Problem Issuance of stock: organization costs. Snowbound Corporation was incorporated in July. The firm's charter authorized the sale of 200,000 shares of $10 par-value common stock. The following transactions occurred during the year:     7/1:   Sold 45,000 shares of common stock to investors for $18 per share. Cash was collected and the shares were issued.     7/7: Issued 600 shares to Sharon Dale, attorney-at-law, for services rendered during the corporation's organizational phase. Dale charged $12,600 for her work.   8/11: Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were issued. 12/14: Issued 30,000 shares to the MJB Company for land valued at $900,000. Instructions Prepare journal entries to record each transaction. Student Guidance ReportAshford University ACC205Guidance ReportWeek FourLISTEN TO AUDIO/VIDEO EXPLAINING THE GUIDANCE REPORTYELLOW INDICATES ACCOUNT AMOUNTS CHANGEDChange Account to:Based Upon Course Start DateAccount to be changedOriginal AmountJan - FebMar-AprMay-JunJul-AugSept-OctNov-DecCh 7 Ex 2Loan$ 225,000$ 250,000$ 260,000$ 270,000$ 280,000$ 290,000$ 450,000QuestionsYOUR ANSWERS BASED UPON COURSE START DATEa. Compute Hall’s accrued interest as of December 31, 20X1.b. Present the appropriate balance sheet disclosure for the accrued interest and the current and long-term portion of the outstanding debt as of December 31, 20X1.c. Repeat parts (a) and (b) using a date of December 31, 20X2, rather than December 31, 20X1. Assume that Hall is in compliance with the terms of the loan agreement.Accrued interest 12/31/X2DisclosureAccount to be changedOriginal AmountJan - FebMar-AprMay-JunJul-AugSept-OctNov-DecCh 7 Ex 4Salary expense5000051,00052,00053,00054,00055,00056,000QuestionsYOUR ANSWERS BASED UPON COURSE START DATESalary expenseSocial Security PayableMedicare PayableFed Taxes PayableState Taxes PayableInsurance PayableCashPayroll Tax ExpenseSocial Security PayableMedicare PayableState unemploymentFed unemploymentAccount to be changedOriginal AmountJan - FebMar-AprMay-JunJul-AugSept-OctNov-DecCh 7 Pb 212/1 Note payable2000025,00026,00028,00030,00031,00033,00012/1 Interest rate015%15%15%15%15%15%Warranty2027202820292030203120322033Purchase on account1600017,00018,00019,00020,00021,00022,000Note payable50006,0007,0008,0009,00010,00011,000Warranty repair162172182192202222232Salary accural14001,5001,6001,7001,8001,9002,000Vacation6%360006%37,0006%38,0006%39,0006%40,0006%41,0006%42,00012/26 interest120$ 120$ 120$ 120$ 120$ 120$ 120a. Prepare journal entries to record the preceding transactions and events.CashNotes PayableWarranty expenseWarranty LiabilityMerchandiseAccounts PayableCashNote PayableWarranty LiabilityCashSalary ExpenseSalary PayablePayroll ExpenseAccrued Vacation Payableb. Determine accrued interest as of December 31, 20XX, and prepare the necessary adjusting entry or entries.12/1 one month accrual12/26 60 day note-accrue 5 daysTotal Interest Acc.

1. Problem
Issuance of stock: organization costs. Snowbound Corporation
was incorporated in July. The firm's charter authorized the sale
of 200,000 shares of $10 par-
value common stock. The following transactions occurred durin
g the year:
7/1:
Sold 45,000 shares of common stock to investors for $18 per sh
are. Cash was collected and the shares were issued.
7/7:
Issued 600 shares to Sharon Dale, attorney-at-
law, for services rendered during the corporation's organization
al phase. Dale charged $12,600 for her work.
8/11:
Sold 20,000 shares to investors for $22 per share. Cash was coll
ected and the shares were issued.
12/14:
Issued 30,000 shares to the MJB Company for land valued at $9
00,000.
Instructions
Prepare journal entries to record each transaction.
Student Guidance ReportAshford University ACC205Guidance
ReportWeek FourLISTEN TO AUDIO/VIDEO EXPLAINING
THE GUIDANCE REPORTYELLOW INDICATES ACCOUNT
AMOUNTS CHANGEDChange Account to:Based Upon Course
Start DateAccount to
be changedOriginal
AmountJan - FebMar-AprMay-JunJul-AugSept-OctNov-DecCh 7
Ex 2Loan$ 225,000$ 250,000$ 260,000$ 270,000$
280,000$ 290,000$ 450,000QuestionsYOUR ANSWERS
BASED UPON COURSE START DATEa. Compute Hall’s

2. accrued interest as of December 31, 20X1.b. Present the
appropriate balance sheet disclosure for the accrued interest and
the current and long-term portion of the outstanding debt as of
December 31, 20X1.c. Repeat parts (a) and (b) using a date of
December 31, 20X2, rather than December 31, 20X1. Assume
that Hall is in compliance with the terms of the loan
agreement.Accrued interest 12/31/X2DisclosureAccount to
be changedOriginal
AmountJan - FebMar-AprMay-JunJul-AugSept-OctNov-DecCh 7
Ex 4Salary
expense5000051,00052,00053,00054,00055,00056,000Questions
YOUR ANSWERS BASED UPON COURSE START
DATESalary expenseSocial Security PayableMedicare
PayableFed Taxes PayableState Taxes PayableInsurance
PayableCashPayroll Tax ExpenseSocial Security
PayableMedicare PayableState unemploymentFed
unemploymentAccount to
be changedOriginal
AmountJan - FebMar-AprMay-JunJul-AugSept-OctNov-DecCh 7
Pb 212/1 Note
payable2000025,00026,00028,00030,00031,00033,00012/1
Interest
rate015%15%15%15%15%15%Warranty2027202820292030203
120322033Purchase on
account1600017,00018,00019,00020,00021,00022,000Note
payable50006,0007,0008,0009,00010,00011,000Warranty
repair162172182192202222232Salary
accural14001,5001,6001,7001,8001,9002,000Vacation6%36000
6%37,0006%38,0006%39,0006%40,0006%41,0006%42,00012/2
6 interest120$ 120$ 120$ 120$ 120$ 120$ 120a. Prepare
journal entries to record the preceding transactions and
events.CashNotes PayableWarranty expenseWarranty
LiabilityMerchandiseAccounts PayableCashNote
PayableWarranty LiabilityCashSalary ExpenseSalary
PayablePayroll ExpenseAccrued Vacation Payableb. Determine
accrued interest as of December 31, 20XX, and prepare the

3. necessary adjusting entry or entries.12/1 one month
accrual12/26 60 day note-accrue 5 daysTotal Interest
AccrualPrepare ournal entry:Interest expenseInterest payablec.
Prepare the current liability section of Visconti’s December 31,
20XX balance sheet.Current Liabilities:Accounts payableNote
payableSalaries payableVacation payableWarranty payableTotal
Current LiabilitiesAccount to
be changedOriginal
AmountCh 8 Pb 1Par10$ 11.00$ 12.00$ 13.00$ 14.00$
15.00$ 16.00QuestionsYOUR ANSWERS BASED UPON
COURSE START DATE7/1 CashCommon StockC/S additional
Paid-in-Capital7/7 Attorney expenseCommon StockC/S
additional Paid-in-CapitalCashCommon StockC/S additional
Paid-in-CapitalLandCommon StockC/S additional Paid-in-
Capitalhttp://www.screencast.com/t/7C6URyZc5a../../cpabi_000
/Documents/ACC205%20Chapters/Produced%20videos/Week%2
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Exercises
1.
Prepayments by customers. Greenland Enterprises began a new
magazine in the fourth quarter of 20X2. Annual subscriptions, w
hich cost $18 each, were sold as follows:
Number of Subscriptions Sold
October
400
November
700
December
1,000

4. If subscriptions begin (and magazines are sent) in the month of
sale:
a.
name the necessary journal entry to record the magazine subscri
ptions sold during the fourth quarter.
b.
determine how much subscription revenue Greenland earned by
the end of 20X2.
c.
compute Greenland's liability to subscribers at the end of 20X2.
2. Accrued liability: current portion of long-
term debt. On July 1, 20X1, Hall Company borrowed $225,000
via a long-
term loan. Terms of the loan require that Hall pay interest and $
75,000 of principal on July 1, 20X2, 20X3, and 20X4. The unpai
d balance of the loan accrues interest at the rate of 10% per year
. Hall has a December 31 year-end.
a. Compute Hall's accrued interest as of December 31, 20X1.
b.
Present the appropriate balance sheet disclosure for the accrued
interest and the current and long-
term portion of the outstanding debt as of December 31, 20X1.
c.
Repeat parts (a) and (b) using a date of December 31, 20X2, rat
her than December 31, 20X1. Assume that Hall is in compliance
with the terms of the loan agreement.
3.
Notes payable. Sentry Security Systems purchased $72,000 of of
fice equipment on April 1, 20X3, by signing a 3-
year, 12% note payable to Sharp Inc. One third of the principal,
along with interest on the outstanding balance, is payable each
April 1 until maturity. (The first payment is due in 20X4.)
a.
Fill in the following table to reflect Sentry's liabilities, assumin
g a March 31 year-end.

5. 20X4
20X5
20X6
Current Liabilities
Current portion of long-term debt
Interest payable
Long-Term Liabilities
Long-term debt
a.
Assuming that interest is properly recorded at the end of each y
ear, present the proper journal entry to record the last payment
on April 1, 20X6.
4.
Payroll accounting. Assume that the following tax rates and pay
roll information pertain to Brookhaven Publishing:
5. Social Security taxes: 6% on the first $55,000 earned
6. Medicare taxes: 1.5% on the first $130,000 earned
7. Federal income taxes withheld from wages: $7,500
8. State income taxes: 5% of gross earnings
9. Insurance withholdings: 1% of gross earnings
10. State unemployment taxes: 5.4% on the first $7,000 earned

6. 11.
Federal unemployment taxes: 0.8% on the first $7,000 earned
The company incurred a salary expense of $50,000 during Febru
ary. All employees had earned less than $5,000 by month-end.
a.
Prepare the necessary entry to record Brookhaven's February pa
yroll that will be paid on March 1.
b.
Prepare the journal entry to record Brookhaven's payroll tax exp
ense.
5.
Payroll accounting. The following payroll information relates to
Viking Company for the month of July:
Total (gross) employee earnings
$150,000
Earnings in excess of Social Security base earnings
18,000
Earnings in excess of Medicare base earnings
2,000
Earnings in excess of unemployment base earnings
94,000
Federal income taxes withheld
14,500
State income taxes withheld
3,000
Employee deductions for medical insurance
2,200
The Social Security tax rate is 6% on the first $55,000 earned p
er employee; Medicare is 1.5% on the first $130,000 earned. Th
e state and federal unemployment tax rates are 5.4% and 0.8%, r
espectively, on the first $7,000 earned per employee.
a. Compute the employees' total take-home pay.
b. Compute Viking's total payroll-related expenses.
c. Assuming a stable work force, is total take-
home pay likely to increase, decrease, or remain the same in Se
ptember? Briefly explain.

7. Problems
1.
Current liabilities: recognition and valuation. The seven transac
tions and events that follow relate to the 20X2 operations of Blu
e Giant Products.
· On February 1, the company signed a 1-
year contract with the food processors union, agreeing to a 6%
wage increase for all employees. The cost of the wage increase i
s estimated to be $100,000 per month.
·
A customer slipped on a soft drink that he had spilled while wal
king through a Blue Giant store. The customer injured his back
and has filed a $50,000 damage suit against the company. Blue
Giant attorneys feel the suit is uncalled for and without merit.
·
Blue Giant purchased merchandise on October 15 for $4,000; ter
ms 5/15, n/60. The company overlooked the discount and intend
s to pay the supplier in January 20X3.
·
Equipment that cost $12,000 was acquired on November 1 by is
suing a 3-month, 10%, $12,000 note payable.
·
Office furniture that cost $4,000 was purchased on December 1,
with Blue Giant signing a $4,240, 12-
month note payable. Interest is included in the note's face value.
·
The company operates in a state that has a 6% sales tax. Sales o
f merchandise on account during December amounted to $300,0
00.
·
On the last day of 20X2, Blue Giant borrowed $1 million from
Monticello Bank. The loan's principal is due in 10 equal annual
installments of $100,000 each, with each installment payable on
December 31. The loan has a 9% interest rate.
Instructions
a.

8. Indicate which of the seven transactions and events would appea
r in the Current Liability section of the firm's December 31, 20
X2, balance sheet.
b.
Show how the items in part (a) would be disclosed. Use proper
dollar amounts.
c.
Indicate how the transactions and events that are not current lia
bilities would be handled for accounting purposes.
2.
Current liabilities: entries and disclosure. A review of selected f
inancial activities of Visconti's during 20XX disclosed the follo
wing:
12/1: Borrowed $20,000 from the First City Bank by signing a
3-
month, 15% note payable. Interest and principal are due at mat
urity.
2/10: Established a warranty liability for the XY-
80, a new product. Sales are expected to total 1,000 units during
the month. Past experience with similar products indicates that
2% of the units will require repair, with warranty costs averagin
g $27 per unit.
12/22: Purchased $16,000 of merchandise on account from Oreg
on Company, terms 2/10, n/30.
12/26: Borrowed $5,000 from First City Bank; signed a $5,120
note payable due in 60 days.
12/31: Repaired six XY-
80s during the month at a total cost of $162.
12/31: Accrued 3 days of salaries at a total cost of $1,400.
12/31: Accrued vacation pay amounting to 6% of December's $3
6,000 total wage and salary expense.
Instructions
a.
Prepare journal entries to record the preceding transactions and
events.
b.

9. Determine accrued interest as of December 31, 20XX, and prepa
re the necessary adjusting entry or entries.
c.
Prepare the current liability section of Visconti's December 31,
20XX balance sheet.
2.
Notes payable. Red Bank Enterprises was involved in the follow
ing transactions during the fiscal year ending October 31:
8/2: Borrowed $75,000 from the Bank of Kingsville by signin
g a 120-day note for $79,000.
8/20: Issued a $40,000 note to Harris Motors for the purchase
of a $40,000 delivery
truck. The note is due in 180 days and carries a 12% interest rat
e.
9/10: Purchased merchandise from Pans Enterprises in the amo
unt of $15,000. Issued a 30-
day, 12% note in settlement of the balance owed.
9/11: Issued a $60,000 note to Datatex Equipment in settlemen
t of an overdue account payable of the same amount. The note is
due in 30 days and carries a 14% interest rate.
10/10: The note to Paris Enterprises was paid in full.
10/11: The note to Datatex Equipment was due today, but insuff
icient funds were available for payment. Management authorize
d the issuance of a new 20-
day, 18% note for $60,700, the maturity value of the original ob
ligation.
10/31: The new note to Datatex Equipment was paid in full.
Instructions
a. Prepare journal entries to record the transactions.
b.
Prepare adjusting entries on October 31 to record accrued intere
st.
c.
Prepare the Current Liability section of Red Bank's balance shee
t as of October
31. Assume that the Accounts Payable account totals $203,600 o

10. n this date.
4.
Payroll journal entries. The following tax rates and payroll infor
mation pertain to the Syracuse operations of IMS Company for
November:
5. Social Security taxes: 6% on the first $55,000 earned
6. Medicare taxes: 1.5% on the first $130,000 earned
7. Federal income taxes withheld from wages: $4,400
8. State income taxes: 6% of gross earnings
9. Insurance withholdings: 1% of gross earnings
10. Pension contributions: 2.5% of gross earnings
11. State unemployment taxes: 5.4% on the first $7,000 earned
12.
Federal unemployment taxes: 0.8% on the first $7,000 earned
Sales staff salaries amounted to $26,000, $3,000 of which is ove
r the unemployment earnings base but subject to all other appro
priate taxes. The company's branch manager, Tracy Smith, earne
d her regular salary of $9,000 during the month.
Instructions
a.
Prepare the journal entry to record the November payroll. Smith
's salary is classified as an administrative expense by the compa
ny.
b.
IMS matches employees' insurance and pension contributions. P
repare a journal entry to record the firm's payroll taxes and othe
r related payroll costs. Assume that these amounts will be remitt
ed to the proper authorities in December.
c.
The owner of IMS asked the firm's accountant to reclassify all p
ersonnel as independent contractors. The accountant explained t
hat such a reclassification would not be appropriate because, by
law, the personnel were considered employees. Briefly comment
on the probable reasoning behind the owner's request