Question

04. a) Sarah Corporation has an annual payroll of $150,000. At December 31. Sarah Corporation owes salaries of $7.600 on which employee withholdings payable are 51.200 and employee benefits payable by the company are $1,000. The company has calculated its share of Canada Pension Plan. Employment Insurance, and other employee benefits to be 6% of payroll expense. The company will pay these amounts early next year. Show what Sarah will report for the foregoing on its income statement and year-end balance sheet

Answer 1

Q4 a) Income Statement Salary expense Payroll expense Total Salary expense $150,000 $9,000 6% of $150,000 $159,000 Balance Sheet Current Liabilities: Salaries payable Employee withholdings payable Employee benefits payable Total Current Liabilities $7,600 $1,200 $1,000 $9,800

Answer is given below with working

Q No. 4b) a) Credit Date Account Titles and Explanation January 31 Cash Discount on issue of bonds Bond payable (To record issue of bonds) Debit $97,000 $3,000 $100,000 b) Credit Debit $3,150 Date Account Titles and Explanation July 31 Interest expense Discount on issue of bonds Cash (To record interest paid) $150 $3,000 c) Credit Debit $2,625 Date Account Titles and Explanation Dec 31 Interest expense Discount on issue of bonds Interest payable (To record interest accrued) $125 $150/6*5 $2,500 $3,000/6*5 Working notes: Bonds payable face value Issue price Discount on issue of bonds $100,000 $97,000 97% of face value $3,000 Total interest payment terms Discount per term 20 (10 years *2) $150 $3,000/20 Total interest expense Cash interest Discount per term Total interest expense $3,000 6% of $100,000 for 6 months $150 $3,150