Devry ACCt305 week 5 homework

E13-3 The following
selected transactions relate to liabilities of United Insulation Corporation.
United’s fiscal year ends on December 31.

Required: Prepare
the appropriate journal entries through the maturity of each liability.
2013
Jan.
13 Negotiated a revolving credit
agreement with Parish Bank that can be renewed annually upon bank approval. The
amount available under the line of credit is $20 million at the bank’s prime
rate.
Feb.
1 Arranged a three-month bank loan of
$5 million with Parish Bank under the line of credit agreement. Interest at the
prime rate of 10% was payable at
maturity.
May
1 Paid the 10% note at maturity.
Dec.
1 Supported by the credit line, issued
$10 million of commercial paper on a nine-month note. Interest was discounted
at issuance at a 9% discount rate.
31 Recorded any necessary adjusting entry(s).
2014
Sept.
1 Paid the commercial paper at
maturity.

E13-11 An annual
report of Spring Corporation contained a rather lengthy narrative entitled
“Review of Segmental Results of Operation.” The narrative noted that
short-term notes payable and commercial paper outstanding at the end of the
year aggregated $756 million and that during the following year “This
entire balance will be replaced by the issuance of long-term debt or will
continue to be refinanced under existing long-term credit facilities.”

Required: How
did Sprint report the debt in its balance sheet? Why?

E13-15 Cupola Awning
Corporation introduced a new line of commercial awnings in 2013 that carry a
two-year warranty against manufacturer’s defects. Based on their experience
with previous product introductions, warranty costs are expected to approximate
3% of sales. Sales and actual warranty expenditures for the first year of
selling the product were:

Sales Actual Warranty
Expenditures
$50,00,000
$37,500

Required: 1.
Does this situation represent a loss contingency? Why or why not? How should
Cupola account for it?
2.
Prepare journal entries that summarize sales of the awnings (assume all credit
sales) and any aspects of the warranty that should be recorded during 2013.
3. What
amount should Cupola report as a liability at December 31, 2013?

E13-17 Sound Audio
manufactures and sells audio equipment for automobiles. Engineers notified
management in December 2013 of a circuit flaw in an amplifier that poses a
potential fire hazard. An intense investigation indicated that a product recall
is virtually certain, estimated to cost the company $2 million. The fiscal year
ends on December 31.

Required: 1.
Should this loss contingency be accrued, disclosed only, or neither? Explain.
2. What
loss, if any, should Sound Audio report in its 2013 income statement?
3. What
liability, if any, should Sound Audio report in its 2013 balance sheet?
4.
Prepare any journal entry needed.

E13-27 Lee Financial
Services pays employees monthly. Payroll information is listed below for
January 2013, the first month of Lee’s fiscal year. Assume that none of the
employees exceeded any relevant wage base.

Salaries $
5,00,000
Federal income taxes to be withheld 1,00,000
Federal unemployment tax rate 0.60%
State unemployment tax rate (after FUTA deduction) 5.40%
Social Security (FICA) tax rate 7.65%

Required: Prepare
the appropriate journal entries to record salaries and wages expense and
payroll tax expense for the January 2013 pay period.