Ch10 - Chapter 10 Reporting and Interpreting Current...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 10 Reporting and Interpreting Current Liabilities EXERCISES E10–4 Req. 1 March 31, 2007: Compensation expense (+E - SE) ......................................... 224,000 Liability for income taxes withheld (+L) ................................ 46,000 Liability for union dues withheld (+L) .................................... 3,000 Liability for insurance premiums withheld(+L) ...................... 1,000 CPP payable (+L) ................................................................. 16,445 EI payable (+L) .................................................................... 9,611 Cash ( - A) .............................................................................. 147,944 Payroll for March including employee deductions. Req. 2 March 31, 2007: Compensation expense (+E - SE) ......................................... 29,900 CPP payable (+L) ................................................................. 16,445 EI payable (+L) ..................................................................... 13,455 Employer’s additional payroll expenses for March ($9,611 x 1.4 = $13,455). Req. 3 Liability for income taxes withheld ( - L) ..................................... 46,000 Liability for union dues withheld ( - L) ........................................ 3,000 Liability for insurance premiums withheld ( - L) .......................... 1,000 CPP payable ( - L) ($16,445 x 2) ............................................... 32,890 EI payable ( - L) ($9,611 + $13,455) .......................................... 23,066 Cash ( - A) .............................................................................. 105,956 Remittance of employee deductions and employer-related amounts for March. Req. 4 The total compensation expense was $253,900, comprised of $224,000 of salaries and wages plus $29,900 of additional payroll charges levied on the employer.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
The total payroll (salaries and wages) was $224,000. The take-home pay was $147,944 and the percent of payroll that was take-home pay was 66% = $147,944 ÷ $224,000. Employee compensation is a large cost for most organizations. Employers are not concerned about the distinction between salaries and fringe benefits because both are expenses that are deductible for tax purposes. Employees sometimes prefer an extra dollar in fringe benefits over an extra dollar of salary because some fringe benefits are either not taxable or are not taxable in the current period. In the absence of tax effects, most employees prefer increases in salaries because they have full control over those dollars. E10–6 Req. 1 November 1, 2007: Cash (+A) ........................................................................ 4,500,000 Note payable (+L) ........................................................ 4,500,000 Borrowed on 6-month, 10%, note payable. Req. 2 December 31, 2007 (end of the fiscal year): Interest expense (+E - SE) ............................................ 75,000 Interest payable (+L) .................................................... 75,000 Adjusting entry for 2 months’ accrued interest ($4,500,000 x 10% x 2/12 = $75,000). Req. 3 April 30, 2008 (maturity date): Note payable ( - L) ............................................................. 4,500,000 Interest payable (per above) ( - L) ..................................... 75,000 Interest expense ($4,500,000 x 10% x 4/12) (+E - SE) 150,000 Cash ( - A) ...................................................................... 4,725,000 Paid note plus interest at maturity. Req. 4 It is doubtful that long-term borrowing would be appropriate in this situation. After the Christmas season, Hudson’s Bay will collect cash from its credit sales. At this point, it does not need borrowed funds. It would be costly to pay interest on a loan that was not needed. It might be possible to borrow for a longer term at a lower interest rate and
Image of page 2
invest idle cash to offset the interest charges. Hudson’s Bay should explore this possibility with its bank but in most cases it would be better to borrow on a short-term basis to meet short-term needs. E10–9 Req. 1 Warranty expense for 2008 = $3,600,000 x 0.004 = $14,400 Req. 2 Estimated warranty liability, January 1, 2008 $35,200 + Warranty expense for the year 14,400 – Cost of servicing products under warranty (15,600 ) = Estimated warranty liability, December 31, 2008 $34,000 E10–11 Req. 1 Date Assets Liabilities Shareholders’ Equity Jan. 10, 2008 Inventory + $18,000 Accounts Payable +$18,000 Not Affected March 1, 2008 Cash + $100,000 Note Payable + $100,000 Not Affected April 5, 2008 Accounts Receivable + $34,200 Inventory –$21,000 ($30,000 x 70%) GST Payable + $1,800 PST Payable + $2,400 Revenues + $30,000 Cost of goods sold –$21,000 ($30,000 x 70%) Req. 2 February 28, 2009
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern