E10-1 Megan Haak and Kathy Quandt borrowed $15,000 on a 7-month, 8% note from Golden State Bank to open their business, MK?s Coffee House. The money was borrowed on June 1, 2012, and the note matures January 1, 2013. Instructions (a) Prepare the entry to record the receipt of the funds from the loan. (b) Prepare the entry to accrue the interest on June 30. (c) Assuming adjusting entries are made at the end of each month, determine the bal- ance in the interest payable account at December 31, 2012. (d) Prepare the entry required on January 1, 2013, when the loan is paid back. E10-2 On May 15, Gruzik?s Outback Clothiers borrowed some money on a 4-month note to provide cash during the slow season of the year. The interest rate on the note was 8%. At the time the note was due, the amount of interest owed was $480. Instructions (a) Determine the amount borrowed by Gruzik. (b) Assume the amount borrowed was $18,500. What was the interest rate if the amount of interest owed was $555? (c) Prepare the entry for the initial borrowing and the repayment for the facts in part (a). E10-3 On June 1, Chetney Company Ltd. borrows $60,000 from First Bank on a 6-month, $60,000, 8% note. The note matures on December 1. Instructions (a) Prepare the entry on June 1. (b) Prepare the adjusting entry on June 30. (c) Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30. (d) What was the total financing cost (interest expense)? E10-4 In providing accounting services to small businesses, you encounter the follow- ing situations pertaining to cash sales. 1. Duvall Company rings up sales and sales taxes separately on its cash register. On April 10, the register totals are sales $22,000 and sales taxes $1,100. 2. Hubbard Company does not segregate sales and sales taxes. Its register total for April 15 is $13,780, which includes a 6% sales tax. Instructions Prepare the entries to record the sales transactions and related taxes for (a) Duvall Com- pany and (b) Hubbard Company. E10-5 During the month of March, Lavonis Company?s employees earned wages of $64,000. Withholdings related to these wages were $4,896 for Social Security (FICA), $7,500 for federal income tax, $3,100 for state income tax, and $400 for union dues. The company incurred no cost related to these earnings for federal unemployment tax, but incurred $700 for state unemployment tax. Instructions (a) Prepare the necessary March 31 journal entry to record wages expense and wages payable. Assume that wages earned during March will be paid during April. (b) Prepare the entry to record the company?s payroll tax expense.
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