Compensated Absences

E13-6 (Compensated
Absences)Assume the facts in E13-5 except that
Matt Broderick Company has chosen not to accrue paid sick leave until used, and
has chosen to accrue vacation time at expected future rates of pay without
discounting. The company used the following projected rates to accrue vacation
time.

Year in Which Vacation Projected Future Pay
Rates
Time Was Earned Used to Accrue Vacation Pay
2013
$10.75
2014 11.60

Instructions
(a)Prepare journal entries to record transactions related to
compensated absences during 2013 and 2014.
(b)Compute the amounts of any liability for compensated absences that
should be reported on the balance sheet at December 31, 2013, and 2014.

E13-8 (Payroll Tax Entries)The payroll of YellowCard Company for September 2013 is as
follows. Total payroll was $480,000, of which $110,000 is exempt from Social
Security tax because it represented amounts paid in excess of $113,700 to
certain employees. The amount paid to employees in excess of $7,000 was
$400,000. Income taxes in the amount of $80,000 were withheld, as was $9,000 in
union dues. The state unemployment tax is 3.5%, but YellowCard Company is
allowed a credit of 2.3% by the state for its unemployment experience. Also,
assume that the current FICA tax is 7.65% on an employee’s wages to $113,700
and 1.45% in excess of $113,700. No employee for YellowCard makes more than
$125,000. The federal unemployment tax rate is 0.8% after state credit.

Instructions
Prepare the necessary journal entries if the wages and salaries
paid and the employer payroll taxes are recorded separately.

E13-11 (Warranties)Sheryl
Crow Equipment Company sold 500 Rollomatics during 2014 at $6,000 each.During
2014, Crow spent $20,000 servicing the 2-year warranties that accompany the
Rollomatic. All applicable transactions are on a cash basis.

Instructions
(a)Prepare 2014 entries for Crow using the expense warranty approach.
Assume that Crow estimates the total cost of servicing the warranties will be
$120,000 for 2 years.
(b)Prepare 2014 entries for Crow assuming that the warranties are not
an integral part of the sale. Assume that of the sales total, $150,000 relates
to sales of warranty contracts. Crow estimates the total cost of servicing the
warranties will be $120,000 for 2 years. Estimate revenues to be recognized on
the basis of costs incurred and estimated costs.

P13-9 (Premium Entries
and Financial Statement Presentation)Sycamore
Candy Company offers an MP3 download (seven-single medley) as a premium for
every five candy bar wrappers presented by customers together with $2.50. The
candy bars are sold by the company to distributors for 30 cents each. The
purchase price of each download code to the company is $2.25. In addition, it
costs 50 cents to distribute each code. The results of the premium plan for the
years 2014 and 2015 are as follows. (All purchases and sales are for cash.)

2014 2015
MP3
codes purchased
250,000 330,000
Candy
bars sold
2,895,400 2,743,600
Wrappers
redeemed 1,200,000 1,500,000
2014
wrappers expected to be redeemed in 2015
290,000
2015
wrappers expected to be redeemed in 2016 350,000

Instructions
(a)Prepare the journal entries that should be made in 2014 and 2015
to record the transactions related to the premium plan of the Sycamore Candy
Company.
(b)Indicate the account names, amounts, and classifications of the
items related to the premium plan that would appear on the balance sheet and
the income statement at the end of 2014 and 2015.

P14-2 (Issuance and
Redemption of Bonds)Venezuela Co. is building a new
hockey arena at a cost of $2,500,000. It received a downpayment of $500,000
from local businesses to support the project, and now needs to borrow
$2,000,000 to complete the project. It therefore decides to issue $2,000,000 of
10.5%, 10-year bonds. These bonds were issued on January 1, 2013, and pay
interest annually on each January 1. The bonds yield 10%. Venezuela paid
$50,000 in bond issue costs related to the bond sale.

Instructions
(a)Prepare the journal entry to record the issuance of the bonds and
the related bond issue costs incurred on January 1, 2013.
(b)Prepare a bond amortization schedule up to and including January
1, 2017, using the effectiveinterest method.
(c)Assume that on July 1, 2016, Venezuela Co. redeems half of the
bonds at a cost of $1,065,000 plus accrued interest. Prepare the journal entry
to record this redemption.

P14-9 (Entries for
Zero-Interest-Bearing Note; Payable in Installments)Sabonis Cosmetics Co. purchased machinery on December 31,
2013, paying $50,000 down and agreeing to pay the balance in four equal
installments of $40,000 payable each December 31. An assumed interest of 8% is
implicit in the purchase price.

Instructions
Prepare the journal entries that would be recorded for the
purchase and for the payments and interest on the following dates. (Round
answers to the nearest cent.)

(a)December 31,
2013. (d)December 31,
2016.
(b)December 31,
2014. (e)December 31,
2017.
(c)December 31,
2015.