PRINCIPLES OF ACCOUNTING II

EXAM I

Name – Colin Loughman Date – 3/28/21

TRUE/FALSE

1. Federal unemployment (FUTA) tax is withheld from each

employee's wages. False

2. No gain or loss is recorded when a plant asset is sold for

an amount equal to its book value. True

3. Over the life of a depreciable asset, its recorded cost decreases, the related
accumulated depreciation increases, and its book value remains constant. False

4. A W-2 form is the withholding allowance certificate for an employee with two
dependents. False

5. In most situations, the total Social Security taxes levied on employers will exceed
the amount of Social Security taxes withheld from employees. True

6. If an uninsured asset is destroyed by fire, the firm suffers a loss measured by the
asset's estimated salvage value. False

MULTIPLE CHOICE

_B_1. A gain or loss on the sale of a plant asset is determined

by comparing the:

A. Asset's original cost with the sales proceeds

B. Asset's book value with the sales proceeds
C. Asset's original cost with the asset's book value.
D. Initial estimate of the asset's salvage value with the sales proceeds.
E. None of these.

_B_2. A plant asset's book value equals its estimated salvage value:

A. On the date of the asset's disposal

B. At the end of the asset's useful life
C. On each date the asset's depreciation is brought up to date.
D. At any time throughout the asset's useful life
E. None of these.
_E_3. Which is a factor in determining federal income tax withheld?

A. Level of wages
B. Marital status
C. Number of dependents
D. Pay period
E. All of the above

_B_4. The book value of a depreciable asset is

A. The original cost of the asset.

B. The original cost of the asset less its accumulated
depreciation.
C. The original cost of the asset less its salvage value.
D. The accumulated depreciation on the asset.
E. None of these.

_C_5. Federal Unemployment Tax Act taxes are

A. Levied on both employer and employee

B. Levied on employee only
C. Levied on employer only
D. Levied only on the firm's executives
E. None of the above
PROBLEMS

1. Greensburg Inc. had the following payroll for October 2020:

Employee Wages $90,000

Federal income tax withheld 23,000
FICA 5,000
Health premiums deducted 3,000
Salaries (included above)
subject federal unemployment
taxes 90,000
Salaries (included above)
subject to state unemployment
taxes 90,000

REQUIRED:
Present journal entries on October 31, 2020 to record:
a. Accrual of the monthly payroll.
b. Accrual of the employer's payroll tax. (Assume that the employer matches health
premiums and the federal unemployment tax is 0.8%, and the state unemployment
tax is 5.4%.)

1. a.)
Salaries and Wages Expense – 180,000
Federal Income Taxes withheld – 23,000
FICA Taxes Payable – 5,000
Health Premiums Deducted Payable -3,000
Salaries and Wages Payable – 149,000

b.)
Payroll Tax Expense – 10,580
FICA Taxes Payable- 5,000
Federal Unemployment Taxes Payable – 720
State Unemployment Taxes Payable – 4,860

2. During 2020, the partnership of Kiki and Tammy earned net income of $ 125,000.
Kiki’s beginning capital was $ 60,000 and she withdrew $15,000 during the year.
Tammy’s beginning capital $ 70,000 and she had drawings of $22,000 for the year.

Instructions:
(a) Assume the partnership income- sharing agreement calls for income to be
divided with a salary of $ 30,000 to Kiki and $ 25,000 to Tammy, interest of 10% on
beginning capital, and the remainder divided 60% to Kiki and 40% to Tammy.
Prepare the journal entry to record the allocation of net income.

(b) Prepare the Partnership Equity Statement for 2019 under the assumption in
part a

2. a.) Income Summary – 125,000

Kiki, Capital [30,000 + 6,000 + (57,000 x 60%) – 70,200
Tammy, Capital [25,000 + 7,000 + (57,000 x 40,000)] – 54,800

b.) Kiki Tammy Total

Capital 2017 60,000 70,000 130,000
Net Income 70,200 54,800 125,000
Totals 130,200 124,800 255,000
Less: Drawings 15,000 22,000 37,000

3. A microcomputer was purchased on January 1, 2017 at a cost of $11,000. It is

expected to have a useful life of 5 years and a residual value of $1000. The
microcomputer is depreciated using the straight line method. Assume the
microcomputer is disposed of, after year end depreciation has been recorded on
January 1, 2020.

REQUIRED:

Give the general journal entry to record the sale of the microcomputer under the
following unrelated circumstances:

a. The microcomputer is sold for $1,000.

b. The microcomputer is sold for $7,300.
c. The microcomputer is abandoned

Hint: Calculate Accumulated Depreciation balance at January 1, 2020

3. a.)
Cash – 1,000
Accumulated Depreciation-Equipment – 6,000
Equipment – 11,000
Loss on Disposal of Plant Seed – 4,000

b.)
Cash – 7,300
Accumulated Depreciation-Equipment – 6,000
Equipment – 11,000
Loss on Disposal of Plant Seed – 2,300

c.)
Accumulated Depreciation-Equipment – 6,000
Equipment – 5,000
Loss on Disposal of Plant Seed – 11,000