Reference no: EM131776013

Question 1 - You and several classmates are studying for the next accounting examination. They ask you to answer the following questions:

1. If cash is borrowed on a $70,000, 9-month, 12% note on August 1, how much interest expense would be incurred by December 31?

2. The cash register total including sales taxes is $42,000, and the sales tax rate is 5%. What is the sales taxes payable?

3. If $42,000 is collected in advance on November 1 for 6-month magazine subscriptions, what amount of subscription revenue is earned by December 31?

Question 2 - Moth Company has the following account balances at December 31, 2010.

Notes payable ($60,000 due after 12/31/11)                        $100,000

Unearned revenue                                                            70,000

Other long-term debt ($90,000 due in 2011)                        250,000

Salaries payable                                                                32,000

Utilities payable                                                                 13,000

Accounts payable                                                              50,000

In addition, Moth is involved in a lawsuit. Legal counsel feels it is probable Moth will pay dam¬ages of $85,000 in 2011.

(a) Prepare the current liability section of Moth's 12/31/10 balance sheet.

(b) Moth's current assets are $570,000. Compute Moth's working capital and current ratio.

Question 3 - In January, gross earnings in Alexi Company were $60,000. All earnings are subject to 8% PICA taxes. Federal income tax withheld was $14,000, and state income tax withheld was $1,600. (a) Calculate net pay for January, and (b) record the payroll.

Question 4 - In January, the payroll supervisor determines that gross earnings for Bond Company are $110,000. All earnings are subject to 8% PICA taxes, 5.4% state unemployment taxes, and 0.8% federal unemployment taxes. Bond asks you to record the employer's payroll taxes.

Question 5 - Rob Judson Company had the following transactions involving notes payable.

July 1, 2010 Borrows $50,000 from Third National Bank by signing a 9-month, 12% note.

Nov. 1, 2010 Borrows $60,000 from DeKalb State Bank by signing a 3-month, 10% note.

Dec. 31, 2010 Prepares adjusting entries.

Feb. 1, 2011 Pays principal and interest to DeKalb State Bank.

Apr. 1,2011 Pays principal and interest to Third National Bank.

Instructions - Prepare journal entries for each of the transactions.

Question 6 - On June 1, Melendez Company borrows $90,000 from First Bank on a 6-month, $90,000, 12% note.

Instructions

(a) Prepare the entry on June 1.

(b) Prepare the adjusting entry on June 30.

(c) Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30.

(d) What was the total financing cost (interest expense)?