Chapter 9: Exercises

Here’s a breakdown of the approach you can take for each of these exercises: Exercise 9-1: Classifying Liabilities Classify each item: • • • Current liabilities: Payable within one year of the balance sheet date. Long-term liabilities: Due in more than one year. Not a liability: Items that don’t meet the criteria for liabilities. Examples: • • Notes payable due in 6–11 months would be a current liability. Notes payable due in 13–24 months would be a long-term liability. Exercise 9-2: Recording Known Current Liabilities For each transaction, you’ll need to: 1. Record the initial sale and related sales tax. 2. Record the remittance of sales tax to the government. Exercise 9-3: Financial Statement Impact For each transaction, analyze its effect on the accounting equation (Assets = Liabilities + Equity) by identifying the affected accounts and amounts. Exercise 9-4: Accounting for Note Payable Determine: 1. The maturity date. 2. The journal entries for the issuance and maturity payments of the note. Exercise 9-5: Interest-Bearing Notes with Year-End Adjustments Steps: 1. Calculate the maturity date and the interest for each part of the note (current and next year). 2. Record the issuance, accrual of interest at year-end, and final payment journal entries. Exercise 9-6: Note to Extend Credit Period Calculate the journal entries to: 1. Replace the account payable with partial cash payment and a note. 2. Record the payment at maturity with interest. Exercise 9-7: Computing Payroll Taxes For each tax: • • • FICA Social Security: 6.2% of applicable earnings. FICA Medicare: 1.45% of gross pay. FUTA and SUTA: Apply respective rates to the employee's taxable earnings. Compute each tax amount based on the given situations. Exercise 9-8: Payroll-Related Journal Entries Using data from Exercise 9-7(a), record salary expenses and the related payroll liabilities. Exercise 9-9: Employer Payroll Tax Expense Record the employer's payroll tax expense for September 30, based on Exercise 97(a). Exercise 9-10: Recording Payroll for Ramirez Company Tasks: 1. 2. 3. 4. Calculate accrued payroll and deductions. Record cash payment of net payroll. Record employer payroll taxes and other expenses. Pay liabilities. Exercise 9-11: Payroll Tax Computation for Mest Company Complete the payroll tax table for each employee and then calculate the totals for Social Security, Medicare, FUTA, and SUTA taxes. Exercise 9-12: Warranty Expense and Liability 1. Calculate warranty expense for Year 1 (4% of sales). 2. Record liability adjustments at year-end and repairs in the subsequent year. Exercise 9-13: Financial Statement Impact of Warranty Transactions Analyze each transaction’s effect on the accounting equation, detailing account names, increases, and decreases. Exercise 9-14: Recording Bonuses Record: 1. Bonus expense at year-end. 2. Payment of bonuses. Exercise 9-15: Estimated Liabilities For each situation: 1. Record accrued vacation benefits. 2. Calculate and record warranty expense based on estimated repairs. Exercise 9-16: Health and Pension Benefits 1. Record accrued benefits. 2. Note the treatment of retirement benefits in the balance sheet (long-term liability). Exercise 9-17: Contingent Liabilities Determine the appropriate treatment: 1. Record liability if probable and estimable. 2. Disclose in notes if probable but not estimable. 3. No disclosure if the contingency is remote. Exercise 9-18: Preparing a Classified Balance Sheet Using the trial balance information, organize assets, liabilities, and equity into a classified balance sheet. Exercise 9-19: Times Interest Earned Compute times interest earned for each company using the formula: Times Interest Earned=Net Income + Interest Expense + Income Tax ExpenseInter est Expense\text{Times Interest Earned} = \frac{\text{Net Income + Interest Expense + Income Tax Expense}}{\text{Interest Expense}}Times Interest Earned=Interest ExpenseNet Income + Interest Expense + Income Tax Expense Identify the company with the strongest coverage ratio. Exercise 9-20A: Computing Gross and Net Pay For Lenny Florita, calculate: 1. Regular and overtime pay. 2. Deductions for FICA and federal income tax. 3. Total deductions and net pay. Exercise 9-21A: Payroll Register Completion and Entries Fill in the payroll register and record journal entries for: 1. 2. 3. 4. Accrued payroll and deductions. Payment of net payroll. Payroll tax expenses. Payment of liabilities. Exercise 9-22B: Accounting for Income Taxes 1. Calculate the adjustment to Income Taxes Payable. 2. Record entries for the adjustment and the payment of taxes.