1-1. Employee A and Employee B are the only 2 employees working at our firm. The following is the payroll information for each for the week of November 20. We pay our employees every Thursday. Use a cap of $100,000 and rates of 6% for social security and 1.5% for Medicare.

Employee A is a salaried employee. She earns $78,000 per year. So far this year she has earned $52,500. She paid $350 in federal income tax, $125 in state income tax, and paid a medical insurance premium of $75.

Employee B is an hourly worker. He earns $50/hour and has earned $102,000 so far this year. He worked 44 hours this week. He paid federal income tax of $400, state income tax of $150, and medical insurance premium of $100. He also contributes $100 per week to his pension.
INSTRUCTIONS: Determine the gross pay, total deductions, and net pay for each employee.

 

1-2. Company ABC has five employees. The totals of their payroll register are as follows:

Office Salaries……………………….$2400

Sales Salaries……………………….$1600

Federal Income Tax withheld…….$900

Union dues withheld………………..$75

Social security withheld……………$240 [6%]

Medicare withheld…………………..$60 [1.5%]

Net Pay………………………………..$2725

In addition, the company pays .8% for federal unemployment and 5% for state unemployment. All wages are taxable.
INSTRUCTIONS: Make the three journal entries to complete the payroll process.

 

2-1. (Pg. 136 3-1B) On March 31, 2010, the following data were accumulated to assist the accountant in preparing the adjusting entries for Hackney Realty:

a. The supplies account balance on March 31 is $2,315. The supplies on hand on March 31 are $990.

b. The unearned rent account balance on March 31 is $7,950, representing the receipt of an advance payment on March 1 of three month’s rent from tenants.

c. Wages accrued but not paid at March 31 are $800.

d. Fees accrued but unbilled at March 31 are $7,100.

e. Depreciation of office equipment is $700.

INSTRUCTIONS:
1. Journalize the adjusting entries required at March 31, 2010.
2. Explain the difference between adjusting entries and entries that would be made to correct errors.

 

2-2. (Pg. 137 3-2B) selected account balances before adjustment for Perfect Realty at October 31, 2010, the end of the current year, are as follows:

 

Debits

Credits

 

Accounts Receivable

$ 40,000

 

Equipment

100,000

 

Accumulated Depreciation

$ 12,000

 

Prepaid Rent

9,000

 

Supplies

1,800

 

Wages payable

 

Unearned Fees

6,000

 

Fees Earned

215,000

 

Wages Expense

75,000

 

Rent Expense

 

Depreciation Expense

 

Supplies Expense

Data needed for year-end adjustments are as follows:

a) Unbilled fees at October 31, $2,900.

b) Supplies on hand at October 31, $400.

c) Rent expired, $6,000.

d) Depreciation of equipment during year, $3,000.

e) Unearned fees at October 31, $800.

f) Wages accured but not paid at October 31, $1,400.

INSTRUCTIONS: Journalize the six adjusting entries required at October 31, based on the data presented.

 

3. Discussion Question. (Pg. 572 12-2)

Rahmel Becker and Heather Morrow decide to form a partnership. Becker will contribute $300,000 to the partnership, while Morrow will contribute only $30,000. However, Morrow will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Becker will only work five hours per week for their partnership. The two partners are attempting to determine a formula for dividing partnership net income. Becker believes the partners should divide income in the ratio of 7:3, favoring Becker, since Becker provides the majority of the capital. Morrow believes that income should be divided 7:3, favoring Morrow, since Morrow provides the majority of effort in running the partnership business.
INSTRUCTIONS: How would you advise the partners in developing a method for dividing income. At least 1 paragraph!

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