Asked Client, to accept a 60-day, 15% note to replace its existing $7,000 accoun

Question

Asked Client, to accept a 60-day, 15% note to replace its existing $7,000 account payable to Office Station. Issued a $350,000, 4-year, 12% note at face value to Forest Hills Bank and received $350,000 cash. The note requires annual interest payments each December 31. Sold merchandise that cost $4,800 to Creek Co. for $7,000 under credit terms of 2/10, n/60 FOB shipping point, Invoice dated October 27. Paid part-time receptionist tor two weeks salary, $1.000. The petty cash fund was increase to $380. Weekly payroll of $3,000 entirely subject to F.I.C.A. and Medicare (7 65%), federal (0.8%) and state (4%) unemployment taxes. Journal entry to record Employer payroll taxes. Required:

Explanation / Answer

Journal Entry:

on 26,

Debit Accounts Payable $7000

Credit Note Paybale $7000

on 26,

Debit Cash $350000

Credit Note Payable $350000

on 27,

Debit Accounts Receivable $7000

Credit Sales $7000

Debit Cost of Goods Sold $4800

Credit Finished Goods Inventory $4800

on 31,

Debit Payroll Tax Expense $373.50

Credit FICA & Medicare Tax $229.50

Credit Federal Unemployment Tax $ 24

Credit State Unemployment Tax $120

(payroll tax expenses booked on week payroll of $3000)

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