1. Sample Problem Chapter 12

3. a) During the year 2007, Sam & Sons Co. had net credit sales of $920,000. Past experience shows that 0.9% of the firm’s net credit sales result in uncollectible accounts. Journal entry: Uncollectible Accounts Expense $8,280 Allowance for Doubtful Accounts $8,280

4. b) Equipment purchased by One Stop Shops for $28,700 on January 2 ,2007 has an estimated useful life of nine years and an estimated salvage value of $1,700. What adjustment for depreciation should be recorded on the firm’s worksheet for the year ended December 31, 2007 28,700 – 1,700 = 27,000 27,000/9= 3,000 Journal entry: Depreciation expense (equipment) $3,000 Accumulated depreciation (equipment) $3,000

5. c) On December 31, 2007, Parrish Plumbing Supply owed wages of $6,400 to its factory employees, who are paid weekly. Journal entry: Wages expense $6,400 Wages payable $6,400

6. d) On December 31, 2007, Parrish Plumbing supply owed the employer’s social security (6.2%) and Medicare (1.45%) taxes on the entire $6,400 of accrued wages. Journal entry: Payroll tax expense $489.60 Social security tax payable $396.80 Medicare tax payable $92.80

7. e) On December 31, 2007, Parrish Plumbing Supply owed federal (0.8%) and state (5.4%) unemployment taxes on the entire $6,400 of accrued wages. Journal entry: Payroll tax expense $396.80 Federal unemployment tax payable $51.20 State unemployment tax payable $345.60