Question

WHAT ARE THE JOURNAL ENTRIES FOR THESE EVENTS  

1	On January 1, purchased land and building for $250,000. The building was appraised at $180,000 and the land at $120, 000. Pavilion paid $50,000 cash and financed the balance. The balance was financed with a 10-year installment note. The note had an interest rate of 8% and annual payment of $29,806 due on the last of the year.
2	On January 1, issued $100,000 of 8 percent, five-year bonds. The bonds were issued at 95.
3	Purchased 300 alarm systems at a cost of $320. Cash was paid for the purchase.
4	Sold 200 alarm systems for $625 cash each plus sales tax of 5 percent. Use FIFO to compute cost of goods sold
5	Sold $120,000 of monitoring services. The customer paid with a credit card. The credit card company charged a 5% fee
6	Replenished the petty cash fund on June 30. The fund has $10 cash and receipts of $155 for yard mowing and $34 for office supplies expense
7	Collected the amount due from the credit card company

8	Paid installers and other employees a total of $100,000 for salaries for the year. Assume the social security tax rate is 6% and the medicare tax rate is 1.5%. Federal income tax withheld amount to $5,000. The net amount of salaries was paid in cash.
9	Paid the payroll liabilities, both the amounts withheld from the salaries plus the employer share of social security tax and medicare tax from the event mentioned above. Disregard unemployment tax in this entry.
10	Paid bond interest and amortized the discount.
11	Paid the annual installment on the amortized note.
	Adjustments
12	Recognize depreciation expense for the building. The building has a 40-year life and a $10,000 salvage value.
13	The alarm sold above were covered with a one-year warranty. Pavilion estimates that the warranty cost will be 2% of alarm sales.
14	The unemployment tax on the three employees has not been paid. Record the accrued unemployment tax on the salaries for the year. The unemployment tax rate is 5% and gross wages for all employees exceeded $7,000.

Answer 1

Journal Entries:

	Account titlte and explanation	Debit	Credit
1	Buildings	$150,000
	Land	$100,000
	Cash		$50,000
	Notes payable		$200,000
	[To record purchase of buildings and land]
2	Cash [100,000 x 0.95]	$95,000
	Discount on bonds payable	$5,000
	Bonds payable		$100,000
	[To record issuance of bonds payable]
3	Inventory [300 x $320]	$96,000
	Cash		$96,000
	[To record purchase of inventory for cash]
4	Cash	$131,250
	Sales revenue [200 x $625]		$125,000
	Sales tax payable [125,000 X 5%]		$6,250
	[To record sales for cash]
	Cost of goods sold [(40 x $310) + (160 x $320) ]	$63,600
	Inventory		$63,600
	[To record cost of goods sold]
5	Accounts receivable	$114,000
	Credit Card fee expenes [120,000 x 5%]	$6,000
	Service revenue		$120,000
	[To record service revenue]
6	Yard mowing Expense	$155
	Office supplies expense	$34
	Cash short & Over	$1
	Cash		$190
	[To replenish the petty cash fund]
7	Cash	$114,000
	Accounts receivable		$114,000
	[To record collection from credit card company]
8	Salaries expense	$100,000
	Social Security tax payable (100,000 x 6%)		$6,000
	Medicare payable (100,000 x 1.5%)		$1,500
	Federal Withholding payable		$5,000
	Cash		$87,500
	[To record payment of salaries]
9	Social Security tax payable (6,000 + 6,000 employer portion)	$12,000
	Medicare payable (1,500 + 1,500 employer portion)	$3,000
	Federal Withholding payable	$5,000
	Cash		$20,000
	[To record payment of payroll liabilities]
10	Interest expense	$9,000
	Cash [100,000 x 8%]		$8,000
	Discount on bonds payable [5,000/5 years]		$1,000
	[To record interest expense on bonds payable]
11	Notes payable [200,000/10]	$20,000
	Interest expense	$29,806
	Cash		$49,806
	[To record payment of installment and interest expense]

Calculations:

For Transaction 1

Fair value	300,000	100%
Building	180,000	60%
Land	120,000	40%
Cost	2,500,000	100%
Building	1,500,000	60%
Land	1,000,000	40%

For transaction 6:

Fund balance		$200
Cash on hand	$10
Yard mowing	$155
Office supplies expense	$34	$199
Amount of cash missing		$1