Introduction
On July 25, 20x1, Jake's Computer Sales and Repair enters into an agreement with Inner-Tech, a local computer software development firm. Inner-Tech pays Jake's Computer Sales and Repair $45,000 in advance for ongoing computer repair services. At year-end, Jake determines that $38,500 of this amount has been earned.
Requirement 1
a. Journalize the unearned revenue transaction on July 25, 20x1.
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DATE
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Account and Explanation
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DEBIT
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CREDIT
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Jul 25
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To record unearned revenue
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b. Journalize the necessary adjustment for December 31, 20x1.
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DATE
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Account and Explanation
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DEBIT
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CREDIT
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Dec 31
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To adjust unearned revenue
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Requirement 2
Analysis shows that around 2 percent of A-line sales require after-sale repairs. Beginning July 1, 20x1, Jake's Computer Sales and Repair provides customers with a limited product warranty on each A-line computer sold. Sales of A-line computers total to $74,500 in July 20x1.
a. Compute the estimated warranty expense payable amount.
b. Journalize the estimated warrantee expense.
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DATE
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Account and Explanation
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DEBIT
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CREDIT
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Jul 31
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To accrue warranty payable
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c. Actual repairs made during August 20x1 to products under warranty results in cash expenditures of $800. Journalize the warranty repair cost.
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DATE
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Account and Explanation
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DEBIT
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CREDIT
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Aug 30
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To accrue warranty payable
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d. At what amount is warranty expense reported on the income statement for the month ended August 20x1?
Requirement 3
Jake's Computer Sales and Repair has one employee, Dave, who earns a monthly gross salary of $3,415 for the month of August 20x1. So far, in 20x1, Dave has earned a gross salary amounting to $23,905.
Jake's Computer Sales and Repair withholds the following amounts from Dave's gross salary:
- Social Security taxes and Medicare taxes-Federal Insurance Contributions Act (FICA)-at 7.65 percent of gross salary up to $106,800
- Income tax withheld: 10 percent
- Other amounts withheld:
- Health insurance: $200 per month
- Retirement plan contribution: $400 per pay period
- Charitable contribution: $20 per pay period
a. Compute Dave's net salary by completing the following table:
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Gross pay:
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Less withholding deductions:
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Income tax
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Employee FICA tax
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Health insurance
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Employee retirement contribution
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Employee charitable contribution
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Net pay
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b. Journalize salaries, payroll taxes, and benefits payable. In addition, journalize the salary payment.
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DATE
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DEBIT
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CREDIT
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Aug 31
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To record salaries payable
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DATE
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DEBIT
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CREDIT
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31
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To record payment of salary
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c. As Dave's employer, Jake's Computer Sales and Repair must also make a payroll tax payment. Journalize the entry to record employer payroll taxes.
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DATE
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DEBIT
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CREDIT
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Aug 31
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To record employer payroll taxes
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d. Journalize the payment of taxes to the federal government.
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DATE
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DEBIT
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CREDIT
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Aug 31
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To record payment of payroll taxes to government
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