Question

>Continuing Problem P11-36 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 Riv- ers 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 1. Record the issuance of the $15,000 note payable on September 1, 2019. 2. Record the employee payroll and employer payroll tax entries on September 30, 2019 3. Record all payments related to September's payroll. Payments are made on October 15, 2019. PIC COLLAGE

Answer 1

Accounts Debit Credit Date 2019 Sep. 1 Cash Notes payable 15000 15000 Debit Credit 3000 Date Accounts 2019 Sep. 30 Salaries expense Federal income tax payable (25% x $3000) Social security tax payable (6.2% x $3000) Medicare tax payable (1.45% x $3000) Health insurance premium payable Salaries payable 750 186 43.5 250 1770.5 409.5 Sep. 30 Payroll tax expense Social security tax payable (6.2% x $3000) Medicare tax payable (1.45% x $3000) FUTA tax payable (0.6% x $3000) SUTA tax payable (5.4% x $3000) 186 43.5 18 162

Debit Credit Date Accounts 2019 Oct. 15 Salaries payable Cash 1770.5 1770.5 Oct. 15 Federal income tax payable Social security tax payable Medicare tax payable Health insurance premium payable FUTA tax payable SUTA tax payable Cash 750 372 87 250 18 162 1639

4 Debit Credit Date Accounts 2019 Dec. 31 Interest expense ($15000 x 6% x 4/12) Interest payable 300 300 5 Debit Credit Date Accounts 2020 Sep. 1 Note payable Interest payable Interest expense ($15000 x 6% x 8/12) Cash 15000 300 600 15900

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