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Chapter 10 Current Liabilities and Payroll
a. Determine the quick ratio for both companies. b. Interpret the quick ratio difference between the two companies.
Problems Series A
PR 10-1A liability transactions
OBJ. 1, 5
The following items were selected from among the transactions completed by Warwick Co. during the current year:
Feb. 3. Purchased merchandise on account from Onifade Co., 410,000, terms n30. Mar. 3. Issued a 45-day, 6 note for 410,000 to Onifade Co., on account.
Apr. 17. Paid Onifade Co. the amount owed on the note of March 3. June 1. Borrowed 250,000 from Aldhiezer Bank, issuing a 60-day, 7.5 note.
July 21. Purchased tools by issuing a 300,000, 60-day note to Nash Co., which discounted the note at the rate of 8.
31. Paid Aldhiezer Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 9 note for 250,000. Journalize both the debit
and credit to the notes payable account. Aug. 30. Paid Aldhiezer Bank the amount due on the note of July 31.
Sept. 19. Paid Nash Co. the amount due on the note of July 21. Dec. 1. Purchased ofice equipment from Oso Co. for 340,000, paying 40,000 and issu-
ing a series of ten 8 notes for 30,000 each, coming due at 30-day intervals. 12. Settled a product liability lawsuit with a customer for 165,000, payable in Janu-
ary. Warwick accrued the loss in a litigation claims payable account. 31. Paid the amount due Oso Co. on the irst note in the series issued on
December 1.
Instructions
1. Journalize the transactions. 2. Journalize the adjusting entry for each of the following accrued expenses at the end of
the current year: a. Product warranty cost, 32,500.
b. Interest on the nine remaining notes owed to Oso Co. PR 10-2A
Entries for payroll and payroll taxes
OBJ. 2, 3
The following information about the payroll for the week ended December 30 was ob- tained from the records of Qualitech Co.:
Salaries: Deductions:
Sales salaries 350,000
Income tax withheld 118,800
Warehouse salaries 180,000
Social security tax withheld 40,500
Oice salaries 145,000
Medicare tax withheld 10,125
675,000 U.S. savings bonds
14,850 Group insurance
12,150 196,425
Tax rates assumed: Social security, 6
Medicare, 1.5 State unemployment employer only, 5.4
Federal unemployment employer only, 0.8
1. b Dr. Payroll Tax Expense, 52,795
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Chapter 10 Current Liabilities and Payroll