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5741 Homework # 2 Question

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Question 1;The controller for Mason Company neglected to have her staff accrue the payroll for the last week in December, 2012. The following data should have been considered and accounted for in Mason Company?s books.;Total Payroll = $1,350,000;Income Tax to be withheld = $150,000;FICA Taxes applicable to the payroll accrual = $28,000;FUTA Tax on accrued payroll = $4, 000;Compensated absences to the payroll = $75,000 vacation time and $85,000 sick time.;Employees who do not take vacation will receive compensation in lieu of time taken off.;Sick time does not vest and if the employee does not use their sick time, it is forfeited back to company.;Union dues that should have been withheld from employee?s payroll = $12,000;Question 2;On November 1, 2012, Aladdin Company entered into an agreement whereby Aladdin Company accepted a discounted note payable for $2,000,000 (Mason Company received cash). The terms were 0% interest (market rate of interest is 6%) and payable on May 1, 2013. Make all necessary entries on the books of Mason Company for 2012.;Question 3;Mason Company entered into a lease agreement with Aladdin Company to purchase a piece of equipment on January 1, 2012. The term of the lease are: 8%, 5 years lease with a 6 year useful life. The machine has a fair value of $600,000. The residual value is zero. Mason Company does not know the interest rate that Aladdin Company uses. Assume that the entries have not yet been made on the books of Mason Company.;Requirement: Prepare a five year amortization schedule. Make all necessary entries on the books of Mason Company for the first year.;Question 4;Requirement: Assume that the lessor?s (Aladdin Company) interest rate is also 8% and that the lease qualifies as a direct financing lease, using the above information in question 4: Prepare the lessor?s amortization table for the duration of the lease and make all necessary entries on the books of Aladdin Company for the first two years.;Question 5;On January 1st, 2012, Aladdin Company purchased $1,000,000 of 8%, 5 year, Mason Company bonds on the open market for $960,000. The bonds are dated and were issued by Mason Company on January 1st, 2010. The bonds pay interest each January 1st and July 1st. The effective interest method is used.;Requirement: Make any necessary entries for Mason Company.

 

Paper#28180 | Written in 18-Jul-2015

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