Plant Assets and Depreciation
Which of the following costs are included in the cost of land:
-Legal Fees
-Surveying Fees
-Sidewalks
-Property Taxes
-Sidewalk Lights
What are legal fees, surveying fees, and property taxes?
The allocation of the cost of an intangible asset to expense over its estimated useful life.
What is amortization?
These are the acronyms for State Unemployment Taxes and Federal Unemployment Taxes.
What are SUTA and FUTA?
Amounts received in advance from customers for future products or services. (answer is the account name and type)
Hint: not estimated, the amounts are known.
What is Unearned Revenue - a liability?
The principal is the amount recorded when issuing a note payable. The principal plus this must be repaid at maturity.
What is interest?
This is an example of an accelerated depreciation method.
What is double declining balance?
True or false:
Company vehicles and bank accounts are examples of intangible assets.
What is false?
These are other assets (plant assets and current assets)
Both employers and employees have to pay their share of these two taxes.
What are FICA Social Security taxes and FICA Medicare taxes?
Employee vacation benefits are this type of liability.
What is estimated?
Employees' take home pay after all deductions, which is recorded as salaries payable (and eventually paid as cash) is called this.
What is net pay?
On January 1, a food manufacturer installed equipment costing $180,000 with a useful life of 4 years and an estimated salvage value of $20,000. This is the amount of depreciation in year 3 using the Straight Line method.
What is $40,000?
(Cost – Salvage Value)/Useful Life
($180,000-$20,000)/4=$40,000
Trademarks and Goodwill are examples of this type of asset.
What are intangible assets?
Tasty Foods Inc. is calculating employer taxes for the pay period. Their only employee earned $6,000 so far this year and their current paycheck is $1,400. These are the amounts of federal and state unemployment taxes the company must pay for this employee for the current pay period.
Hint: FUTA rate is 0.6% of the first $7,000 earned and SUTA rate is 5.4% of the first $7,000 earned.
What are $2.40 (FUTA) and $21.60 (SUTA)?
Wages to Date: $6,000
Wages this Pay Period: $1,400
Total Wages: $7,400
Wages Subject to unemployment taxes: $400 ($7,400 - $7,000 maximum)
FUTA: $400 x 0.6% = $2.40
SUTA: $400 x 5.4% = $21.60
On December 1, Sylvester Company requested a 90-day, $8,000, 6% note from their supplier Office Supply Inc. for a time extension on their past-due accounts payable. This is the journal entry when the note payable issued.
What is:
debit Notes Payable $8,000
credit A/P - Office Supply Inc, $8,000
?
These are assets that increase the usefulness of land, but unlike land, they have a limited useful life and are subject to depreciation.
What are land improvements?
Synergy Company owns equipment that cost $50,000 and has accumulated depreciation of $40,000. This is the journal entry to record the disposal of the equipment on January 1 if they sold the equipment for $12,000.
What is debit Cash $12,000, debit Accumulated Depreciation $40,000, credit Gain on Disposal of Equipment $2,000, and credit Equipment $50,000?
Cost – Accumulated Depreciation = Book Value
$50,000 - $40,000 = $10,000
Sale Price -Book Value = gain/(loss)
$12,000-$10,000 = $2,000 gain
Ore mines and coal mines are this type of asset.
What are natural resources?
A company with 20 employees who have earned $10,000 of sales salaries ends their first pay period on January 7th. Withholdings from the employees’ salaries include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $1,200 of federal income taxes, $250 of medical insurance deductions, and $70 of union dues. No employee earned more than $7,000 in this first period. This is the journal entry when they record the salaries expense and liabilities.
What is
debit Salaries Expense $10,000
credit FICA - Social Security Taxes Payable $620
credit FICA- Medicare Taxes Payable $145
credit Employee Federal Income Taxes Payable $1,200
credit Employee Medical Insurance Payable $250
credit Employee Union Dues Payable $70
credit Salaries Payable $7,715
?
On December 1, Sylvester Company requested a 90-day, $8,000, 6% note from their supplier Office Supply Inc. for a time extension on their past-due accounts payable. This is the year-end adjusting journal entry for interest accrued on the note.
What is
debit Interest Expense $40
credit Interest Payable $40
?
$8,000 x 6% x 30/360 = $40
Rose Florists has a 30 year mortgage on their store building with monthly payments of $1,200. This is the amount of mortgage payable listed as current liabilities on the balance sheet as of December 31st.
What is $14,400?
Current year amount only = $1,200 per month x 12 months
On January 1, a food manufacturer installed equipment costing $180,000 with a useful life of 4 years and an estimated salvage value of $20,000. This is the amount of depreciation in year 2 using the Double Declining Balance method.
What is $45,000?
Calculate Straight-Line Rate: 100%/Useful life = 100%/4 years = 25%
Double the Straight-Line Rate: 25% x 2 = 50%
Year 1: Beginning Book Value x DDB Rate = $180,000 x 50% = $90,000 depreciation expense
Accumulated depreciation $90,000
Ending Book Value: Cost – Accumulated Depreciation = $180,000-$90,000=$90,000
On January 1, a food manufacturer installed equipment costing $180,000 with a useful life of 4 years and an estimated salvage value of $20,000. The manufacturer estimates the equipment will be able to produce 400,000 product units during its useful life. It actually produces the following units: 102,000 in year 1, 94,000 in year 2, 98,000 in year 3, and 110,000 in year 4. This is the depreciation in year 1 using the Units of Production Method.
What is 40,800?
Cost - Salvage Value = Depreciable Cost:
$180,000-$20,000 = $160,000
Depreciable Cost/Estimated # of total units = Depreciation Expense per Unit:
$160,000/400,000 units = $0.40 per unit
Depreciation Expense for Year 1:
102,000 units produced x $0.40 per unit = $40,800
A company has 5 employees, each of whom earns $2,000 per month and have been employed since January 1st. On February 28th, must record the February payroll taxes expense. FICA Social Security taxes are 6.2% of the first $137,700 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee. This is the journal entry.
What is
?
On December 1, Sylvester Company requested a 90-day, $8,000, 6% note from their supplier Office Supply Inc. for a time extension on their past-due accounts payable. This is the journal entry when Sylvester Company pays in full on the 90th day.
What is
debit Notes Payable $8,000
debit Interest payable $40
credit Interest Expense $80
credit Cash $8,120
?
$8,000 x 6% x 60/360 = $80
Smart Computer Supply store sold a laptop for $2,400 to a customer. The state has a 5% sales tax. This is the journal entry to record the sale.
What is
Debit Cash $2,520
Credit Sales Taxes Payable $120
Credit Sales $2,400
?
Sales Tax: $2,400 x 5% = $120