Reference no: EM131876202

Questions -

1. Total payroll of Waston Co. was $1,840,000 of which $320,000 represented amounts paid in excess of $106,800 to certain employees. The amount paid to employees in excess of $7,000 was $1,440,000. Income taxes withheld were $450,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8% and the F.I.C.A tax is 7.65% on an employee's salaries and wages to $106,800 and 1.45% in excess of $106,800.

Instructions: (Show all work)

a) Prepare the journal entry for the salaries and wages paid.

b) Prepare the entry to record the employer payroll taxes.

2. DJ Co. is a calendar year firm with 120million common shares outstanding throughout 2013. As part of its executive compensation plan, at January 1, 2012, the company had issued 12 million executive stock options permitting executives to buy 12 million shares of stock for $10 each within the next eight years, but not prior to January 1, 2015. The fair value of the options was estimated on the grant date to be $3 per option. The stock options qualify for tax purposes as an incentive plan. The company's net income was $480 million in 2013. Its income tax rate is 40%. The average market price of the stock during 2013 was $12 per share.

Instructions: (show al work)

a) Determine the basic and dilutive EPS (rounded to two decimal places) for DJ in 2013.