Accounting Assignment 11.1 and Assignment 11.2

Accounting Assignment 11.1 and Assignment 11.2
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1
Assignment 11.1 Handout
1. On August 31, 2010, Gordon, Co., purchased $7,000 of inventory on a one-year, 12% note
payable.
Requirements
R1. Journalize the company’s accrual of interest expense on February 28, 2011, their fiscal yearend.
R2. Journalize the company’s payment of the note plus interest on August 31, 2011.
2. Catskills Corporation guarantees its snowmobiles for three years. Company experience
indicates that warranty costs will add up to 5% of sales. Assume that the Catskills dealer in
Colorado Springs made sales totaling $519,000 during 2011. The company received cash for
20% of the sales and notes receivable for the remainder. Warranty payments totaled $19,000
during 2011.
Requirements
R1. Record the sales, warranty expense, and warranty payments for the company.
R2. Post to the Estimated warranty payable T-account. At the end of 2011, how much in
Estimated warranty payable does the company owe?
3. Farley Motors, Inc., a motorcycle manufacturer, included the following note (adapted) in its
annual report:
Requirements
R1. Why are these contingent (versus real) liabilities?
R2. How can a contingent liability become a real liability for Farley Motors? What are the limits to
the company’s product liabilities in the United States?
4. Gina Tarver is paid $720 for a 40-hour workweek and time-and-a-half for hours above 40.
Requirements
R1. Compute Tarver’s gross pay for working 52 hours during the first week of February.
R2. Tarver is single, and her income tax withholding is 20% of total pay. Tarver’s only payroll
deductions are payroll taxes. Compute Tarver’s net (take-home) pay for the week. Use an 8%
FICA tax rate, and carry amounts to the nearest cent.
5. Return to the Gina Tarver payroll situation in Short Exercise 10-4. Tarver’s employer, College
of St. Mary, pays all the...