Reference no: EM13504654

Introduction

On July 25, 20x1, Jake's Computer Sales and Repair enters into an agreement with Inner-Tech, a local computer software development firm. Inner-Tech pays Jake's Computer Sales and Repair $45,000 in advance for ongoing computer repair services. At year-end, Jake determines that $38,500 of this amount has been earned.

Requirement 1

a.        Journalize the unearned revenue transaction on July 25, 20x1.

DATE	Account and Explanation	DEBIT	CREDIT
Jul 25
	To record unearned revenue

 

 

 

 

b.       Journalize the necessary adjustment for December 31, 20x1.

 

DATE	Account and Explanation	DEBIT	CREDIT
Dec 31
	To adjust unearned revenue

 

 

 

 

 

Requirement 2

Analysis shows that around 2 percent of A-line sales require after-sale repairs. Beginning July 1, 20x1, Jake's Computer Sales and Repair provides customers with a limited product warranty on each A-line computer sold. Sales of A-line computers total to $74,500 in July 20x1.

a.           Compute the estimated warranty expense payable amount.

b.          Journalize the estimated warrantee expense.

 

DATE	Account and Explanation	DEBIT	CREDIT
Jul 31
	To accrue warranty payable

 

 

 

 

c.           Actual repairs made during August 20x1 to products under warranty results in cash expenditures of $800. Journalize the warranty repair cost.

 

DATE	Account and Explanation	DEBIT	CREDIT
Aug 30
	To accrue warranty payable

 

 

 

 

d.          At what amount is warranty expense reported on the income statement for the month ended August 20x1?

 

Requirement 3

Jake's Computer Sales and Repair has one employee, Dave, who earns a monthly gross salary of $3,415 for the month of August 20x1. So far, in 20x1, Dave has earned a gross salary amounting to $23,905.

Jake's Computer Sales and Repair withholds the following amounts from Dave's gross salary:

 

• Social Security taxes and Medicare taxes-Federal Insurance Contributions Act (FICA)-at 7.65 percent of gross salary up to $106,800
• Income tax withheld: 10 percent
• Other amounts withheld:
  • Health insurance: $200 per month
  • Retirement plan contribution: $400 per pay period
  • Charitable contribution: $20 per pay period

 

a.        Compute Dave's net salary by completing the following table:

 

Gross pay:
Less withholding deductions:
Income tax
Employee FICA tax
Health insurance
Employee retirement contribution
Employee charitable contribution
Net pay

 

b.       Journalize salaries, payroll taxes, and benefits payable. In addition, journalize the salary payment.

 

DATE		DEBIT	CREDIT
Aug 31
	To record salaries payable

 

 

 

 

DATE		DEBIT	CREDIT
31
	To record payment of salary

 

 

 

 

 

 

 

c.        As Dave's employer, Jake's Computer Sales and Repair must also make a payroll tax payment. Journalize the entry to record employer payroll taxes.

 

DATE		DEBIT	CREDIT
Aug 31
	To record employer payroll taxes

 

 

 

d.       Journalize the payment of taxes to the federal government.

DATE		DEBIT	CREDIT
Aug 31
	To record payment of payroll taxes to government