maintenance on each machine during the warranty period averages $330.

Required:

(a) Prepare entries to record the sale of the machines and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 1998 were $17,000

(b) On the basis of the data above, prepare the appropriate entries, assuming that the cash basis method is used.

END Of Chapter 13

& Beginning of Chapter 14

P14-6

For the Entire $700,000 Bond Issue, Calculate the CV as of:

5/1/98 700,000 + .06(700,000) = $742,000

12/31/98 742,000 - (42,000/116mths) x 8 mths = 739,103

4/1/99 739,103 - (42,000/116mths) x 3 mths = 738,017

CV Associated with $420,000 as of 4/1/99? 420/700 = 60%

60% x 738, 017 = 442,810

Calc Gain/Loss on the Retirement:

Cost to retire: $420,000 x 1.02 = 428,400

CV of $420,000 as of 4/1 (442,810)

Extraord Gain 14,410

END Of Chapter 14