AC1220 Lab 5.2

Introduction
On July 25, 20x1, Jake’s Computer Sales and Repair enters into an agreement with Inner-Tech, a local computer software development firm. Inner-Tech pays Jake’s Computer Sales and Repair $45,000 in advance for ongoing computer repair services. At year-end, Jake determines that $38,500 of this amount has been earned.

Requirement 1 a. Journalize the unearned revenue transaction on July 25, 20x1.

DATE | Account and Explanation | DEBIT | CREDIT | Jul 25 | | | | | | | | | To record unearned revenue | | |

b. Journalize the necessary adjustment for December 31, 20x1.

DATE | Account and Explanation | DEBIT | CREDIT | Dec 31 | | | | | | | | | To adjust unearned revenue | | |

Requirement 2
Analysis shows that around 2 percent of A-line sales require after-sale repairs. Beginning July 1, 20x1, Jake’s Computer Sales and Repair provides customers with a limited product warranty on each A-line computer sold. Sales of A-line computers total to $74,500 in July 20x1.

a. Compute the estimated warranty expense payable amount.

b. Journalize the estimated warrantee expense.

DATE | Account and Explanation | DEBIT | CREDIT | Jul 31 | | | | | | | | | To accrue warranty payable | | |

c. Actual repairs made during August 20x1 to products under warranty results in cash expenditures of $800. Journalize the warranty repair cost. DATE | Account and Explanation | DEBIT | CREDIT | Aug 30 | | | | | | | | | To accrue warranty payable | | |

d. At what amount is warranty expense reported on the income statement for the month ended August 20x1?

Requirement 3
Jake’s Computer Sales and Repair has one employee, Dave, who earns a monthly gross salary of $3,415 for the month of August 20x1. So far, in 20x1, Dave has earned a gross salary amounting to $23,905.
Jake’s Computer Sales and Repair withholds the following amounts from Dave’s gross salary:

* Social Security taxes and Medicare taxes—Federal Insurance Contributions Act (FICA)—at 7.65 percent of gross salary up to $106,800 * Income tax withheld: 10 percent * Other amounts withheld: * Health insurance: $200 per month * Retirement plan contribution: $400 per pay period * Charitable contribution: $20 per pay period

a. Compute Dave’s net salary by completing the following table:

Gross pay: | | | Less withholding deductions: | | | Income tax | | | Employee FICA tax | | | Health insurance | | | Employee retirement contribution | | | Employee charitable contribution | | | Net pay | | |

b. Journalize salaries, payroll taxes, and benefits payable. In addition, journalize the salary payment.

DATE | | DEBIT | CREDIT | Aug 31 | | | | | | | | | To record salaries payable | | |

DATE | | DEBIT | CREDIT | 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | To record payment of salary | | |

c. As Dave’s employer, Jake’s Computer Sales and Repair must also make a payroll tax payment. Journalize the entry to record employer payroll taxes.

DATE | | DEBIT | CREDIT | Aug 31 | | | | | | | | | To record employer payroll taxes | | |

DATE | | DEBIT | CREDIT | Aug 31 | | | | | | | | | | | | | To record payment of payroll taxes to government | | | d. Journalize the payment of taxes to the federal government.