Question

Selected transactions of Shadrach Computer Corporation during November and December of 2019 are as follows: November Transactions: Nov. 1 9 20 Borrowed money from the bank by issuing a non-interest-bearing, $54,000, 90-day note. The note is discounted on a 15% basis. Sold 120 computers with a 1-year assurance-type warranty for $5,200 each on credit (ignore cost of goods sold). Past experience indicates that warranty costs average $115 per computer. Sold 120 software packages at $290 each on credit (ignore cost of goods sold). With each software package, Shadrach offered a premium in the form of a USB drive for the return of one proof of purchase. The offer expires June 30, 2020. The cost of each USB drive is $15, and Shadrach estimates that 80% of the premiums will be redeemed; therefore, 96 USB drives were purchased on credit. Paid $2,500 in fulfillment of the warranty agreement on several of the computers sold on November 9. Accrued monthly vacation pay. Shadrach has 100 employees who are each paid an average of $190 per day. Shadrach has a policy of allowing each employee 12 days' paid vacation per year; the related liability is recorded on a monthly basis. Employees are paid monthly. paid monthly payroll. Gross salaries were $440,000. No vacations were taken during November. Income tax withholdings of 20% are applicable to the salaries of all employees. A F.I.C.A. tax of 8% for both employees and employers is also applicable to the entire amount of gross salaries. These rates apply to all salaries because no employee's salary has exceeded the maximum wage limit. The state allows the corporation a 1% unemployment compensation merit-rating reduction from the normal rate of 5.4%. The federal unemployment rate is 0.6%. Prior to October, each individual employee had accumulated a gross salary in excess of $7,000 for 2019. 30

Answer 1

Date	Accounts title	Ref	Dr	Cr
01-Nov	Cash	111	51,975
	Discount On Note payable	261	2,025
	Note Payable	260		54,000
31-Dec	Interest expense 2 months	540	1,350
	Discount On Note payable	261		1,350
09-Nov	Accounts Receivable	121	6,24,000
	Sales Revenue	411		6,24,000
	Warranty expense	551	13,800
	Estimated Warranty Liability	240		13,800
12-Nov	Accounts Receivable 120*290	121	34,800
	Sales Revenue	411		34,800
	Premium expense	552	1,440
	Estimated Premium Liability	241		1,440
20-Nov	Estimated Warranty Liability	240	2,500
	Cash	111		2,500
30-Nov	Salaries Expenses (190*12*100*(1/12))	521	19,000
	Liability for Compensated Absences	222		19,000
30-Nov	Salaries Expenses	521	4,40,000
	Federal income taxes witholding payable (0.20 x $440,000)	225		88,000
	F.I.C.A taxes payable (0.08 x $440,000)	224		35,200
	Cash (Balancing Figure)	111		3,16,800
30-Nov	Payroll Tax Expense	522	35,200
	F.I.C.A taxes payable (0.08 x $440,000)	224		35,200
14-Dec	Estimated Premium Liability	241	300
	Cash	111		300
29-Dec	Loss from accident	561	1,400
	Estimated Liability from Lawsuit	245		1,400
31-Dec	Salaries Expenses (190*12*100*(1/12))	521	19,000
	Liability for Compensated Absences	222		19,000
31-Dec	Salaries expense	521	13,200
	Bonus payable	221		13,200
	(560000*.7= (392000-260000)*10%=
31-Dec	Salaries Expenses	521	4,33,000
	Federal income taxes witholding payable (0.20 x $433,000)	225		86,600
	F.I.C.A taxes payable (0.08 x $433,000)	224		34,640
	Cash (Balancing Figure)	111		3,11,760
31-Dec	Payroll Tax Expense	522	34,640
	F.I.C.A taxes payable (0.08 x $440,000)	224		34,640
31-Dec	Salaries' Expenses	521	56,000
	Bonus Payable	221		56,000