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Item 1

Item 1 16.66 points

Lakeview Company completed the following two transactions. The annual accounting period ends December 31.

1. On December 31, calculated the payroll, which indicates gross earnings for wages ($76,000), payroll deductions for income tax ($7,600), payroll deductions for FICA ($5,700), payroll deductions for American Cancer Society ($2,850), employer contributions for FICA (matching), and state and federal unemployment taxes ($665). Employees were paid in cash, but payments for the corresponding payroll deductions have not yet been made and employer taxes have not yet been recorded.
2. Collected rent revenue of $5,925 on December 10 for office space that Lakeview rented to another business. The rent collected was for 30 days from December 12 to January 10 and was credited in full to Deferred Revenue.

Required:

1. 1. & 2. Prepare the journal entries to record payroll on December 31, the collection of rent on December 10 and adjusting journal entry on December 31.
2. 3. Show how any of the liabilities related to these items should be reported on the company’s balance sheet at December 31.

Answer 1

Date	Particulars	Debit	Credit
Dec-31	Salary expenses	$76,000
	FICA Expenses	$5,700
	state and federal unemployment taxes	$665
	Income Tax payable		$7,600
	FICA Payable- Employee Contribution		$5,700
	Payable to American Cancer Society		$2,850
	FICA Payable- Employer Contribution		$5,700
	state and federal unemployment taxes payable		$665
	Cash		$59,850
Date	Particulars	Debit	Credit
Dec-10	Cash	$5,925
	Deferred Revenue		$5,925
Adjusting Entry for Rent on 31st Dec
Date	Particulars	Debit	Credit
Dec-10	Deferred Revenue	$3,950
	Rent Income		$3,950
	Rent Collection Period - Dec-12 to Jan-10
	Total Days = 30 days
	Revenue to be recognised for the period - Dec-12 to Dec-31
	Total Days = 20 Days
	Amount to be credited to Rental Income = (5925/30*20)

Liability	Balance as on 31st Dec after Adjusting entry	Remarks
Income Tax payable	$7,600	To be reported under - Current Liabilities / Statuary Dues Payable
FICA Payable- Employee Contribution	$5,700	To be reported under - Current Liabilities / Statuary Dues Payable
Payable to American Cancer Society	$2,850	To be reported under - Current Liabilities / Other payables
FICA Payable- Employer Contribution	$5,700	To be reported under - Current Liabilities / Statuary Dues Payable
state and federal unemployment taxes payable	$665	To be reported under - Current Liabilities / Statuary Dues Payable
Deferred Revenue	$1,975	To be reported under - Current Liabilities /Un-earned Revenue