Chap009wildtextbook

The note bears interest at 6 per year principal and

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The note bears interest at 6% per year. Principal and interest are due in 3 months (December 1, 2011). DR CR Sep 1 Cash 20,000 Notes payable 20,000 To record note to American Bank 9-11
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On December 1, 2011, Smith would make the following entry: DR CR Notes payable 20,000 Interest expense 300 Cash 20,300 To record payment of note and interest $20,000 × 6% × (3 / 12) = $300 Face Value Equals Amount Borrowed 9-12
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Note Date End of Period Maturity Date An adjusting entry is required to record interest expense incurred to date. End-of-Period Adjustment to Notes 9-13
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Dec. 1, 2011 Dec. 31, 2011 Feb. 1, 2012 James Burrows borrowed $8,000 on Dec. 1, 2011, by signing a 12%, 2-month note payable. End-of-Period Adjustment to Notes Note Date End of Period Maturity Date 9-14
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On December 1, 2011, James Burrows would make the following entry: End-of-Period Adjustment to Notes Dec 1 Cash 8,000 Notes payable 8,000 To record amount borrowed from bank On December 31, 2011, the adjustment is: DR CR Dec 31 Interest expense 80 Interest payable 80 To accrue interest on note $8,000 × 12% × (1 / 12) = $80 9-15
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On February 1, 2012, James Burrows would make the following entry. End-of-Period Adjustment to Notes DR CR Feb 1 Notes payable 8,000 Interest payable 80 Interest expense 80 Cash 8,160 To record payment of note $8,000 × 12% × (1 / 12) = $80 9-16
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Employers incur expenses and liabilities from having employees. Payroll Liabilities 9-17
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Employee Payroll Deductions FICA Taxes Medicare Taxes Federal Income Tax State and Local Income Taxes Voluntary Deductions Gross Pay Net Pay 9-18
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FICA Taxes — Soc. Sec. FICA Taxes Medicare 2010: 6.2% of the first $106,800 earned in the year ( Max = $6,622). 2010: 1.45% of all wages earned in the year. Employers must pay withheld taxes to the Internal Revenue Service (IRS). Employee FICA Taxes Federal Insurance Contributions Act (FICA) 9-19
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Amounts withheld depend on the employee’s earnings, tax rates, and number of withholding allowances. Employers must pay the taxes withheld from employees’ gross pay to the appropriate government agency. Federal Income Tax State and Local Income Taxes Employee Income Tax 9-20
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Amounts withheld depend on the employee’s request. Employers owe voluntary amounts withheld from employees’ gross pay to  the designated agency. Voluntary Deductions Examples include union dues, savings accounts, pension contributions, insurance premiums, and charities. Employee Voluntary Deductions 9-21
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The entry to record payroll expenses and deductions for an employee might look like this.
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