Assignment:

Problem #1 -- Entries for payroll and payroll taxes
The following information about the payroll for the week ended December 30 was obtained from the records of Arnsparger Equipment Co.:

Tax rates assumed:
Social security, 6%
Medicare, 1.5%
State unemployment (employer only), 4.5%
Federal unemployment (employer only), 0.8%

Instructions

Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries:

a. December 30, to record the payroll.

b. December 30, to record the employer's payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $30,000 is subject to unemployment compensation taxes.

Problem #2 -- Present value of bonds payable; discount

Baliga Co. produces and sells high-quality audio equipment. To finance its operations, Baliga Co. issued $18,000,000 of five-year, 8% bonds with interest payable semiannually at a market (effective) interest rate of 10%.

a. Determine the present value of the bonds payable, using the present value tables in Chapter 10 of your text. Round to the nearest dollar.

b. Illustrate the General Journal entry that would be made to record the issuance of the bonds.

Problem #3 -- Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount

On July 1, 2012, Bliss Industries, Inc. issued $24,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 12%, receiving cash of $22,194,444.43. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Instructions

1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds
2. Prepare an amortization table for at least 3 interest periods for this bond issue.
3. Journalize the entries to record the following:

a. The first semiannual interest payment on December 31, 2012, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.)

b. The interest payment on June 30, 2013, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.)

4. Determine the total interest expense for 2012.