Accounting for liabilities of a known amount This problem continues the Canyon Canoe Company situation from Chapter 10. Amber and Zack Wilson are continuing their analysis of the company’s position and believe the company will need to borrow $15,000 in order to expand operations. They consult Rivers Nation Bank and secure a 6%, one-year note on September 1, 2019, with interest due at maturity. Additionally; the company hires an employee, john Vance, on September 1. John will receive a salary of $3,000 per month. Payroll deductions include federal income tax at 25%, OASDI at 6.2%, Medicare at 1.45%, and monthly health insurance premium of $250. The company will incur matching FICA taxes, FUTA tax at 0.6%, and SUTA tax at 5.4%. Round calculations to two decimals. Omit explanations on journal entries Requirements Record the issuance of the $15,000 note payable on September 1, 2019. Record the employee payroll and employer payroll tax entries on September 30, 2019. Record all payments related to September’s payroll. Payments are made on October 15, 2019. Record the entry to accrue interest due on the note at December 31, 2019. Record the entry Canyon Canoe Company would make to record the payment to the bank on September 1, 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Accounting for liabilities of a known amount

This problem continues the Canyon Canoe Company situation from Chapter 10. Amber and Zack Wilson are continuing their analysis of the company’s position and believe the company will need to borrow $15,000 in order to expand operations. They consult Rivers Nation Bank and secure a 6%, one-year note on September 1, 2019, with interest due at maturity. Additionally; the company hires an employee, john Vance, on September 1. John will receive a salary of $3,000 per month. Payroll deductions include federal income tax at 25%, OASDI at 6.2%, Medicare at 1.45%, and monthly health insurance premium of $250. The company will incur matching FICA taxes, FUTA tax at 0.6%, and SUTA tax at 5.4%. Round calculations to two decimals. Omit explanations on journal entries

Requirements

Record the issuance of the $15,000 note payable on September 1, 2019.
Record the employee payroll and employer payroll tax entries on September 30, 2019.
Record all payments related to September’s payroll. Payments are made on October 15, 2019.
Record the entry to accrue interest due on the note at December 31, 2019.
Record the entry Canyon Canoe Company would make to record the payment to the bank on September 1, 2020.

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