Question

January 2—Paid Mass Media $4,200.00 for prepaid advertising in local newspapers for the
next 12 months.
January 2—Paid Pierce Properties $2,750.00 for January rent. Of this amount, 25% is for office
facilities and 75% is for factory facilities.
January 2—Paid Owen's Insurance $6,000.00 for prepaid insurance for the first quarter of the year.
January 3—Received a check from Horsfield Happy Ice Cream as partial payment on account in
the amount of $5,000.00.
January 3—Paid Rockaway Metal the balance of $2,873.00 on account.
Narrative of Transactions
January 2—Paid Mass Media $4,200.00 for prepaid advertising in local newspapers for the
next 12 months.
January 2—Paid Pierce Properties $2,750.00 for January rent. Of this amount, 25% is for office
facilities and 75% is for factory facilities.
January 2—Paid Owen's Insurance $6,000.00 for prepaid insurance for the first quarter of the year.
January 3—Received a check from Horsfield Happy Ice Cream as partial payment on account in
the amount of $5,000.00.
January 3—Paid Rockaway Metal the balance of $2,873.00 on account.
January 10—Receive a check from Horsfield Happy Ice Cream as partial payment on account in
the amount of $5,000.00.
January 10—Receive a phone bill in the amount of $1,402.22 from Unique Telephone Systems
on account.
January 15—Paid Liberty Bank $2,535.79 for December payroll taxes payable for the amounts of
FWT Payable, $1,613.11; FICA Tax Payable, $822.68.
January 15—Assign Job 76 to Cold Refrigeration for the purchase of a refrigeration system. The start date will be January 16th. The completion date will be no later than February 28th. The estimated direct material is $9,175.00. The estimated indirect material is $1,860.00. The estimated
direct labor is $15,600.00. The contract amount is $45,800.00.A deposit of $10,000.00 was provided by Cold Refrigeration in signing the contract. The deposit is unearned revenue. Half of the
contract will be billed upon 50% completion with the deposit applied against that billing with the remaining amount due immediately. A quarter of the contract will be billed upon 75% completion
of the contract with the amount due immediately. The remaining amount of the contract is to be billed when the job is 100% complete and is payable within 30 days of the billing.
January 16—Purchased $4,441.00 of factory supplies from Johnston Equipment paid in cash.
January 16—Purchased $2,965.00 of direct materials from Smith Synthetics on account.
January 16—Purchased $427.50 of office supplies from OfficeMax on account.
January 19—Apply from direct materials requisition $2,800.00 of direct materials. Apply from indirect materials requisition $325.00 of indirect materials. Apply from time cards s $7,950.00 of direct labor to Job 74 completing the job.Applied factory overhead is based on 25% of direct labor cost. Transfer the completed job to the COGS account from Direct Material and Indirect Material and Factory Overhead accounts. When making the journal entry for applying direct labor debit COGS for the gross pay and credit FWT Payable and FICA Tax Payable for the appropriate amounts with the net pay going to Salaries Payable.
January 20. —Paid the electric bill from Susquehanna Electric in the amount of $2,356.21 for the month of December. Allocate 30% to Factory Overhead
January 20—Paid the FUTA Tax Payable for the previous year.
January 20—Paid the SUTA Tax Payable for the previous year.
January 23—Ashman Alcove Designs paid the balance on account.
January 27—Paid O-Ring Enterprises the balance owed on account.
January 27—Paid post office $300.00 cash for postage added to postage meter
January 28—Apply from direct materials requisition $4,600.00 of direct materials. Apply from indirect materials requisition $950.00 of indirect materials. Apply $8,000.00 (from time cards) of direct labor and factory overhead to Job 76 irect materials. Apply $8,000.00 (from time cards) of direct labor and factory overhead to Job 76, completing 50% of the job. Factory overhead is based on 25% of direct labor cost. Transfer the partially completed job from Direct Material and Indirect Material to WIP. When making the journal entry for applying direct labor, debit WIP for the gross
pay and credit FWT Payable and FICA Tax Payable for the appropriate amounts with the net pay going to Salaries Payable. Set up the accounts receivable and bill Cold Refrigeration for 50% of
the contract on account, applying the initial $10,000.00 deposit against the billing.
January 29—Received a check from Cold Refrigeration in the amount of $9,976.25 on account.
January 31—Received the following data for the monthly payroll:
Direct labor (already recorded) $19,600.00
Sales commission 5,132.50
Officers' salaries 5,000.00
Office salaries 1,920.00
Record the monthly payroll. Direct labor payroll has already been recorded, as it was incurred in January. Debit other salary expense accounts for the appropriate amounts; credit FWT Payable for 15% of gross pay; credit FICA Tax Payable for 7.65% of gross pay; and credit Salaries Payable for the net pay. Record the payroll taxes imposed on the employer for all personnel for the month of January. (Prepare the "Schedule of Employer Payroll Taxes Allocation" using the appropriate tax rates.)
January 31—Received a check from Messina Missions for the balance on account
January 31—Received a check from Horsfield Happy Ice Cream for the remaining balance on account.
January 31—Paid all employee wages earned in January.

1. Prepare a Balance Sheet
2. Prepare an Income Statement   
3. Prepare a Trial Balance

Answer 1

Solution:

JOURNAL ENTRIES			($)
2-Jan
Paid mass media for prepaid advertising.
DR	advertising prepayments account		4,200.00
CR	cash account		4,200.00
paid piece properties
2-Jan
DR	rent account		2,750.00
CR	cash account		2,750.00
2-Jan
paid owen insurance
DR	insurance prepayments account		6,000.00
CR	cash account		6,000.00
3-Jan
Received a check
DR	cash account		5,000.00
CR	accounts receivable		5,000.00
3-Jan
Paid Rockway Metal
DR	account payable		2,873.00
CR	cash account		2,873.00
4-Jan
Sold 2 Ice Cream Systems
DR	cash account		5,000.00
CR	Day Dreamers Account		5,000.00
DR	Account receivable account		20,925.00
CR	cost of goods account		20,925.00
DR	account receivable		20,925.00
CR	sales account		20,925.00
DR	cost of goods sold account		3,700.00
CR	direct material account		3,350.00
CR	indirect material account		350.00
6-Jan			$
purchased indirect materials
DR	indirect	materials account	3,643.00
CR	account payable		3,643.00
5-Jan
DR	Mountain swirl Ice account		7,500.00
CR	sales account		7,500.00
DR	Cost of goods sold account		3,000.00
CR	finished goods account		3,000.00
DR	factory overhead account		2,050.00
CR	finished goods account		2,050.00
6-Jan
Purchased factory supplies
DR	Factory Supplies account		847.21
CR	account payable		847.21
9-Jan
DR	Finished goods account		1,620.00
CR	direct material account		1,450.00
CR	indirect material account		170.00
10-Jan
Received a check from Horsfied Happy Ice Cream
DR	Cash account		5,000.00
CR	Account payable		5,000.00
10-Jan
Receive a phone Bill
DR	Telephone expense account		1,402.22
CR	Unique Telephone systems account		1,402.22
DR	Unearned revenue account		10,000.00
CR	Cold refrigeration account		10,000.00
DR	Cost of goods sold account		11,035.00
CR	Direct material account		9,175.00
CR	Indirect material account		1,860.00
DR	factory ooverheads account		3,900.00
CR	finished goods account		3,900.00
DR	Account receivable		45,800.00
CR	sales account		45,800.00
15-Jan			$
Paid Taxes
DR	FWT account		1,613.11
DR	FICA Account		822.68
CR	Cash account		2,435.79
16-Jan
purchased factory supplies
DR	factory supplies account		4,441.00
CR	cash account		4,441.00
16-Jan
purchases
DR	Direct Materials account		2,965.00
CR	accounts payable		2,965.00
16-Jan
purchased office supplies
DR	Office Supplies account		427.50
CR	account payable		427.50
DR	factory supplies account		847.21
CR	Account payable		847.21
DR	Finished goods account		1,987.50
CR	factory overheads account		1,987.50
DR	Cost of goods sold account		3,125.00
CR	Direct materials account		2,800.00
CR	indirect material account		325.00
20-Jan
Paid Electric Bills
DR	electricity bills account		2,356.21
CR	Cash Account		2,356.21
20-Jan
Paid FUTA Tax Payable
DR	F.U.T.A Tax payable account		1,032.39
CR	Cash account		1,032.39
20-Jan			$
Paid S.U.T.A Tax Payable
DR	S.U.T.A tax payable account		1,871.20
CR	Cash Account		1,871.20
23-Jan
Received cash
DR	Cash account		24,681.00
CR	Account receivable		24,681.00
27-Jan
paid O-Ring Enterprises
DR	Account payable		6,941.00
CR	cash account		6,941.00
27-Jan
paid post office
DR	Postage expense account		300.00
CR	cash account		300.00
DR	finished goods account		2,000.00
CR	factory overheads account		2,000.00
DR	W.I.P account		5,550.00
CR	direct materials account		4,600.00
CR	indirect materials account		950.00
29-Jan
Received check
DR	Cash account		9,976.25
CR	account receivable		9,976.25
31-Jan
Received check from Messina
DR	Cash account		9,458.00
CR	account receivable		9,458.00
31-Jan
Received a check
DR	Cash account		12,345.00
CR	Horsifield Happy Ace		12,345.00
29-Jan
DR	Cash account		10,000.00
CR	Job 76		10,000.00
			$
31-Jan
paid wages
DR	Employees wages account		23,771.02
CR	Cash account		23,771.02
DR	Office salaries account		5,000.00
CR	expense account		5,000.00
DR	Office salaries account		1,920.00
CR	expense account		1,920.00

SCHEDULE OF EMPLOYER PAYROLL TAX ALLOCATION
	Jan 31, 20XX
	Employer payroll Taxes
job	wages	FWT	FICA	FUTA	SUTA
	$	$	$	$	$
D.labor	19,600.00	2,940.00	1,499.40	156.80	284.20
s.salaries	5,132.50	769.88	392.64	41.06	74.42
Officers s	5,000.00	750.00	382.50	40.00	72.50
office s.	1,920.00	288.00	146.88	15.36	27.84
TOTALS	31,652.50	4,747.88	2,421.42	253.22	458.96

TOTAL EMPLO	NET
YER TAXES	PAY
4,880.40	14,719.60
1,278.00	3,854.50
1,245.00	3,755.00
478.08	1,441.92
7,881.48	23,771.0