b. Payroll registers for October, November, and December. All employees worked October 1 through December 31 and are subject to the following FICA taxes: OASDI: 6.2% on first $118,500 earned; Medicare: 1.45% up to $200,000, 2.35% on earnings above $200,000. Additional payroll information includes: Monthly Salary Federal Health Employee Income Tax Insurance $ 6,000 $ 1,800 $ 300 Kate Jones Mary Smith 5,000 1,000 300 Sherry Martin 3,000 450 300 c. Calculations for employer payroll taxes liabilities for October, November, and December: OASDI: 6.2% on first $118,500 earned; Medicare: 1.45%; SUTA: 5.4% on first $7,000 earned; FUTA: 0.6% on first $7,000 earned. 2. Record the transactions in the general journal. Omit explanations. 3. Post to the general ledger. 4. Record adjusting entries for the three month period ended December 31, 2018: a. Depreciation on the Building, straight-line, 40 years, no residual value. b. Depreciation on Store Fixtures, straight-line, 20 years, no residual value. c. Accrued interest expense on the note payable for the store fixtures. d. Accrued interest expense on the mortgage payable. e. Accrued income tax expense of $36,000. 5. Post adjusting entries and prepare an adjusted trial balance. 6. Prepare a multi-step income statement and statement of retained earnings for the quarter ended December 31, 2018. Prepare a classified balance sheet as of December 31, 2018. Assume that $13,840 of the mortgage payable is due within the next year. 7. Evaluate the company's success for the first quarter of operations by calculating the following ratios. The market price of the common stock is $25 on December 31, 2018. Round to two decimal places. a. Times interest earned b. Debt to equity c. Earnings per share d. Price/carnings ratio e. Rate of return on common stock 8. The Tusquittee Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $250,000 in 2019 and that the expansion will provide additional operating income of $75,000 in 2019. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options, assuming a 30% income tax rate: Plan 1: Issue 10,000 additional shares of common stock for $20 per share Plan 2: Issue $200,000 in 20-year, 12% bonds payable. Which option will contribute more net income in 2019? Which option provides the highest EPS?
b. Payroll registers for October, November, and December. All employees worked October 1 through December 31 and are subject to the following FICA taxes: OASDI: 6.2% on first $118,500 earned; Medicare: 1.45% up to $200,000, 2.35% on earnings above $200,000. Additional payroll information includes: Monthly Salary Federal Health Employee Income Tax Insurance $ 6,000 $ 1,800 $ 300 Kate Jones Mary Smith 5,000 1,000 300 Sherry Martin 3,000 450 300 c. Calculations for employer payroll taxes liabilities for October, November, and December: OASDI: 6.2% on first $118,500 earned; Medicare: 1.45%; SUTA: 5.4% on first $7,000 earned; FUTA: 0.6% on first $7,000 earned. 2. Record the transactions in the general journal. Omit explanations. 3. Post to the general ledger. 4. Record adjusting entries for the three month period ended December 31, 2018: a. Depreciation on the Building, straight-line, 40 years, no residual value. b. Depreciation on Store Fixtures, straight-line, 20 years, no residual value. c. Accrued interest expense on the note payable for the store fixtures. d. Accrued interest expense on the mortgage payable. e. Accrued income tax expense of $36,000. 5. Post adjusting entries and prepare an adjusted trial balance. 6. Prepare a multi-step income statement and statement of retained earnings for the quarter ended December 31, 2018. Prepare a classified balance sheet as of December 31, 2018. Assume that $13,840 of the mortgage payable is due within the next year. 7. Evaluate the company's success for the first quarter of operations by calculating the following ratios. The market price of the common stock is $25 on December 31, 2018. Round to two decimal places. a. Times interest earned b. Debt to equity c. Earnings per share d. Price/carnings ratio e. Rate of return on common stock 8. The Tusquittee Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $250,000 in 2019 and that the expansion will provide additional operating income of $75,000 in 2019. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options, assuming a 30% income tax rate: Plan 1: Issue 10,000 additional shares of common stock for $20 per share Plan 2: Issue $200,000 in 20-year, 12% bonds payable. Which option will contribute more net income in 2019? Which option provides the highest EPS?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
the tusquittee company is a retail company that began operations on October 1, 2018, when it incorporated in the state of North
Carolina. The Tusquitte Company is authorized to issue 100,000
shares of $1 par value common stock and 50,000 shares of 5 %, $50
par valuepreferred stock . The Company sells a product that
includes a one year warranty and records estimated warranty payable
each month. Customers are charged a 6 % state sale tax. The company
uses a perpetual inventory system. There are three employees that
are paid a monthly salary on the last day of the month. Following
is the chart of accounts for The Tusquittee Company. As a new
business, all beginning balances are $0.
Carolina. The Tusquitte Company is authorized to issue 100,000
shares of $1 par value common stock and 50,000 shares of 5 %, $50
par value
includes a one year warranty and records estimated warranty payable
each month. Customers are charged a 6 % state sale tax. The company
uses a perpetual inventory system. There are three employees that
are paid a monthly salary on the last day of the month. Following
is the chart of accounts for The Tusquittee Company. As a new
business, all beginning balances are $0.
The Tusquittee Company Chart of Accounts Cash Dividends Payable-common Merchandise. Inventory Notes Payable Land Mortgages Payable Building Common Stock-$1 par Value Store fixtures Paid in capital in excesses of par- common Accumulated Depreciation Paid in Capital from treasury
stock transactions Accounts Payable Retained earnings Employee
Income taxes Payable Treasure Stock –Common FICA-OASDI Taxes
Payable Cash dividends FICA-Medicare taxes payable Sales Revenue
Employee Health Insurance Payable Cost of good Sold Federal
Unemployment taxes payable Salaries Expense State Unemployment
Taxes Payable Payroll Tax Expense Income tax payable Utilities
Expense Sales taxes payable Depreciation Expense Estimated Warranty
Payable Warranty Expense Interest payable INCOME TAX EXPENSE
Interest expense
________________________________________________________________________________________________
The tusquitte company completed the following transactions during
the last quarter of 2018, its first year of operations:
stock
Income taxes Payable Treasure Stock –Common FICA-OASDI Taxes
Payable Cash dividends FICA-Medicare taxes payable Sales Revenue
Employee Health Insurance Payable Cost of good Sold Federal
Unemployment taxes payable Salaries Expense State Unemployment
Taxes Payable Payroll Tax Expense Income tax payable Utilities
Expense Sales taxes payable Depreciation Expense Estimated Warranty
Payable Warranty Expense Interest payable INCOME TAX EXPENSE
Interest expense
________________________________________________________________________________________________
The tusquitte company completed the following transactions during
the last quarter of 2018, its first year of operations:
Oct 1 issued 25,000 share of $1 par value common stock for cash of $10
per share.
per share.
1 issued a $200,000, 10-year, 8% mortgage payable for
land with an existing store building, mortgage payments of $2,425
are due on the first day of each month, beginning November 1. The
assets had the following market values: land, $40,00; building
$160,000. 1 issued a one-year , 10% note payable for $10,000 for
score fixtures. The principal and interest are due October 1, 2019.
3 purchased merchandise inventory on account from top rate for
$125,000, terms n/30. 15 paid $160 for utilities. 31 recorded cash
sales for the month of $185,000 plus sales tax of 6%. The cost of
the goods sold was $110,000 and estimated warranty payable was 8%.
31 recorded October payroll and paid employees. 31 accrued employer
payroll taxes for October Nov 1 paid the first mortgage payment 3
paid top rate for the merchandise inventory purchased on October 3.
10 purchased merchandise inventory on account from top rate for
$150,000, terms n/30 12 purchased 500 shares of treasury stock for
$15 per share. 15 paid all liabilities associated with the October
31 payroll. 15 remind (paid) sales tax from October sales to the
state of north Carolina. 16 paid $6,000 to satisfy warranty claims.
17 declared cash dividends of $1 per outstanding share of common
stock. 18 paid $245 for utilities 27 paid the cash dividends. 30
recorded cash sales for the month of $140,000 plus sales tax of 6%.
The cost of the goods sold was $84,000 and estimated warranty
payable was 8% 30 recorded November payroll and paid employees. 30
accrued employer payroll taxes for November. Dec 1 paid the second
mortgage payment. 10 paid top rate for the merchandise inventory
purchased on November 10 12 paid $7,500 to satisfy warranty claims.
15 sold 300 shares of treasury stock for $20 per share. 15 paid all
liabilities associated with the November sales to the state of
north Carolina. 18 paid$220 for utilities. 19 purchased merchandise
inventory on account from top rate for$90,000, terms n/30. 31
recorded cash sales for the month of $210,000 plus sales tax of 6%.
The cost of the goods sold was $126,000 and estimated warranty
payable was 8%. 31 recorded December payroll and paid employees. 31
accrued employer payroll taxes for December. Requirements:
land with an existing store building, mortgage payments of $2,425
are due on the first day of each month, beginning November 1. The
assets had the following market values: land, $40,00; building
$160,000. 1 issued a one-year , 10% note payable for $10,000 for
score fixtures. The principal and interest are due October 1, 2019.
3 purchased merchandise inventory on account from top rate for
$125,000, terms n/30. 15 paid $160 for utilities. 31 recorded cash
sales for the month of $185,000 plus sales tax of 6%. The cost of
the goods sold was $110,000 and estimated warranty payable was 8%.
31 recorded October payroll and paid employees. 31 accrued employer
payroll taxes for October Nov 1 paid the first mortgage payment 3
paid top rate for the merchandise inventory purchased on October 3.
10 purchased merchandise inventory on account from top rate for
$150,000, terms n/30 12 purchased 500 shares of treasury stock for
$15 per share. 15 paid all liabilities associated with the October
31 payroll. 15 remind (paid) sales tax from October sales to the
state of north Carolina. 16 paid $6,000 to satisfy warranty claims.
17 declared cash dividends of $1 per outstanding share of common
stock. 18 paid $245 for utilities 27 paid the cash dividends. 30
recorded cash sales for the month of $140,000 plus sales tax of 6%.
The cost of the goods sold was $84,000 and estimated warranty
payable was 8% 30 recorded November payroll and paid employees. 30
accrued employer payroll taxes for November. Dec 1 paid the second
mortgage payment. 10 paid top rate for the merchandise inventory
purchased on November 10 12 paid $7,500 to satisfy warranty claims.
15 sold 300 shares of treasury stock for $20 per share. 15 paid all
liabilities associated with the November sales to the state of
north Carolina. 18 paid$220 for utilities. 19 purchased merchandise
inventory on account from top rate for$90,000, terms n/30. 31
recorded cash sales for the month of $210,000 plus sales tax of 6%.
The cost of the goods sold was $126,000 and estimated warranty
payable was 8%. 31 recorded December payroll and paid employees. 31
accrued employer payroll taxes for December. Requirements:
1)In
preparation for recording the transactions, prepare:
A)An
amortization Schedule for the first 3 months of the mortgage
payable issued on October 1. Round interest calculations to the
nearest dollar.
Transcribed Image Text:b. Payroll registers for October, November, and December. All employees worked
October 1 through December 31 and are subject to the following FICA taxes:
OASDI: 6.2% on first $118,500 earned; Medicare: 1.45% up to $200,000, 2.35%
on earnings above $200,000. Additional payroll information includes:
Monthly
Salary
Federal
Health
Employee
Income Tax
Insurance
$ 6,000
$ 1,800
$ 300
Kate Jones
Mary Smith
5,000
1,000
300
Sherry Martin
3,000
450
300
c. Calculations for employer payroll taxes liabilities for October, November, and
December: OASDI: 6.2% on first $118,500 earned; Medicare: 1.45%; SUTA:
5.4% on first $7,000 earned; FUTA: 0.6% on first $7,000 earned.
2. Record the transactions in the general journal. Omit explanations.
3. Post to the general ledger.
4. Record adjusting entries for the three month period ended December 31, 2018:
a. Depreciation on the Building, straight-line, 40 years, no residual value.
b. Depreciation on Store Fixtures, straight-line, 20 years, no residual value.
c. Accrued interest expense on the note payable for the store fixtures.
d. Accrued interest expense on the mortgage payable.
e. Accrued income tax expense of $36,000.
5. Post adjusting entries and prepare an adjusted trial balance.
6. Prepare a multi-step income statement and statement of retained earnings for the
quarter ended December 31, 2018. Prepare a classified balance sheet as of December
31, 2018. Assume that $13,840 of the mortgage payable is due within the next year.
7. Evaluate the company's success for the first quarter of operations by calculating
the following ratios. The market price of the common stock is $25 on December
31, 2018. Round to two decimal places.
a. Times interest earned
b. Debt to equity
c. Earnings per share
d. Price/carnings ratio
Transcribed Image Text:e. Rate of return on common stock
8. The Tusquittee Company wants to expand and is considering options for raising
additional cash. The company estimates net income before the expansion of
$250,000 in 2019 and that the expansion will provide additional operating income
of $75,000 in 2019. The company intends to sell the shares of treasury stock, so
use issued shares for the analysis rather than current shares outstanding. Compare
these options, assuming a 30% income tax rate:
Plan 1: Issue 10,000 additional shares of common stock for $20 per share
Plan 2: Issue $200,000 in 20-year, 12% bonds payable.
Which option will contribute more net income in 2019? Which option provides the
highest EPS?
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