BUSINESS COLLEGE

Adjusting and paying accrued wages LO P1Pablo Management has five part-time employees, each of whom earns $90 per day. They are paid on Fridays for work completed Monday through Friday of the same week. Near year-end, the five employees worked Monday, December 31, and Wednesday through Friday, January 2, 3, and 4. New Year's Day. (January 1) was an unpaid holiday.
1. Prepare the year-end adjusting entry for wages expenses.
2. Prepare the journal entry to record payment of the employees' wages on Friday, January 4, 2018.

Answers

Answer 1
Answer:

Answer:

1. Dr Wages expense $450

Cr Wages payable $450

2.Dr Wages expense $1350

Dr Wages payable $450

Cr Cash $1800

Explanation:

1. Preparation of the year-end adjusting entry for wages expenses.

Dec 31

Dr Wages expense $450

Cr Wages payable $450

( 5 employees * $90 per day)

(To record wages expenses)

2. Preparation of the journal entry to record payment of the employees' wages on Friday, January 4, 2018

Jan 4

Dr Wages expense $1350

(3 days*5 employees*$90=$1350)

Dr Wages payable $450

(5 employees * $90 per day)

Cr Cash $1800

($1350+$450 =$1800)

(To record payment of the employees' wages)

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On December 31, 2017, Extreme Fitness has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2018, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $10,000. What amount would the company report as its net accounts receivable on December 31, 2017? Prepare the journal entry to write off the accounts on January 2, 2018. Assuming no other transactions occurred between December 31, 2017, and January 3, 2018, what amount would the company report as its net accounts receivable on January 3, 2018? Has net accounts receivable changed from December 31, 2017?

Answers

Answer and step-by-step explanation:

Step 1: Calculation of net accounts receivable on December 31, 2017

Net accounts receivable

= Accounts Receivable - Allowance for Doubtful Debts

= $800,000 - $55,000

= $745,000

The company shall report its net accounts receivable on December 31, 2017 as $745,000.

Step 2: Journal entry to write off the accounts:

                                                                                    Debit             Credit

2-Jan-2018      Allowance for doubtful debts            $10,000

                               Accounts receivable                                          $10,000

                        Writing off debts not collectible

Step 3: Calculation of net accounts receivable on January 3, 2018:

Net accounts receivable

= Accounts Receivable - Allowance for Doubtful Debts

= $790,000 - $45,000

= $745,000

The company shall report its net accounts receivable on January 3, 2018 as $745,000. The net accounts receivable has not changed from December 31, 2017 because the write-offs worth $10,000 were estimated and allowed for in 2017. Hence, the decrease in accounts receivable is offset by an equal decrease in the allowance for doubtful debts.

Final answer:

Extreme Fitness had a Net Accounts Receivable of $745,000 on December 31, 2017. Even after the write-off of certain accounts totalling $10,000 on January 2, 2018, the Net Accounts Receivable strikes the same balance on January 3, 2018, because the write-off affects both the Accounts Receivable and Allowance for Doubtful Accounts equally.

Explanation:

On December 31, 2017, Extreme Fitness had a balance of $800,000 in Accounts Receivable. This amount was offset by a balance of $55,000 in Allowance for Doubtful Accounts, resulting in a Net Accounts Receivable of $745,000 ($800,000 - $55,000).

The company learnt on January 2, 2018, about certain uncollectible accounts and authorized a write-off of $10,000. The journal entry for this would be Debit: Allowance for Doubtful Accounts $10,000 and Credit: Accounts Receivable $10,000. This reduces the Book Value of Accounts Receivable by the write-off amount but does not affect the Net Accounts Receivable.

Thus, post the write-off action on January 3, 2018, the total Accounts Receivable would reduce to $790,000 ($800,000 - $10,000), and the Allowance for Doubtful Accounts would reduce to $45,000 ($55,000 - $10,000). The Net Accounts Receivable, however, still stays at $745,000 ($790,000 - $45,000), just as it was on December 31, 2017.

Learn more about Accounts Receivable here:

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The shapes of firms' cost curves are important because:___________a. they tell us whether a firm is profitable or not.
b. they help us determine how much a firm will produce and even how it will produce it.
c. cost curves tell us the profitability of the firm.
d. they help us understand the market that the firm is in.

Answers

Answer:

a. they tell us whether a firm is profitable or not.

Explanation:

The shape of a firms curve tells us if a firm is profitable or not. If the firm is charging a higher price that is greater than its average cost of production for whatever quantity that was produced, we will have it that this firm will earn profits. But when the price that the firm is charging is smaller than its average cost of production, the firm will experience losses.

Mullee Corporation produces a single product and has the following cost structure: Number of units produced each year 7,000 Variable costs per unit: Direct materials $ 51 Direct labor $ 12 Variable manufacturing overhead $ 2 Variable selling and administrative expense $ 5 Fixed costs per year: Fixed manufacturing overhead $441,000 Fixed selling and administrative expense $112,000 The absorption costing unit product cost is:________a. $65 per unit
b. $128 per unit
c. $63 per unit
d. $149 per unit

Answers

Answer:

unitary absorption production cost= $128

Explanation:

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

First, we need to calculate the unitary fixed manufacturing overhead:

Unitary fixed overhead= 441,000 / 7,000= $63

Now, the unitary absorption production cost:

unitary absorption production cost= 51 + 12 + 2 + 63

unitary absorption production cost= $128

The workers at State Hospital, a public sector employer, and Acme Inc, a private employer, are subject to speech censorship and arbitrary job termination. Constitutional issues are present only for the State Hospital workers.TrueFalse

Answers

Answer:

The workers at State Hospital, a public sector employer, and Acme Inc, a private employer, are subject to speech censorship and arbitrary job termination. Constitutional issues are present only for the State Hospital workers is a TRUE statement.

Explanation:

  • The State Hospital is owned and supervised directly by the state government, whereas, the organization named Acme Inc, is privately owned.
  • In a state-owned entity, the state government is the authority that has the final say which is based on the Constitution.
  • Hence, the arbitration done in the state hospital issues would also include Constitutional issues.
  • Whereas, the same would not be the case with the privately owned organization.

During 2018, Colorado Company stock was sold for $9,400. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500. None of the equity investments result in significant influence. (a) Prepare the adjusting journal entry needed on December 31, 2017. (b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2018. (c) Prepare the adjusting journal entry needed on December 31, 2018.

Answers

Explanation:

The journal entries are as follows

a. Unrealized Holding Gain or Loss Dr $1,310

                      To Fair value Adjustment  $1,310

(Being the unrealized gain or loss is recorded)

2. Cash $9,410

   Loss on Sale of Investment  $490     ($9,900 - $9,410)

                  To Equity Investment  $9,900

(Being the sale of the stock is recorded)

3. Fair value Adjustment  $1,020

             To  Unrealized Holding Gain or Loss  $1,020

(Being the fair value adjustment is recorded)

The computation is shown below:

Stock                              Cost                  Fair Value      Unrealized Gain(Loss)

Clemson Corp. Stock    $20,200           $19,410          -$790

Buffaloes Co. stock       $20,200           $20,700         $500

Net unrealized gain (loss)                                            -$290

2017                                                                                -$1,310

Fair value adjustment                                                   -$1,020

Ramona owns 20% of the stock of Miller, Inc. Miller reports the following items for the current year: Sales $3,400,000 Gain on sale of stock held for 2 years 250,000 Cost of goods sold 1,800,000 Operating expenses 900,000 Dividends paid to stockholders 180,000 What are the effects on Ramona's taxable income if Miller, Inc. is organized as: a. A corporation? b. An S corporation?

Answers

Answer:

Explanation:

a) A corporation?

A Corporations are taxable entities. Miller, Inc. will pay tax on its income. Ramona will be taxed on dividends received. Ramona has $36,000 ($180,000 x 20%) of dividend income from Miller. The dividend income will be taxed at 15%.

b) An S corporation?

An S corporations are conduit entities and do not pay tax on their income. The income from the conduit flows through and is taxed to the owners of the S corporation. Ramona will be taxed on 20% of Miller's income. Capital gains and losses of conduit entities must be reported separately, so that the owners can properly treat them in the calculation of their net capital gain or loss for the year. Miller has $700,000 ($3,400,000 - $1,800,000 - $900,000) of operating income and a $250,000 long-term capital gain in the current year. Ramona must include $140,000 ($700,000 x 20%) of ordinary income and $50,000 ($250,000 x 20%) of long-term capital gain on her individual return. The $140,000 of ordinary income is added to Ramona's gross income. The long-term capital gain of $50,000 is netted with other capital gains and losses. Because the income of the conduit is being taxed at the owner level, dividends paid to owners are considered to be returns of capital investment and are not taxed.

Answer: on S corporation taxable income will be affected by 140,000 and on corporation it will be 36000

Taxable income of Ramona    

  S corporation  Corporation

share on profits 140000          0

dividends           36000

Explanation:

Miller Inc    

  S corporation     corporation

sales   3400000 3400000

cost of sales   1800000         1800000

gross profit  1600000   1600000

other income  250000         250000

gain on sale of stock  250000   250000

operating expenses  900000 900000

Net Profit   950000         950000

dividends   0       180000

taxable income of Miller Inc    

             S corporation Corproration

Net Profit   950000          950000

gain on sale of stock -250000    -250000

Taxable Income  700000          700000

for the S corporation Miller gets a share of 20% on the taxable profits of the S corporation and on the corporation he gets 20% of the total dividends to shareholder. The gain is capital in nature and is not taxable income as per SARS.

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