Acc225 liability case due 7 pm est on february 16, 2021

1. ACC225
Liability Case
Due: 7PM EST on February 16, 2021
Note: Consider each part of the homework as separate and
distinct problems.
Part A
Martin Manufacturing has six employees who were paid the
following wages during 2020:
Employee Annual Wages for 2020
Beth Smith $35,000
Yu Zhang $175,000
Mohammad Nessman $175,000
Mark Bruno $80,000
Jeff Sparta $75,000
Helena Marx $150,000
The state unemployment tax is 5.4% The federal unemployed
rate is 0.6%. The maximum
unemployment wages per employee are $7,000 for both the state
and the federal government.
Income tax is withheld at the rate of 22% for all employees who
have annual wages over

2. $50,000. If wages are under $50,000, the withholding rate is
15%. Martin Manufacturing is in a
state that does not impose income taxes. Social security is
imposed on both the employer and
employee at the rate of 6.2% on the first $137,700 of wages.
Medicare tax is imposed on both
the employer and the employee at the rate of 1.45% on total
wages.
Required:
1. Calculate the amount of payroll taxes paid by the employer,
Martin Manufacturing
2. Prepare the journal entry to record the payment of the
payroll.
3. Prepare the journal entry to record the payroll tax expense at
12/31/2020, assuming the
payroll taxes will be paid in 2021.
SEE NEXT PAGE
Part B
Fantasy Company sells video gaming consoles with a 3-year
assurance-type warranty. In the
past, Fantasy Company has found that in the year in the year of
sale, warranty costs have been
1% of sales, in the year after sale warranty costs have been 3%
of sales and in the final year of
the warranty period the warranty costs have been 8% of sales.
The following sales data is
available: 2020 = $750,000, 2021 = $800,000; 2022 =

3. $600,000. Warranty expenditures were
$6,000, $70,000 and $80,000 in 2020, 2021 and 2022,
respectively.
Required:
1. Prepare journal entries to record the accrual of warranty
expense and the payment of
warranty expenditures for 2020, 2021 and 2022.
2. What amount would Fantasy Company report as a liability on
its December 31, 2022
balance sheet if the balance of the warranty liability was
$10,000 on December 31,
2019.
Part C
Maxwell Corporation completed a bond issuance in 2021 to
raise cash in anticipation of
building a new factory sometime in the near future. The 1st
bond issuance occurred on January
1, 2021, when Maxwell issued $3,000,000 of 10%, 10-year
bonds when the market rate of
interest for similar bonds was 8%. Interest is paid
semiannually on June 30th and December
31st. Maxwell uses the effective interest method to amortize
the bond premiums and
discounts. On December 31, 2024, the ½ of the bonds were
retired by Maxwell after the
12/31/24 interest payment by purchasing them on the open
market at a price of $1,600,000.
Required:

4. 1. Calculate the issue price of the bonds on January 1, 2021.
2. Prepare an amortization table for the life of the bonds.
3. Prepare the journal entry to record the issuance of the bonds
on January 1, 2021.
4. Prepare the journal entries for the payment of interest on
June 30, 2021 and December
31, 2021.
5. Prepare the journal entry for the partial retirement of the
bonds on December 31, 2024.