P10-2A (A) Record note transactions; show financial statement presentation.

The current liabilities section of the December 31, 2010, balance sheet of Learnstream Company included notes payable of $14,000 and interest payable of $490. The note payable was issued to Tanner Company on June 30, 2010. Interest of 7% is payable at maturity, March 31, 2011. The following selected transactions occurred in the year ended December 31, 2011: Jan 12 . Purchased merchandise on account from McCoy Company for $29,000, terms n/30. Learnstream 2 uses a perpetual inventory system. 31 Feb. 28 Mar. 31 31 Apr. 30 Aug. 1 Issued a $29,000, three-month, 5% note to McCoy Company in payment of an account. Interest is payable monthly. Paid interest on the McCoy note (see January 31 transaction). Paid the Tanner note, plus interest. Paid interest on the McCoy note (see January 31 transaction). Paid the McCoy note, plus one months interest (see January 31 transaction). Purchased equipment from Scottie Equipment by paying $15,000 cash and signing a $33,000, 10month, 8% note. Interest is payable at maturity.

Sept.30 Borrowed $100,000 cash from the First Interprovincial Bank by signing a 10-year, 5% note payable. Interest is payable quarterly on December 31, March 31, June 30, and September 30. Of the principal, $12,000 must be paid each September 30. Dec. 31 Paid interest on the First Interprovincial Bank note (see September 30 transaction).

Record the transactions and any adjustments required at December 31. Date Account/Description Jan. 12 Merchandise Inventory
resp_40

Debit 29000
29000

Credit

Accounts Payable-McCoy 31 Accounts Payable-McCoy Notes Payable-McCoy Feb. 28 Interest Expense Cash Mar. 31
resp_13
resp_48

resp_0

29000 29000
29000

29000

resp_0
resp_46

29000 121
121

29000

resp_31

121 14000 490 245

14000

121

Notes Payable-Tanner Interest Payable Interest Expense Cash

resp_13

resp_32
resp_31

490
245

14735
resp_31

14735

Mar. 31

Interest Expense Cash

resp_13

121

121

121
resp_46

121

Apr. 30

Notes Payable-McCoy Interest Expense

29000 121

29000
121

resp_31

Cash Aug. 1 Equipment

resp_13 resp_21 resp_47

29121 48000
48000

29121

Notes Payable-Scottie Cash Sept 30 Cash

resp_13

33000 15000 100000

100000

33000
15000

resp_13

Notes Payable-FI Bank Dec. 31 Interest Expense

resp_31

resp_45

100000 1250
1250

100000

resp_13 Cash (to record payment of interest)

1250
1100

1250

Dec. 31

Interest Expense

resp_31
resp_32

1100

Interest Payable

1100

1100

LEARNSTREAM COMPANY (Partial) Balance Sheet December 31, 2011 Current liabilities Notes payable
resp_0 33000

$ 33000

Current portion of longterm notes payable

resp_0

12000
12000

Interest payable
resp_0 1100

1100

$ 46100
46100

Long-term liabilities Notes payable

resp_0

$ 100000
100000

Less Current portion

resp_0

( 12000
12000

$ 88000
88000

Show the income statement presentation of interest expense for the year.

LEARNSTREAM COMPANY (Partial) Income Statement Year Ended December 31, 2011 Other expense Interest expense
resp_0 2958

$ 2958

P10-4A Record warranty transactions. On January 1, 2009, Hopewell Company began a warranty program to stimulate sales. It is estimated that 5% of the units sold will be returned for repair at an estimated cost of $35 per unit. Sales and warranty figures for the three years ended December 31 are as follows: 2009 Sales (units) Sales price per unit Units returned for repair under warranty Actual warranty costs 2,400 $150 75 $4,200 2010 2,700 $120 90 $4,350 2011 3,200 $125 105 $4,590

Calculate the warranty expense for each year and warranty liability at the end of each year. Warranty Expense 2009 $ 4200
4200

Warranty Liability
0

$0 4725

2010

375
375

4725

2011

5600
5600 1385

1385

Record the warranty transactions for each year. Credit Repair Parts Inventory for the actual warranty costs. Date Account/Description 2009 Warranty Liability
resp_0

Debit 4200
resp_0
4200

Credit

Repair Parts Inventory Warranty Expense

resp_0

4200 4200
4200

4200

Warranty Liability 2010 Warranty Liability

resp_0

4200 4350
4350

4200

resp_0

Repair Parts Inventory Warranty Expense

resp_0

resp_0

4350 4725
4725

4350

Warranty Liability 2011 Warranty Liability

resp_0

4725 4590
4590

4725

resp_0

Repair Parts Inventory Warranty Expense

resp_0

resp_0

4590 5600
5600

4590

Warranty Liability

resp_0

5600

5600

To date, what percentage of the units sold have been returned for repair under warranty? 3.3
3.3

What has been the average actual warranty cost per unit for the three year period? $ 49 Assume that at December 31, 2011, management reassesses its original estimates and decides that it is more likely that the company will have to service 7% of the units sold in 2011. Management also determines that the average actual cost per unit incurred to date (as calculated in (c) above), is more reasonable than its original estimate. What should be the balance in the warranty liability account at December 31, 2011?
10976

Warranty expense 2011: $ 10976

Warranty liability at December 31, 2011: $ 6761

BE10-11 (A) Calculate gross, net pay, and employer costs.

Becky Sherricks regular hourly wage rate is $12.50, and she receives an hourly rate of $18.75 for work over 40 hours per week. In the pay period ended January 5, Becky worked 46 hours. Beckys CPP deductions total $26.99, EI deductions total $10.60, and her income tax withholdings are $91.88. (a) Calculate Beckys gross and net pay for the pay period. (b) What are Beckys employers costs for CPP, EI, and income tax? Gross earnings Net pay (b) Employer costs: CPP contributions EI premiums Income tax 26.99 14.84 0
26.99 14.84 612.50

$ 612.50 483.03

483.03

BE10-12 (A) Record payroll.

Becky Sherricks regular hourly wage rate is $17.00, and she receives an hourly rate of $25.50 for work over 40 hours per week. In the pay period ended January 5, Becky worked 47 hours. Beckys CPP deductions total $39.16, EI deductions total $14.85, and her income tax withholdings are $128.78. Prepare the journal entries to record Beckys pay for the period, including employer costs, assuming she was paid on January 5. Date Account/Description Jan. 5 Wages Expense
resp_7 resp_8

Debit 858.50
858.50

Credit

Wages Payable

675.71 128.78 39.16 14.85 675.71

675.71

675.71

Income Tax Payable CPP Payable EI Payable Jan. 5 Wages Payable Cash Jan. 5
resp_1

resp_5

128.78
39.16

resp_2
resp_8

14.85

resp_0 resp_3

675.71 59.95
59.95

675.71

Employee Benefits Expense CPP Payable EI Payable

resp_1

39.16 20.79

39.16

resp_2

20.79

Bri Companys gross pay for the week ended August 22 totalled $54,000, from which $2,673 was deducted for CPP, $934 for EI, and $8,100 for income tax. Prepare the entries to record (a) the employee payroll costs, assuming salaries were paid August 22, and (b) the employer payroll costs, assuming these will not be paid until September. Date Aug. 22 Account/Description Salaries and Wages Expense
resp_7 resp_8

Debit 54000
54000

Credit

42293
42293

Salaries and Wages Payable Income Tax Payable CPP Payable EI Payable Aug. 22
resp_1 resp_5

8100
8100

2673
2673

resp_2
resp_8 42293

934
934

Salaries and Wages Payable Cash

resp_0

42293

42293
42293 resp_3

Aug. 22

Employee Benefits Expense

3981

3981

CPP Payable EI Payable

resp_2

resp_1

2673
2673

1308
1308

P11-8A (A) Calculate revenue, expense, and gross profitpercentage ofcompletion and zero profit methods. Cosky Construction Company is involved in a long-term construction contract to build an office building. The estimated cost is $37 million and the contract price is $48 million. Additional information follows: Year Cash Collections Actual Costs Incurred 2009 $7,680,000 $5,550,000 2010 17,760,000 16,650,000 2011 12,000,000 9,250,000 2012 10,560,000 5,550,000 $48,000,000 $37,000,000 The project is completed in 2012 as scheduled and all cash collections related to the contract have been received. Determine the revenue, expense, and gross profit for each year of the contract, using the percentage-of-completion method. Revenue 2009 2010 2011 2012 $ 7200000 $ 21600000 $ 12000000 $ 7200000
7200000

Expense $ 5550000 $ 16650000 $ 9250000 $ 5550000

5550000

Gross Profit $ 1650000 $ 4950000 $ 2750000 $ 1650000

1650000

21600000

16650000

4950000

12000000

9250000

2750000

7200000

5550000

1650000

Determine the revenue, expense, and gross profit for each year of the contract, if Cosky Construction used the zero profit method? Revenue 2009 2010 2011 $ 5550000 $ 16650000 $ 9250000
5550000

Expense $ 5550000 $ 16650000 $ 9250000

5550000

Gross Profit $0 $0 $0
0

16650000

16650000

9250000

9250000

2012

$ 16550000

16550000

$ 5550000

5550000

$ 11000000
11000000

P11-9A (A) Revise revenue, expense, and gross profitpercentage-of-completion.

Cosky Construction Company is involved in a long-term construction contract to build an office building. The estimated cost is $36 million and the contract price is $53 million. Additional information follows: Year Cash Collections Actual Costs Incurred 2009 $8,480,000 $5,400,000 2010 19,610,000 16,200,000 2011 13,250,000 12,200,000 2012 11,660,000 11,200,000 $53,000,000 $45,000,000

Because costs were higher than expected in 2011, Cosky revised its total estimated costs from $36 million to $45 million at the end of 2011. The project is completed in 2012 as scheduled and all cash collections related to the contract have been received. Assuming Cosky Construction uses the percentage-of-completion method, prepare a revised schedule to determine the revenue, expense, and gross profit for each year of the long-term construction contract
2009 Revenue $ 7950000
7950000

2010 $ 23850000
23850000

2011

2012

$ $ 12200000
12200000

$ $ 11200000
11200000

Expense Gross Profit

$ 5400000
5400000

$ 16200000
16200000

$ 2550000
2550000

$ 7650000
7650000