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ACCT - Shadrach Computer Corporation

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Question;Selected transactions of the Shadrach Computer Corporation during November and December of 2013 are as follows:Nov. 1 Borrowed money from the bank by issuing a non-interest-bearing, $40,000, 90-day note. The note is discounted on a 12% basis.9 Sold 100 computers with a 1-year warranty for $5,000 each on credit (ignore cost of goods sold). Past experience indicates that warranty costs average $125 per computer. Shadrach uses the expense warranty accrual method for record keeping.12 Sold 100 software packages at $300 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, 2014. The cost of each USB drive is $5, and Shadrach estimates that 80% of the premiums will be redeemed, therefore, 80 USB drives were purchased on credit.20 Paid $2,900 in ful?llment of the warranty agreement on several of the computers sold on November 9.30 Accrued monthly vacation pay. Shadrach has 90 employees who are each paid an average of $160 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.30 Paid monthly payroll. Gross salaries were $432,000. No vacations were taken during November. Income tax withholdings of 20% are applicable to the salaries of all employees. An F.I.C.A. tax of 6% for employees and 8% for employers is also applicable. 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 2013. Dec.14 Twenty proofs of purchase were returned from the November 12 sale.29 An individual?led suit against Shadrach for damages caused in a November 5th accident that resulted when a member of the sales force hit the individual?s car while on personal business. The amount of the suit?led was $1,500. Because the employee was on personal business, the company?s insurance company will not pay the claim. In Shadrach?s attorney?s opinion, the amount of the suit is reasonable, furthermore, the company believes it is likely to lose the suit.31 Accrued monthly vacation pay.Dec. 31 Paid monthly payroll. Gross salaries were $435,000. The salaries included $6,800 of vacation pay in the sales force and $3,200 of vacation pay in the of?ce staff. The F.I.C.A. tax rate still applies to all wages because no employee?s salary exceeded the maximum wage limit.31 Recorded president?s bonus. The president receives a 10% bonus on any income over $200,000, before deducting income taxes and the bonus. Shadrach?s effective income tax rate is 30%, and income before income taxes and bonus for 2013 was $560,000. The bonus will be paid in January 2014.Required: Prepare journal entries to record the preceding transactions of Shadrach Computer Corporation for 2013. Include year-end accruals. Round all calculations to the nearest dollar.

 

Paper#43351 | Written in 18-Jul-2015

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