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Accounting Principle 6th Edition
Weygandt Test Bank

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CHAPTER 10
CURRENT LIABILITIES AND PAYROLL
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S

TAXONOMY
Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT
Exercises
1. 1 AP 6. 1 AP 11. 2 AP 16. 3 AN 21. 5 AN
2. 1 AP 7. 1,3,4 AN 12. 2 AP 17. 4 AP 22. 5 AN
3. 1 AP 8. 2 AP 13. 2,3,4 AN 18. 4 AP *23. 6 AP
4. 1 AP 9. 2 AP 14. 2,5 AP 19. 4 AP *24. 6 AP
5. 1 AP 10. 2 AP 15. 3 E 20. 5 AN *25. 6 AP
Note: AN = Analysis AP = Application E = Evaluation

SUMMARY OF QUESTIONS BY LEVEL OF DIFFICULTY (LOD)
Item SO LOD Item SO LOD Item SO LOD Item SO LOD Item SO LOD
Exercises
1. 1 M 6. 1 M 11. 2 M 16. 3 M 21. 5 E
2. 1 E 7. 1,3,4 E 12. 2 H 17. 4 E 22. 5 E
3. 1 E 8. 2 E 13. 2,3,4 M 18. 4 E *23. 6 H
4. 1 M 9. 2 M 14. 2,5 H 19. 4 M *24. 6 M
5. 1 E 10. 2 M 15. 3 M 20. 5 M *25. 6 M
Note: E = Easy M = Medium H=Hard

CHAPTER STUDY OBJECTIVES
1. Account for determinable or certain current liabilities. Liabilities are present

obligations arising from past events, to make future payments of assets or services.
Determinable liabilities have certainty about their existence, amount, and timing—in
other words, they have a known amount, payee, and due date. Examples of
determinable current liabilities include operating lines of credit, notes payable, accounts
payable, sales taxes, unearned revenue, current maturities of long-term debt, and
accrued liabilities such as property taxes, payroll, and interest.
2. Account for estimated liabilities. Estimated liabilities exist, but their amount or timing
is uncertain. As long as it is likely the company will have to settle the obligation, and the
company can reasonably estimate the amount, the liability is recognized. Product
warranties, customer loyalty programs, and gift cards result in liabilities that must be
estimated. They are recorded either as an expense (or as a decrease in revenue) or a
liability in the period when the sales occur. These liabilities are reduced when repairs
under warranty or redemptions occur. Gift cards are a type of unearned revenue as they
result in a liability until the gift card is redeemed. As some cards are never redeemed, it
is necessary to estimate the liability and make adjustments.
3. Account for contingencies. A contingency is an existing condition or situation that is

uncertain, where it cannot be known if a loss (and a related liability) will result until a
future event happens, or does not happen. Under ASPE, a liability for a contingent loss
is recorded if it is it likely a loss will occur and the amount of the contingency can be
reasonably estimated. Under IFRS, the threshold for recording the loss is lower. It is
recorded if a loss is probable. Under ASPE, these liabilities are called contingent
liabilities, and under IFRS, these liabilities are called provisions. If it is not possible to
estimate the amount, these liabilities are only disclosed. They are not disclosed if they
are unlikely.
4. Determine payroll costs and record payroll transactions. Payroll costs consist of
employee and employer payroll costs. In recording employee costs, Salaries Expense is
debited for the gross pay, individual liability accounts are credited for net pay. In
recording employer payroll costs, Employee Benefits Expense is debited for the
employer’s share of CPP, EI, workers’ compensation, vacation pay, and any other
deductions or benefits provided. Each benefit is credited to its specific current liability
account.
5. Prepare the current liabilities section of the balance sheet. The nature and amount
of each current liability and contingency should be reported in the balance sheet or in the
notes accompanying the financial statements. Traditionally, current liabilities are
reported first and in order of liquidity. International companies sometimes report current
liabilities on the lower section of the balance sheet and in reverse order of liquidity.
6. Calculate mandatory payroll deductions (Appendix 10A). Mandatory payroll
deductions include CPP, EI, and income taxes. CPP is calculated by multiplying
pensionable earnings (gross pay minus the pay period exemption) by the CPP
contribution rate. EI is calculated by multiplying insurable earnings by the EI contribution
rate. Federal and provincial income taxes are calculated using a progressive tax scheme
and are based on taxable earnings and personal tax credits. The calculations are very
complex and it is best to use one of the CRA income tax calculation tools such as payroll
deduction tables.
EXERCISES
Exercise 1
Leung Properties Co. paid $5,600 for property taxes in the 2013 calendar year. In 2014, Leung
receives its property tax bill on May 1 for $6,200 which is payable on June 30, 2014.
Instructions
Calculate the prepaid or property taxes payable that Leung will report on its balance sheet if
Leung’s year end is
a. February 28, 2014
b. May 31, 2014
c. September 30, 2014
d. December 31, 2014.
Solution Exercise 1 (10 min.)

a. Property taxes payable ($5,600 x 2÷12) ........................................ $ 933
b. Property taxes payable ($6,200 x 5÷12) ........................................ $ 2,583
c. Prepaid property taxes ($6,200 x 3÷12) ........................................ $ 1,550
d. Both Prepaid property taxes and property taxes payable are ........ $0
Exercise 2
Chu Company billed its customers a total of $2,655,500 for the month of November. The total
includes 13% HST (Harmonized Sales Tax).
Instructions
a. Determine the proper amount of revenue to report for the month.
b. Prepare the general journal entry to record the revenue and related liabilities for the month.

a. $2,655,500 ÷ 1.13 = $2,350,000 is the total sales revenue.
b. $2,350,000 × .13 = $305,500 is the HST (Harmonized Sales Tax) liability.

Journal Entry:
Accounts Receivable ..................................................................... 2,655,500
Sales Revenue ....................................................................... 2,350,000
HST Payable .......................................................................... 305,500
Exercise 3
On April 1, Hoadley Company borrows $90,000 from Northwest Provincial Bank by signing a 6-
month, 6%, interest-bearing note. Hoadley’s year end is August 31.
Instructions
Prepare the following entries associated with the note payable on the books of Hoadley
Company:
a. The entry on April 1 when the note was issued.
b. Any adjusting entries necessary on May 31 in order to prepare the quarterly financial
statements. Assume no other interest accrual entries have been made.
c. The adjusting entry at August 31 to accrue interest.
d. The entry to record payment of the note at maturity.

a. Apr 1 Cash ............................................................................. 90,000
Notes Payable ........................................................ 90,000
b. May 31 Interest Expense ........................................................... 900

Interest Payable ..................................................... 900
($90,000 × 6% × 2÷12)
c. Aug 31 Interest Expense ........................................................... 1,350

Interest Payable ..................................................... 1,350
($90,000 × 6% × 3÷12)
d. Oct 1 Notes Payable ............................................................... 90,000

Interest Payable ($900+$1,350) .................................... 2,250
Interest Expense ($90,000 x 6% x 1÷12) ....................... 450
Cash ....................................................................... 92,700
Exercise 4
Walters Accounting Company receives its annual property tax bill for the calendar year on
May1, 2015. The bill is for $32,000 and payable on June 30, 2015. Walters paid the bill on June
30, 2015. The company prepares quarterly financial statements and had initially estimated that
its 2015 property taxes would be $30,000.
Instructions
Prepare all the required journal entries for 2015 related to the property taxes.

Mar 31 Property Tax Expense ($30,000 × 3÷12) ........................... 7,500
Property Tax Payable.................................................. 7,500
Jun 30 Property Tax Expense ($32,000 × 6÷12 - $7,500).............. 8,500

Property Tax Payable ........................................................ 7,500
Prepaid Property Tax ($32,000 x 6÷12) ............................. 16,000
Cash .......................................................................... 32,000
Sep 30 Property Tax Expense ($32,000 × 3÷12) ........................... 8,000

Prepaid Property Tax ................................................. 8,000
Dec 31 Property Tax Expense ($32,000 × 3÷12) ........................... 8,000

Prepaid Property Tax .................................................. 8,000
Exercise 5
Elliott Company had the following transactions during March:
Mar 1 Purchased computer equipment by issuing a $15,000, 6-month, 8% note payable.
Interest is due at maturity.
Mar 5 Provided services to customers for $9,800 plus 5% GST; customers paid cash.
Mar 15 Purchased supplies on account from Grand and Toy for $3,500. Supplier terms are
2/10, n/30.
Mar 31 Paid the Grand and Toy account in full.
Instructions
a. Record the transactions.
b. Record any adjusting entries required at March 31 related to these liabilities.

a.
Mar 1 Computer Equipment ......................................................... 15,000
Note Payable (6 month) .............................................. 15,000
Mar 5 Cash………….. .................................................................. 10,290

GST Payable ($9,800 x 5%)........................................ 490
Service Revenue......................................................... 9,800
Mar 15 Supplies………. ................................................................. 3,500

Accounts Payable ....................................................... 3,500
Mar 31 Accounts Payable .............................................................. 3,500

Cash… ........................................................................ . 3,500
b.
Mar 31 Interest Expense ($15,000 x 8% x 1÷12) ........................... 100
Interest Payable .......................................................... 100
Exercise 6
During April 2014, DMZ Company incurred the following transactions. This is DMZ’s first period
of operations, and they plan to use the periodic method of accounting for inventory.
Apr 1 Purchased a new automobile for $36,500; the automobile was paid for with a 2-year
5% note payable. Interest is due monthly on the 1st day of each month and the
principal due as follows: 50% due in 1 year, the remainder due in 2 years.
Apr 5 Sold merchandise to Customer A on account for $72,000 plus 5% GST; terms n/30.
Apr 6 Customer A returns one-half of the merchandise purchased on Apr 5 and receives a
credit on account.
Apr 13 Customer A paid their account balance in full.
Apr 25 Sold merchandise to Customer B for $102,900 including 5% GST; terms n/30.
Apr 28 Received $22,000 from Customer C for services to be provided in May.
Apr 30 Recorded any adjusting entries required related to April transactions.
In addition to liabilities arising from the above transactions, DMZ’s Accounts Payable balance at
April 30, 2014 is $65,000.
Instructions
a. Record the above transactions.
b. Prepare the current liabilities portion of DMZ’s balance sheet at April 30, 2014.

a.
Apr 1 Automobile…….................................................................. 36,500
Note Payable .............................................................. 36,500
Apr 5 Accounts Receivable – Customer A ................................... 75,600

GST Payable (72,000 x 5%)........................................ 3,600
Sales Revenue............................................................ 72,000
Apr 6 Sales Returns and Allowances ($72,000 x ½) .................... 36,000

GST Payable ($3,600 x ½)................................................. 1,800
Accounts Receivable – Customer A ............................ 37,800
Apr 13 Cash ($75,600-37,800) ...................................................... 37,800

Accounts Receivable – Customer A ............................ 37,800
Apr 25 Accounts Receivable – Customer B ................................... 102,900

GST Payable (102,900 x 5÷105) ................................. 4,900
Sales Revenue............................................................ 98,000
Apr 28 Cash………….. .................................................................. 22,000

Unearned Revenue ..................................................... 22,000
Apr 30 Interest Expense ($36,500 x 5% x 1÷12) ........................... 152

Interest Payable .......................................................... 152
b.
DMZ Company
Balance Sheet (partial)
April 30, 2014
Liabilities
Current liabilities
Accounts payable .......................................................................... 65,000
GST Payable ($3,600 – 1,800 + 4,900) ......................................... 6,700
Interest payable............................................................................. 152
Unearned revenue ........................................................................ 22,000
Current portion of long term debt ($36,500 x ½) ............................ 18,250
Total current liabilities ................................................................... $112,102
Exercise 7
Fiddler Music Company, which prepares annual financial statements, is preparing adjusting
entries on December 31. Analysis indicates the following:
1. The company is the defendant in an employee discrimination lawsuit involving $50,000 of
damages. Legal counsel believes it is unlikely that the company will have to pay any
damages.
2. December 31st is a Friday. The employees of the company have been paid on Monday,
December 27th for the previous week which ended on Friday, December 24th. The
company employs 30 people who earn $80 per day and 15 people who earn $120 per day.
All employees work 5-day weeks.
3. Employees are entitled to one day's vacation for each month worked. All employees
described above in 2. worked the month of December.
4. The company is a defendant in a $750,000 product liability lawsuit. Legal counsel believes
the company probably will have to pay the amount requested.
5. On November 1, Fiddler signed a $10,000, 6-month, 8% note payable. No interest has
been accrued to date.
Instructions
Prepare any adjusting entries necessary at the end of the year.

1. No entry—loss is not likely.
2. Wages Expense ............................................................................ 21,000

Wages Payable ...................................................................... 21,000
30 × $80 × 5 = $12,000
15 × $120 × 5 = 9,000
$21,000
3. Vacation Benefits Expense ........................................................... 4,200

Vacation Benefits Payable [(30 × $80) + (15 × $120)] ............ 4,200
4. Loss from Lawsuit ......................................................................... 750,000

Estimated Liability from Lawsuit ............................................. 750,000
5. Interest Expense ($10,000 × 8% × 2 ÷ 12) .................................... 133

Interest Payable ..................................................................... 133
Exercise 8
During the month of July, Toys to Go started a new promotion. The company offered to reward
their customers for all sales made on Barbie dolls or Toy Trucks during the month of July. For
each sale made, the customer will receive a 1% reward of the sales price which can be
redeemed on future purchases until December of the current year. During the month of July,
$250,000 of Barbie dolls and Toy Trucks were sold. There was $755 worth of redemptions in
August.
Instructions
a. Prepare the journal entries to record all transactions related to the reward promotion.
b. Identify any liabilities that would be reported on the August 31, 2014 balance sheet.

a. July 31 Sales Discounts for Redemption Rewards Issued ......... 2,500
Redemption Rewards Liability ................................ 2,500
(250,000 x .01)
Aug 31 Redemption Rewards Liability ....................................... 755

Cash ....................................................................... 755
b. Redemption Reward Liability ($2,500-755).................................... $1,745
Exercise 9
The following situations are independent:
1. During the Christmas season, Betty’s Spa sold $15,000 worth of gift certificates for spa
treatments. In accordance with Canadian legislation, these gift certificates have no expiry
date. During the first year, 75% of the gift certificates are redeemed by customers.
2. Bill’s Car Service sells coupon books for oil changes. The books sell for $300 and include
10 coupons. Without a coupon, the price of an oil change is $35. During the first year of the
coupon book sales, Bill’s sold 200 books, and by the end of the year, 400 coupons had
been claimed. According to Bill’s research, 90% of coupons will eventually be claimed. The
coupons have no expiry date.
Instructions
For each situation, calculate the related liability at the end of the first year.
1. Total liability .................................................................................. $ 15,000

Less amounts claimed ($15,000 x 75%) ........................................ 11,250
Remaining liability ......................................................................... $ 3,750
2. Total liability for coupons sold (200 books x 10 coupons x $35) .... $70,000
Less 10% will remain unclaimed ................................................... 7,000
Net……………............................................................................... 63,000
Less coupons already claimed (400 x $35) ................................... 14,000
Remaining liability ......................................................................... $ 49,000
Exercise 10
Duane Herman sells exercise machines for home use. The machines carry a 4-year warranty.
Past experience indicates that 6% of the units sold will be returned during the warranty period
for repairs. The average cost of repairs under warranty is $45 for labour and $75 for parts per
unit. During 2015, 2,500 exercise machines were sold at an average price of $800. During the
year, 60 of the machines that were sold were repaired at the average price per unit. The
opening balance in the Warranty Liability account is zero.
Instructions
a. Prepare the journal entry to record the repairs made under warranty.
b. Prepare the journal entry to record the estimated warranty expense for the year. Determine
the balance in the Warranty Liability account at the end of the year.

a. Labour on repaired units: $45 × 60 = $2,700
Parts on repaired units: $75 × 60 = $4,500
Warranty Liability........................................................................... 7,200

Repair Parts ........................................................................... 4,500
Wages Payable ...................................................................... 2,700
To record honouring of 60 warranty contracts
b. 2,500 units × 6% = 150 units

150 units × ($45+$75) = $18,000
Warranty Expense......................................................................... 18,000

Warranty Liability .................................................................... 18,000
To record estimated cost of honouring 150 warranty contracts
The balance in Warranty Liability at year end is $10,800 ($18,000 – $7,200), which equals the
expected cost of honouring the 90 remaining warranty contracts.
Exercise 11
Hardin Manufacturing began operations in January 2014. Hardin manufactures and sells two
different computer monitors.
Monitor A, is a flat panel hi-definition monitor, which carries a two-year manufacturer's warranty
against defects in workmanship. Hardin's management project that 8% of the monitors will
require repair during the first year of the warranty while approximately 6% will require repair
during the second year of the warranty. Monitor A sells for $400. The average cost to repair a
monitor is $80.
Monitor B is a regular LED monitor that retails for $150. Hardin has entered into an agreement
with a local electronics firm who charges Hardin $20 per monitor sold and then covers all
warranty costs related to this monitor.
Sales and warranty information for 2014 is as follows:

Sold 2,000 monitors (800 monitor A and 1,200 monitor B); all sales were on account.
Actual warranty expenditures for monitor A were $4,000.
Instructions
a. Prepare journal entries that summarize the sales and any aspects of the warranty for 2014.
b. Determine the balance in the Warranty Liability account at the end of 2014.

a. To record sales
Accounts Receivable ..................................................................... 500,000
Sales Revenue—A (800 × $400) ............................................ 320,000
Sales Revenue—B (1,200 × $150) ......................................... 180,000
Related to the cost of the maintenance contract on monitor B

Warranty Expense (1,200 × $20)................................................... 24,000
Cash....................................................................................... 24,000
To estimate cost of warranty on monitor A
Warranty Expense (800 × 14% × $80) .......................................... 8,960
To record actual warranty costs on monitor A

Warranty Liability........................................................................... 4,000
Cash....................................................................................... 4,000
b. $8,960 – $4,000 = $4,960
Exercise 12
During the year, Canada Ski Cross Ltd. instituted a customer rewards program. The company
sells skis which are specially used for the latest type of skiing, ski cross. For every $250 of ski
cross equipment purchased by a customer, the company will rebate $50 towards the cost of
purchasing a ski cross helmet. In January, the company had ski cross equipment sales of
$64,000. There were no helmets purchased. In February, there were sales of $32,600 and there
were 135 helmets sold.
Instructions
a. Prepare journal entries for January. What is the ending balance in the liability account for
the end of January?
b. Prepare journal entries for February. What is the ending balance in the liability account for
the end of February?
Solution Exercise 12 (10-13 min.)

a. January Entries
Cash ............................................................................................. $64,000
Sales ...................................................................................... $64,000
Sales Discounts for Redemption Rewards .................................... 12,800

Redemptions Rewards Liability .............................................. 12,800
($64,000 ÷ $250 x $50)
Liability end of January = $12,800
b. February Entries
Cash ............................................................................................. $32,600
Sales ...................................................................................... $32,600
Sales Discounts for Redemption Rewards .................................... 6,520

Redemptions Rewards Liability .............................................. 6,520
($32,600 ÷ $250 x $50)
Redemptions Rewards Liability ..................................................... 6,750

Cash....................................................................................... 6,750
(135 x 50)
Liability end of February ($12,800 + $6,520 – $6,750) = $12,570

Exercise 13
Milner Company is preparing adjusting entries at December 31. An analysis reveals the
following:
1. During December, Milner Company sold 4,900 units of a product that carries a 60-day
warranty. The sales for this product totalled $100,000. The company expects 6% of the
units to need repair under the warranty and it estimates that the average repair cost per unit
will be $15.
2. The company has been sued by a disgruntled employee. Legal counsel believes it is likely
that the company will have to pay $200,000 in damages.
3. The company has been named as one of several defendants in a $400,000 damage suit.
Legal counsel believes it is unlikely that the company will have to pay any damages.
4. During December, ten employees earn vacation pay at a rate of 1 day per month. Their
average daily wage is $100 per employee.
Instructions
Prepare adjusting entries, if required, for each of the four items.

1. 4,900 units × 6% = 294 units expected to be defective.
294 units × $15 = $4,410
Warranty Expense......................................................................... 4,410
2. An entry is required because the loss is likely and estimable.

Loss from Lawsuit ......................................................................... 200,000
Estimated Liability from Lawsuit ............................................. 200,000
3. The loss is unlikely and does not require accrual or disclosure. No entry is required.
4. 10 employees × $100 × 1 day = $1,000.

Vacation Benefits Expense ........................................................... 1,000
Vacation Benefits Payable ...................................................... 1,000
Exercise 14
The following unadjusted balances are taken from the trial balance of Jackson Equipment at
December 31, 2014:
Accounts payable………… ............................................................ $ 53,700
Salaries payable……….. ............................................................... 2,200
Bank demand loan payable ........................................................... 60,000
GST payable…………… ............................................................... 14,800
Note payable, maturing March 31, 2015 ........................................ 10,000
Note payable, maturing March 31, 2016 ........................................ 100,000
Jackson Equipment sells and installs security systems. Beginning on December 1, 2014,
Jackson began offering a 2-year product warranty. Based on research in the industry, Jackson’s
management believes that 5% of security systems will require some warranty work and that the
typical costs for systems requiring warranty work will be $875 during the first year and $325
during the second year. In December, Jackson supplied and installed 80 systems.
Instructions
a. Calculate and record Jackson’s warranty liability at December 31, 2014.
b. Prepare the current liability portion of Jackson’s balance sheet at December 31, 2014.

a.
80 systems x 5% = 4 will require work.
Expected cost in first year (2015) = $875 x 4 ......................... ............. $3,500
Expected cost in second year (2016) = $ 325 x 4 ................... ............. 1,300
$4,800
Entry to record:
Warranty Expense…….................................................... ............. 4,800
Warranty Liability ...................................................... ............. 4,800
b.
Jackson Equipment
December 31, 2014
Liabilities
Current liabilities
Bank demand loan payable ........................................................... $ 60,000
Salaries payable............................................................................ 2,200
GST payable….............................................................................. 14,800
Note payable due in one year........................................................ 10,000
Current portion of warranty liability ................................................ 3,500
Total current liabilities ................................................................... $144,200
Exercise 15
Dejong’s Drycleaning had the following events occur during December, 2014: Dejong is
reporting under ASPE.
1. Dejong signed a $40,000 loan guarantee on behalf of Dejong Junior’s. At December 31,
Junior’s had drawn $10,000 of loan advances. Junior’s has sufficient assets to cover its
liabilities.
2. Dejong was sued by an irate customer who said the trousers that Dejong had returned to
him belonged to someone else. The customer is claiming $10,000,000 in damages for
distress because he mistakenly wore the ill-fitting trousers to work and suffered discomfort
and embarrassment as a result. Dejong’s lawyer has advised them that the likelihood of this
claim succeeding is nil, and has offered to defend them at no charge. The Dejongs have
already paid the claimant $100 for replacement of the missing trousers.
3. Dejong was sued for wrongful dismissal by a former employee. The employee is claiming
$2,000 in lost wages. Dejong’s lawyer has advised them that the claim, if taken to trial, is
likely to be upheld.
4. In early December, some drycleaning fluid spilled and damaged equipment valued at
$5,600. Dejong replaced the equipment, which is insured, and expects their insurance
policy will reimburse at least $5,000 of the cost and possibly the entire amount. However
the exact amount covered by insurance has not yet been determined.
Instructions
For each of the four situations above, evaluate the likelihood and measurability of any losses
that Dejong may face. Indicate if any liability should be recorded or disclosed in Dejong’s
December 31, 2014 financial statements.

1. The loan guarantee results in a contingency that is highly measurable (both the approved
and current loan balances are known) but is unlikely to occur. The guarantee should be
disclosed, but not recorded as a liability.
2. The loss related to the lawsuit cannot be measured with any certainty. Common sense
would suggest that if there were any loss over and above the $100 already paid, it would
not be the $10,000,000 claimed by the plaintiff. In fact, since Dejong's have already paid for
the missing garment, any further loss is likely to be minimal. Therefore measurement is very
uncertain. The likelihood of any loss occurring is very low, based on the information
provided by the lawyer. This item need not be either recorded or disclosed.
3. The contingency is highly measurable, since a specific amount has been claimed. It is likely
to occur based on information provided by the lawyer. The liability of $2,000 should be
recorded.
4. Contingent assets are never recorded. Since it is very likely that a settlement of some
amount (minimum of $5,000) will be received, this fact may be disclosed in the notes to the
financial statements.
Exercise 16
Below are several accounting transactions recorded by Lucy, accounting clerk for B&B
Industrial.
1. Loss from Liability ......................................................................... $500,000
Estimated Liability from Lawsuit ............................................. $500,000
To setup a liability in which we are being sued for $500,000. The lawyers say it is unlikely
that we will have to pay out this amount and the lawsuit will most likely be dismissed. I have
setup the amount based on the best reasonable estimate. Even if the lawsuit is dismissed
this event will have a substantial negative effect on the company’s financial position.
2. No entry
B&B Industrial provided a guarantee on a loan for the company’s owner. The owner needed
to obtain a large loan for medical purposes. No entry needed to account for the loan
guarantee.
3. No entry
No entry needed to setup the reduction in wages that may be incurred due to employees
going on strike.
4. Loss from decline in sales ............................................................. $150,000
Sales Revenue ....................................................................... $150,000
To record the decline in sales due to a recession
5. Gain on Lawsuit ............................................................................ $365,000
Accounts Receivable .............................................................. $365,000
To setup the amount that will be received when we win our lawsuit.
6. No Entry
No entry created for a lawsuit that we will most likely lose because a reasonable amount
cannot be estimated.
Instructions
For each transaction, determine if the accounting clerk correctly recorded the transaction. If you
disagree, provide the correct transaction or disclosure requirement.
Solution Exercise 16
1. Incorrect. No entry should be created. It is recommended to reverse the current entry and
disclose the lawsuit due to the fact that the event could have a substantial negative effect
on the company’s financial position.
2. Correct. No entry is needed, however a loan guarantee should be disclosed even if the
chances of having to pay is small.
3. Correct. No entry or disclosure is required for general risk contingencies that can affect
anyone who is operating a business, such as strike, war or recession.
4. Incorrect. No entry or disclosure is required for general risk contingencies that can affect
anyone who is operating a business, such as strike, war or recession.
5. Correct. No entry can be created if the amount cannot be reasonable estimated.
6. Correct. No entry will be recorded. Since the amount cannot be reasonably estimated it is
only necessary to disclose the contingency in the notes to the financial statements.
Exercise 17
Taylor Company's payroll for the week ending January 15 amounted to $72,000 for Office
Salaries and $136,500 for Store Wages. The following deductions were withheld from
employees' salaries and wages:
Federal and Provincial Income Taxes ........................................... $60,320
CPP .............................................................................................. 5,420
EI .................................................................................................. 4,590
Union Dues ................................................................................... 1,800
United Way ................................................................................... 1,900
Instructions
Prepare the journal entry to record the weekly payroll ending January 15 and also the
employer’s benefits expense on the payroll.

Jan. 15 Office Salaries Expense .................................................. 72,000
Store Wages Expense ..................................................... 136,000
Federal and Provincial Income Taxes Payable ......... 60,320
CPP Payable ............................................................ 5,420
EI Payable ................................................................ 4,590
Union Dues Payable ................................................. 1,800
United Way Payable ................................................. 1,900
Salaries and Wages Payable .................................... 133,970
To record payroll for the week ending January 15
15 Employee Benefits Expense ............................................ 11,846

CPP Payable ............................................................ 5,420
EI Payable ($4,590 × 1.4) ......................................... 6,426
To record employer's benefits expense on January 15 payroll
Exercise 18
The following payroll liability accounts are included in the ledger of the David Croneberger
Company on January 1, 2015:
Income Taxes Payable .................................................................. $4,700
CPP Payable ................................................................................. 800
EI Payable..................................................................................... 900
Union Dues Payable ..................................................................... 400
Health Insurance Premium Payable (Blue Cross).......................... 4,000
Canada Savings Bond Payable ..................................................... 1,000
In January, the following transactions occurred:

Jan 9 Sent a cheque for $4,000 to Liberty Health.
14 Sent a cheque for $400 to the union treasurer for union dues.
15 Paid the Canada Revenue Agency income taxes withheld from employees,
Employment Insurance due, and Canada Pension Plan contributions due.
22 Sent a $1,000 cheque to the Bank of Canada for Canada Savings Bonds purchased
on the payroll plan.
Instructions
Journalize the January transactions

Jan 9 Health Insurance Premium Payable ............................ 4,000
Cash ........................................................................... 4,000
14 Union Dues Payable .......................................................... 400

Cash ........................................................................... 400
15 Income Taxes Payable ...................................................... 4,700

EI Payable ......................................................................... 900
CPP Payable ..................................................................... 800
Cash ........................................................................... 6,400
22 Canada Savings Bond Payable ......................................... 1,000

Cash ........................................................................... 1,000
Exercise 19
Calgary Company prepares a payroll register for the week ending February 15. The totals from
the register are presented below. (Note: for illustration purposes, there is only one employee.)
Earnings:
Regular .................................................................................. $400.00
Overtime ................................................................................ 100.00
Gross ..................................................................................... $500.00
Deductions:
CPP........................................................................................ $21.42
EI ........................................................................................... 9.15
Income Taxes......................................................................... 76.20
United Way............................................................................. 10.00
Union Dues ............................................................................ 20.00
Total ....................................................................................... 136.77
Paid:
Net Pay .................................................................................. $363.23
Accounts Debited:
Office Salaries Expense ................................................................ 500.00
Instructions
Prepare journal entries to record
a. the employee’s portion of the payroll on February 15.
b. the employer’s portion of the payroll on February 15.
c. payment of salaries and wages on February 15.
d. payment of payroll liabilities (excluding salaries and wages) on their respective due dates.

a. The entry to record the employee’s portion of the payroll is:
Feb 15 Office Salaries Expense ................................................ 500.00
CPP Payable ........................................................ 21.42
EI Payable............................................................ 9.15
Income Taxes Payable ......................................... 76.20
United Way Payable ............................................. 10.00
Union Dues Payable ............................................ 20.00
Salary and Wages Payable .................................. 363.23
b. The entry to record the employer’s payroll costs is:

Feb 15 Employee Benefits Expense.......................................... 34.23
CPP Payable ($21.42 × 1).................................... 21.42
EI Payable ($9.15 × 1.4)....................................... 12.81
c. The entry to record payment of salaries and wages is:

Feb 15 Salary and Wages Payable ........................................... 363.23
Cash .................................................................... 363.23
d. The entry to pay other payroll liabilities (excluding salaries and wages) on their respective
dates is:
CPP Payable ($21.42 + $21.42) .................................... 42.84
EI Payable ($9.15 + $12.81) .......................................... 21.96
Income Tax Payable...................................................... 76.20
United Way Payable ...................................................... 10.00
Union Dues Payable...................................................... 20.00
Cash .................................................................... 171.00
Exercise 20
Kent Company’s December 31, 2014 trial balance includes the following accounts:
Accounts payable .......................................................................... $ 29,400
Accounts receivable ...................................................................... 52,000
Interest payable............................................................................. 700
Cash………….. ............................................................................. 3,000
Income taxes payable ................................................................... 1,200
Inventory……………. .................................................................... 27,000
Mortgage payable ......................................................................... 140,000
Note payable…………. .................................................................. 5,000
Prepaid expenses ......................................................................... 1,200
Other information:
The mortgage payable is due in annual principal installments of $4,000 per year.
The note payable is due in full in 18 months’ time.
Industry average working capital ratio is 2.5:1
Instructions
a. Prepare the current liabilities section of Kent’s December 31, 2014 balance sheet.
b. Calculate and comment on Kent’s working capital and current ratio.

a.
Kent Company
December 31, 2014
Liabilities
Current liabilities
Interest payable .......................................................................... 700
Income taxes payable ................................................................... 1,200
Current portion of mortgage payable ............................................. 4,000
Total current liabilities ............................................................. $45,300
b. Total current assets ($52,000 + 3,000 + 27,000 + 1,200) .............. $ 83,200

Less current liabilities .................................................................... 45,300
Working capital ............................................................................. $ 37,900
Current ratio ($83,200 ÷ $45,300) = 1.84

Calculating Kent’s working capital of $37,900 does not provide significant meaningful
information since one cannot compare a monetary amount to those of companies of different
sizes. By using a ratio such as the current ratio, one can compare Kent to other companies and
to the industry average. Although Kent has a positive working capital, its current ratio is less
than the industry average, suggesting Kent has less liquidity than most of its competitors.
Exercise 21
The following are all of the accounts with credit balances from Kupidy Company’s adjusted trial
balance at December 31, 2014:
Accumulated Depreciation – equipment ........................................ 31,500
Allowance for doubtful accounts .................................................... 1,600
C. Kupidy, capital .......................................................................... 47,500
Gain on sale of equipment ............................................................ 600
GST payable ................................................................................. 1,900
Interest payable............................................................................. 2,100
Note payable ................................................................................. 18,000
Sales discounts ............................................................................. 3,750
Sales revenue ............................................................................... 458,000
Other information:
The mortgage is due in monthly principal payments of $1,000 plus interest.
The note payable is a six-month, 10% note, interest due at maturity.
Instructions
Prepare the current liabilities section of Kupidy’s December 31, 2014 balance sheet.

Kupidy Company
December 31, 2014
Liabilities
Current liabilities
GST payable ................................................................................. 1,900
Note payable ................................................................................. 18,000
Current portion of mortgage payable ($1,000 x 12) ....................... 12,000
Total current liabilities ............................................................. $137,300
Exercise 22
On February 28, 2014, Fidanza Company has the following selected accounts after posting
adjusting entries:
Notes payable, 3-month, 6% ......................................................... 80,000
Accumulated depreciation—equipment ......................................... 14,000
Salary, wages, and benefits payable ............................................. 22,000
Notes payable, 5-year, 8% ............................................................ 30,000
Warranty liability ............................................................................ 34,000
Employee benefits expense .......................................................... 6,000
GST payable (net) ......................................................................... 8,000
PST payable ................................................................................. 7,000
Instructions
a. Prepare the current liability section of Fidanza Company's balance sheet, assuming
$25,000 of the mortgage is payable next year. (List liabilities in order of magnitude, with
largest first.)
b. Comment on Fidanza's liquidity, assuming total current assets are $400,000.

a.
FIDANZA COMPANY
Partial Balance Sheet
February 28, 2014
Current Liabilities
Notes payable, 3-month ................................................................ $ 80,000
Warranty liability ............................................................................ 34,000
Current portion of Mortgage payable ............................................. 25,000
Salary, wages, and benefits payable ............................................. 22,000
GST payable (net) ......................................................................... 8,000
PST payable ................................................................................. 7,000
Total Current Liabilities ........................................................... $219,000
b. The liquidity position looks favourable. If all current liabilities are paid out of current assets,
there would still be $181,000 of current assets. The current assets are almost twice the
current liabilities, and it appears as though Fidanza Company has sufficient current
resources to meet current obligations when due.
*Exercise 23
Assume that the payroll records of Crosby Oil Company provided the following information for
the weekly payroll ended November 26, 2012.
Federal and Year-to-Date
Hourly Provincial Earnings Through
Employee Hours Worked Pay Rate Income Tax Union Dues Previous Week
C. White 44 $30 $240 $9 $61,000
J. Wozowski 46 10 65 5 23,200
K. Hurt 39 14 0 — 5,100
M. Khan 42 22 169 7 52,100
Additional information:
All employees are paid overtime at time and a half for hours worked in excess of 44 per
week. The Canadian Pension Plan rate is 4.95% less a basic annual exemption of $3,500
per employee.
The employment insurance deduction is 1.83%.
Maximum pensionable earnings are $50,100 and maximum insured earnings for EI are
$45,900.
Instructions
a. Prepare the payroll register for the pay period.
b. Prepare general journal entries to record the payroll and payroll costs.

a.
CROSBY OIL COMPANY
Payroll Register
Week Ending November 26, 2012
Earnings Deductions
Total Gross Income Tax
Employee Hours Reg. Overtime Pay Payable CPP(1) EI(2) Union Net Pay
C. White 44 $1,320 — $1,320 $240 — — $ 9 $1,071.00
J. Wozowski 46 440 $30 470 65 $19.93 $ 8.60 5 371.47
K. Hurt 39 546 — 546 0 23.70 9.99 — 512.31
M. Kahn 42 924 — 924 169 — — 7 748.00
$3,230 $30 $3,260 $474 $43.63 $18.59 $21 $2,702.78
(1)
Notes CPP Deduction
C. White - reached maximum pensionable earnings ........ 0
J. Wozowski [$470 – ($3,500 ÷ 52 weeks)] × .0495 ............... 19.93
K. Hurt [$546 – ($3,500 ÷ 52 weeks)] × .0495 ............... 23.70
M. Kahn - reached maximum pensionable earnings ........ 0
CPP Payable ................................................................... $43.63
(2)
Notes EI Premium
C. White - reached maximum insurable earnings............. $ 0
J. Wozowski ($470 × .0183) .................................................. 8.60
K. Hurt ($546 × .0183) .................................................. 9.99
M. Kahn - reached maximum insurable earnings............. 0
EI Payable ....................................................................... $18.59
b. Nov. 26 Wages Expense ............................................................ 3,260.00

Income Taxes Payable ......................................... 474.00
CPP Payable ........................................................ 43.63
EI Payable ............................................................ 18.59
Union Dues Payable............................................. 21.00
Wages Payable .................................................... 2,702.78
To record weekly payroll
26 Employee Benefits Expense ......................................... 69.66

CPP Payable ........................................................ 43.63
EI Payable ($18.59 × 1.4)..................................... 26.03
To record employer's benefits expense
*Exercise 24
Karen Blake’s salary earned in 2013 to November 30 was $62,000. Her salary in December
2013 was $6,000. Jim Fayad began working with the company on December 1 and will be paid
his first month's salary of $5,000 on December 31. Income tax withholding for December for
each employee is as follows:
Karen Blake Jim Fayad
Federal and Provincial Income Tax $1,920 $1,600
The following payroll tax rates are applicable:

CPP(1) 4.95%
EI 1.83%
(1)
Less a basic annual exemption of $3,500 per employee
Instructions
Record the payroll for the two employees at December 31 and record the employer's share of
payroll tax expense for the December 31 payroll. Maximum pensionable earnings are $50,100
and maximum insured earnings for EI are $45,900.

Dec 31 Salaries Expense ............................................................... 11,000.00
Income Taxes Payable ($1,920 + 1,600)..................... 3,520.00
CPP Payable(2) ............................................................ 233.06
EI Payable(3) ................................................................ 91.50
Salaries Payable ......................................................... 7,155.44
To record December 31 payroll
CPP Payable(2)
Karen Blake (Karen has reached the maximum pensionable earnings) $ 0.00
Jim Fayad(4) [($5,000 – ($3,500 ÷ 12months)) × .0495] = ..................... 233.06
$233.06
EI Payable(3)
Karen Blake (Karen has reached the maximum insured earnings) ....... 0.00 $
Jim Fayad(4) ($5,000 × .0183)...............................................................
91.50
$91.50
(4)
As Jim Fayad started work December 1, his salary has not yet reached the maximum for CPP
or EI calculation.
Employee Benefits Expense .............................................. 361.16
CPP Payable .............................................................. 233.06
EI Payable ($91.50 × 1.4) ........................................... 128.10
To record employer's share of benefits for Dec. 31 payroll.
*Exercise 25
Debbie Walker earns a salary of $5,500 per month during the year. Employment Insurance
taxes (EI) are 1.83% of the first $45,900 in earnings. The Canadian Pension Plan rate is 4.95%
of the first $50,100 in earnings, less a basic annual exemption of $3,500. During the year,
$23,000 was withheld for income taxes.
Instructions
a. Prepare a journal entry summarizing the payment of Walker's total salary during the year.
b. Prepare a journal entry summarizing the employer’s payroll tax expense on Walker's salary
for the year.
c. Determine the cost of employing Walker for the year.

a. Salary Expense ($5,500 × 12) ....................................................... 66,000.00
Income Taxes Payable ........................................................... 23,000.00
CPP Payable [($50,100 – $3,500) × 4.95%] ........................... 2,306.70
EI Payable ($45,900 × 1.83%)................................................ 839.97
Salary and Wages Payable .................................................... 39,853.33
b. Employee Benefits Expense ......................................................... 3,482.66

CPP Payable .......................................................................... 2,306.70
EI Payable (839.97 × 1.4) ....................................................... 1,175.96
c. The total cost of employment is: $66,000 + $3,482.66 = $69,482.66.

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He put his finger on the crazy device perched up independently in
the left-hand corner; and then came down to the lines again.
“Let that be for the moment,” said he. “It don’t much signify, after
all. How do these notes go? that’s the main question. Read ’em off.”
I spelt them out, following his finger: “b a c e f d e c a d e c.”
“That’s a good boy,” he said. “And now, what are these things
beyond, that have run off the lines, so to speak?”
“What are they? Why, I don’t see what they can be but notes.”
“Exactly. Five notes.”
I stared at the bundle in my hand, and then up at Chaunt.
“O-o-o-o!” I exclaimed.
He uttered a loud ironic laugh. “Well,” he said: “what does ‘b a c e f
d e c a d e c’ spell?”
I scratched my nose. “You tell me, please.”
“O Jerusalem!” he cried, and took his pencil to the line, thus: b a c
| e f | d e | c a d e | c—
“Well?” he said again.
I shook my head.
He positively stamped. “Listen here,” he cried: “ ‘bac ef de cad-e
c’—don’t you see?”
“No.”
“O, you ineffable ass! ‘Back of the caddy’ (that’s to say the tea-
caddy; there it is), ‘see’—see what? What follows? Why, five notes,
don’t they? ‘Back of the caddy see five notes’—and there they are.”
I sank in a heap in my chair. Light had dawned on me. “And you
found ’em there, I suppose?” I murmured—“behind a false back or
something?”
He nodded. “You’re getting on.”
“And, please, what’s the thing at the top?” I continued faintly. “Let
me get it all over at once.”
“Ah!” he said: “there’s a trifle more ingenuity in that, perhaps. What
is it, to begin with? A demisemiquaver balanced on the top of an M
Y, eh?”
“So it appears to me.”
“To any one. Don’t be frightened. Try it every way round, and
conclude with this: ‘On the top of M Y’—that is to say, ‘on M Y,’ which
is my, ‘a demisemiquaver’: or, shorn of all superfluities (he pencilled
it down), thus: ‘on my demisemiquaver.’ Now apply the same
process.”
I looked; pondered; felt myself instantly and brilliantly inspired;
seized the pencil from him, and ticked off the measurements:—
“On my demise | mi | q | u | av | er.”
“Exactly,” said Chaunt, rising with the air of an at-length-released
martyr, and proceeding to roll another cigarette: “ ‘On my demise, my
cue you have here.’ ’Pon my word, without irreverence, it’s worthier
of the composer of ‘Say, den, Julius, whar yo’ walkin’ roun’?’ than of
the author of ‘Some Unnoticed Sides of Bacon.’ But all one can say
is that he adapted himself to the intellectual measure of his legatee.
Have you got a match?”
I must end, I am really ashamed to say, with this. Anyhow, in one
way my uncle was triumphant: I was convinced, at last and at least,
of a value in cryptograms.
THE UNLUCKIEST MAN IN THE
WORLD
He was nicknamed, ironically, Carabas—a sort of French equivalent
for Fortunatus—the only title by which I ever knew him. Perhaps the
underlying sympathy which impelled the jest reconciled him to its
mockery; for there is, after all, an acute distinction in being the
unluckiest man in the world. Somebody says somewhere that it is
better to “lead” in hell than be a super in heaven. There came a time,
I think, when Carabas would have resented good fortune as an
outrage. It would have broken his record, and made him
commonplace at a blow. As with Hawthorne’s young woman who
was bred and throve on poisons, a normal dietary would have been
fatal to him. Carabas was nurtured on ill-luck.
I made his acquaintance at Verey’s in Montreux. It was for ever
Carabas here and Carabas there, and, sometimes, in badinage, M.
le Marquis; for the fellow was always in huge request for his
capability and good-humour. There was a great deal of
commiseration being shown for him when I first arrived. Latterly he
had drawn a prize ticket—for thirty thousand francs, I think it was—in
some State lottery. But, alas! a few days before the declaration of the
winning numbers, he had parted with his voucher for a trifle over cost
price. We got up a consolation subscription for him in the hotel—
relatively, quite a respectable little sum—which, with effusive thanks,
he deposited in the Bureau de Secours Mutuels. The bank stopped
payment almost at once, and Carabas lost his nest-egg, with a
prospect of future “calls” from the parent cuckoo.
After that, we abandoned him to his Nemesis. We had recognized
finally, I suppose, that vails to him meant nothing but tips to his evil
destiny, to whom, as to a rapacious head-waiter, they all accrued.
And so he himself was convinced with us. He showed himself neither
surprised nor aggrieved; but remained the sunniest fatalist, with just
a touch of wistfulness, which Nature had ever produced out of a
union between Candour and Philosophy.
I don’t know what his official position was. I don’t think he knew
himself. He wore a plain peaked cap, and a sleeved waistcoat with
brass buttons, and was, loosely, jackal to the tremendous concierge
whose bullion took the costly glass tabernacle in the hall with
splendour. Carabas himself was not at all a figure of splendour. He
was small, and placable in expression, with smiling cheeks, mobile
lips, pencilled over by a tiny black moustache, and strength visible in
nothing but his eyes. They were his vouchers of distinction above the
common brand.
One thing certain about him was that he was an accomplished
linguist; a second, that, for all his unspoiledness, he had a large
experience of man, and (notably) womankind; a third, that his
courage was equal to his good temper; a fourth, that, with every
natural claim to consideration, his pride halted at no service, whether
of skill or complaisance, which an unscrupulous management could
exact of him; a fifth and last, that he permitted his employers so to
presume upon his reputation for successlessness, as to accept from
them, in reward for his many accomplishments, wages which would
have been cheap to inefficiency. His own material welfare, indeed,
seemed always the thing remotest from his interests. To be helpful to
others was the sum of his morality.
I never could satisfy myself as to his nationality. Once—as one
might ask him anything without offence—I put the question to him. To
my secret surprise, he seemed to hesitate a perceptible moment
before he answered, with a smiling shrug of his shoulders—
“Cosmopolitan, monsieur; a foundling of Fortune.”
“We should do very well, then,” I answered, “to claim you for
England.”
Was it fancy on my part that his pleasant face paled a little? “As to
that,” he said, “I know nothing.”
“You have never been in England?”
He made no reply, but began bustling over some incoming
luggage, calling to the porters at the lift; and in a moment he left me.
The next day he was taken ill. The reversion of a service of raw
oysters, supplied to the guests at table d’hôte, had found its way to
the supper-table of the staff. Carabas detested oysters, but his
gallantry to the fair sex was proverbial, and Ninette, the prettiest of
filles de cuisine, sat next to him. She extracted a single “bivalve”
from her half-dozen, and put it on his plate, moueing at him
ravishingly.
“Love conquers everything, M. Carabas,” she said; “even the
antipathies of the stomach. I will not believe in your protestations
unless you eat this for my sake.”
He swallowed it at a gulp, and—it was a bad oyster, the only
doubtful one in the whole consignment. Later, he was very sick; and
afterwards ill for four days. Ninette cried, and then laughed, and
congratulated herself on her escape. But as for the hotel, it was
disconsolate in the temporary loss of its Carabas.
For my part, I was even particularly conscious of a vague
discomfort in his absence. Somehow a certain personal
responsibility which I had undertaken seemed to weigh upon me the
more heavily for it. It was not that Carabas could have lightened, by
any conceivable means, my burden. It was just a sense of moral
support withdrawn at a critical moment. It was as if the knees of my
conscience were weak, owing to something having gone wrong with
my backbone. But I will explain.
Mr. G——, a very famous lawyer in our own country, had brought
his family, a son and daughter, to holiday in Lucerne. The boy was a
conceited and susceptible youth; to the lady I was—engaged.
There seems no reason why impressionability should spell
obstinacy; yet very often it does. Young Miller (so I will call him)
having invited himself, at the Schweitzerhof, into the toils of a siren—
a patently showy and dubious one—resisted all the efforts of his
family to help him out. Baffled, but resolute, the father thereupon
shifted the scene to Montreux, where they were no sooner arrived
than he was summoned home on business at a moment’s notice. In
the meanwhile, to me (hastily called from Paris, where it had been
arranged I was to join the party on its homeward journey), was
assigned the unenviable and impossible task of safeguarding the
family interests. Miller had positively refused to accompany his father
home, then or thereafter, until his absurd “honour,” as he called his
fatuity, was vindicated. It would never do to abandon the wretched
infant in the wilderness. He had his independence, and was a
desirable parti. Hence my promotion to an utterly fictitious authority.
I knew, naturally, how it would be; and so it turned out. The head
was no sooner withdrawn, than Mademoiselle Celestine—privately
advised, of course, of the fact—arrived at Verey’s. Here, then, was
defiance unequivocal—naked and unashamed, I might have said,
and been nearer the truth of the case. For mademoiselle’s charms
were opulent, and she made no secret of them. One would have
thought a schoolboy might have seen through that rouge and
enamel, through the crude pencilling on those eyelashes, through all
that self-advertising display. I will not dwell upon its details, because
their possessor made, after all, only a summer nightmare for us, and
was early discomfited. She served, at best, for foil to a brighter soul;
and such is her present use in the context.
From the outset there was no finesse, no pretence of propitiation
in her tactics. She understood that it was a matter of now or never
with her quarry, and aimed to bring him down sitting. A woman, even
the best of her sex, never gives “law” in these matters. She goes out
to kill.
The two together formed an opposition camp—quite flagrantly, out
in the sunlight. I thought sometimes the boy looked unhappy; but the
witch would never let me have him to myself, and I could not
manœuvre her from under his guns. I would never have scrupled to
roll her in the mud, could I once have got her alone. But she was too
cunning for that; and, as for her companion, his warfare was, after
all, an honourable warfare. And all the time I had my own particular
Campaspe to safeguard, to console, to squire through the odious
notoriety which her brother’s infatuation had conferred upon us all.
It was Carabas, of course, who in the end procured us a way, his
own, out of the difficulty. The scandal being common property, there
was no need for him to affect an ignorance of it. Yet we never knew,
until the moment of his decision, how it had been occupying his mind
from the beginning, or how, quietly and unobtrusively, he had been
studying to qualify himself as our advocate. “Our advocate,” I say;
but I knew his brief was for the bright eyes of Campaspe. He struck
for the credit of the hotel, he declared; and mam’selle was
associated with the best of that. Anyhow he struck, and daringly.
He had risen from his bed on the fourth day, as smiling, as
complaisant as ever. His presence, like a genial thaw, ameliorated
the little winter of our discontent. We greeted his reappearance with
effusion, and dated, from the moment of it, our restoration to the
social sanities.
It was a dusk, warm evening. The peaks of the Dent du Midi,
thrust into a dewy sky, had been slowly cooling from pink to pearl-
ash, like ingots of white-hot steel. Everything seemed one harmony
of colour, except our thoughts, Campaspe’s and mine, as we strolled
in the deserted garden. The Celestine and her victim had been out
boating on the lake. We met them, unexpectedly returning.
Mademoiselle was eating cherries out of a bag, and daintily spitting
the stones right and left as she advanced. I don’t know how we
should have faced the contretemps; I had no time, indeed, at the
moment, to form a decision, before Carabas came softly and swiftly
from a leafy ambush, and took command of the occasion.
We all, I believe, instinctively recognized it for a critical one.
Mademoiselle’s bosom, though she laughed musically (she had
managed to preserve, it must be owned, the unspoiled voice of a
séductrice) began to rise and fall in spasms. The portier addressed
her without a moment’s hesitation.
“I take the liberty to inform madame that she is in danger.”
She gave a little gasp.
“But is this comedy or melodrama?” she cried vehemently.
“That is,” said Carabas, “as madame shall decide. I have the plot
up my sleeve.”
“The plot!” she echoed, and fell staring at him; and then furiously
from him to us.
“Go on,” she said. “I know very well who has instigated you to
this.”
She checked herself, and, smiling, put out a hand towards her
companion, as if to ask, or give, reassurance. But I noticed, already
to my satisfaction, that the boy did not respond. As for us, we were in
complete darkness.
“I obey, madame,” said Carabas. “This plot is told in a word. There
was once in Paris a certain notorious courtisane et joueuse. Will
madame desire her name?—à bon entendeur demi-mot. One night
this lady’s husband, a Corsican, from whom she was separated on
an honourable allowance, visited, purely by accident, her
establishment. There was a fine scene, and he wounded her
severely. She was forced by the police to prosecute him, and the
jury, amidst the plaudits of the public, gave their verdict—against
madame. But, triumphant there, the husband’s vengeance was
whetted rather than assuaged. He would throw himself upon the
suffrages of his countrymen in a more drastic vindication of his
honour. She had disguised herself—her name—had fled. He
devoted himself to the business of pursuit. At length he believed he
had traced her to an hotel in Territet.”
Carabas shrugged his shoulders and his lips, stuck out his arms at
right angles with his body, stiff from the elbow, and came to a
significant stop. I declare I pitied the adventuress. Every expression
but that of panic seemed eliminated from her face at a touch. She
looked old and haggard; and then, as if conscious of her self-
betrayal, collapsed in a moment, dropping her bag of cherries.
“I am not very well,” she stammered; “the night air tries me.” She
turned lividly upon the portier: “Par pitié, monsieur! C’est pour me
prevenir que vous etes venu, non pour me trahir?”
Without waiting for his answer, she gathered herself together,
literally, folding her train about her arm; made a desperate effort at
self-command; wrenched out a smile, and went off, quavering a little
airy chansonnette. But, after a few steps, despite her royal amplitude
she was running. Carabas, very pale but self-possessed, picked up
the bag, found one cherry in it, put it in his mouth abstractedly, and—
“My God!” cried Miller hoarsely.
Carabas jumped, and gulped.
“A thousand devils!” he cried. “You made me swallow the stone,
monsieur.”
The boy was in a fever of agitation.
“Is she really that—that sort?” he said.
My Campaspe fell upon his neck.
“O, my dear, O, my dear, I am so sorry!” she sobbed.
He put her roughly, but not unkindly, away.
“I’m—I’m going back to England—to the governor,” he said.
“Carabas,” I demanded privately, as we returned to the hotel, “is it
a fact that——?”
“The husband is here? No, monsieur; it is not a fact.”
“But——”
“It was a cause célèbre. I was confident I recognized madame
from the published prints. For the rest, it was just a chance shot; but
it hit the mark.”
“Carabas, you are wonderful; and we shall not forget.”
Miller was as good as his word. With characteristic disregard for
any but his own interests, he was gone the next morning, without
sign or message, leaving us to wobble in his backwash of scandal,
and to get out of it as best we could. His flight, of course, threw open
all the doors of gossip. My business in Paris being unfinished, I had
to go; but first I did my best to provide against unpleasantnesses by
confiding Campaspe to the care of the least slanderous dame de
compagnie I could find. I am afraid, nevertheless, she had but a poor
time of it.
A week later I received a letter from Mr. G——, who in the interval
had returned to Montreux.
“All is happily over with all,” he wrote: “with the exception, that is to
say, of poor Carabas, who is to undergo an operation for
appendicitis. It appears that a cherry-stone, which he swallowed
unwittingly, did the business. The management (OWLS!) demur to
the expense. I have insisted (FOOLS!) upon undertaking it upon my
own account. We owe much to him; and so do they (IDIOTS!). But
they don’t understand how to pay your debts is very often the best
foresight.”
It was a case of pitch and toss. For days, it appeared, Carabas’s
life hung in the balance. In the meanwhile, I was enabled to rejoin
Mr. G—— and his daughter at Montreux, and to take my share in the
nursing. Between gratitude and indignation, we rather claimed
Carabas among us. Campaspe the poor fellow simply adored. Once,
when he fancied himself losing hold, he confided to her, while we
stood by, some main incidents in his life. I retail them here, in an
abbreviated form.
CARABAS’S STORY
“There is no doubt,” he said “that as truly as some men are born
without a palate, so some men are born without luck. It is no use
trying to remedy the deficiency; it is well, rather, to study to reconcile
oneself to it.
“I was born in an English village, of naturalized Huguenot parents.
When I was nineteen, I fell passionately in love. I had for a rival a
youth very strong and unscrupulous. One day he persuaded me to
bathe with him in the river, then swollen with floods. In mid-stream he
pounced upon me, and strove to bear me under. I struggled
desperately—it was of no avail. Death thundered in my ears; the
water enwrapped and proceeded to swallow me. The last thing I saw
was a figure gesticulating and shouting on the bridge a little way
above; then consciousness fled, and I sank. I came to myself,
stranded somewhere in a dark channel. A mad face was bending
over me. I knew it—it was that of the miller. I had been carried into
his race, and, just short of the wheel, he had caught and dragged me
to shore. He was a drunkard, of that I was aware; and he was now
quite demented.
“ ‘Mordieu!’ he said, ‘I see what you’ve come for, and the devil
shan’t call twice for his own.’
“I understood instantly. He meant himself to go with me into the
water—to join issues with the devil who had called for him, and have
a fine frolic into eternity with his visitor. Terror lent me strength. I
caught at a post, and, as he leaned down, shot my whole body at
him like a spring. He went over with a splash, and I heard the wheel
hitch, then begin to turn again, chewing its prey. O, my friends, what
a situation! I lay like one damned, a thousand dreadful reflections
mastering me. I should be accused, if caught, of murdering this man.
That terror quite devoured the other, and increased with every
moment that I lay. Darkness came upon me, and then I rose and
fled. I thought of nothing but to escape; and so, stealing always by
night, I reached London.
“Now, I will tell you the irony of this destiny. Many weeks later I
read, by chance, in a newspaper, how my rival had been granted
your Royal Humane Society’s testimonial, on the evidence of a
casual spectator, for a brave but unsuccessful attempt to save me
from drowning; and how the little pretty romance had terminated with
his marriage to the admiring object of our two regards. So I was
dead; and, as long as I lay in my nameless grave—for my body, it
appeared, had never been recovered—the ghost of my fear was laid.
I do not complain, therefore. Yet—ah, mademoiselle, most
condescending of sympathizers!—she had been very dear to me.”
Here Carabas found it necessary to console my Campaspe before
he could go on.
“I obtained work—under an assumed name, of course—and for
many years found at least a living in that immense capital. I had an
aptitude for languages, which was my great good fortune; yet
prosperity never more than looked at me through the window. What
then? I could keep body and soul together. Ill-luck is too mean a
spirit for Death to patronize. Many a time has the great Angel turned
his back disdainfully on the other’s spiteful hints. He will not claim
me, I believe, until he sees him asleep, or tired of persecuting me.
“One day I was travelling on your underground railway. I had for
companion in my compartment a single individual. He jumped out at
the Blackfriars station, leaving a handbag on the seat. At the
moment the train moved off I noticed this, seized it, and leaned with
it out of the window, with a purpose to shout to its owner. I saw him
in the distance, hurriedly returning. The train gathered speed; I saw
he could never reach me in time, and I flung the bag upon the
platform. Instantly I perceived him leap, and jerk his arm across his
eyes; and on the same moment a terrible explosion occurred.
“Stunned, but unhurt, I had fallen back, when, in a flash, the full
horror of my situation burst upon me. It was the time of the dynamite
scares, and—ah, mon Dieu, mam’selle! your quick wit has already
perceived my misfortune.
“The train had stopped; the place was full of smoke; the hubbub of
a great tumult sounded in my ears. The owner of the infernal
machine was certainly destroyed in his own trap; I, at the same time,
had as certainly thrown the bag. No evidence to exonerate me was
now possible. Without an instant’s consideration, I opened the door
upon the line, slipped out, closed it, and raced for my life through the
smoke to the next station. I was successful in gaining its platform
without exciting observation. News of the catastrophe had already
been passed on, so that I was able, mingling with a frenzied crowd,
to make my way to the streets. But panic was in my feet, and all
reason had fled from my brain. I felt only that to remain in London
would be to find myself, sooner or later, the most execrated of
human monstrosities, on the scaffold. There and then I effaced
myself for the second time, hurried to the docks, and procured a post
as steward on an out-going steamer. I have never been in England
since. I now give monsieur the explanation he once asked for,
secure in the thought that, as ill-luck has at last conceded to me the
ministrations of this dear angel of a mademoiselle, his persecution
must be nearing its end before the approach of the only foe he
dreads. I leave it to monsieur, if he likes, to vindicate my name.”
As he finished, Mr. G——, whose face had been wonderfully

kindling towards the end, bent over the bed.
“This must not be, Carabas,” he said. “The man, the dynamiter,
confessed the whole truth before he died.”
Carabas sprang up.
“Monsieur!” he cried.
“I am a lawyer,” said Mr. G——; “I was connected with the case.
The man confessed, I say. If I had only known that—Carabas!
Carabas! you were the one witness we wanted, and could not find!”
Campaspe knelt down, and put a pitiful young arm round the
shoulders of the unluckiest man in the world.
“Not only we now,” she said softly, “but others also, it seems, owe
you a great debt, dear Carabas. We shall all be unable to pay it if
you die. If—if I give you a kiss, will you live to return it to me on my
wedding day?”
“Mademoiselle!” cried Carabas, radiant. “You shame ill-luck; you
shame even Death. See how they turn and go out by the door!
Vouchsafe me that dear mascot, and I swear I will live for ever.”
He is now, and has been for long, our most loved and trusted
servant, with an iron constitution, and, what is best, an unshakable
conviction that the circumstances which led him on to his present
position were, after all, the kindest of luck in disguise.
JACK THE SKIPPER
“Will you favour me by looking at it, young gentleman?” said the
petitioner.
It was a most curious little model, which the petitioner had taken
reverently out of a handbag. He was a hungry, eager-looking man, in
a battered bowler, shabby frockcoat, and a primordial “comforter”
which might have been made for Job.
Mr. Edward Cantle, busy at his desk, paid no attention.
“It turns, sir, literally, on a question of fresh butter,” said the
petitioner. “Who gets it nowadays, or realizes how, between churn
and table, every pat becomes a dumping-ground for bacilli? Here,
you will observe, the whole difficulty is resolved. We lead the cow
into the cart itself, milk her into a separator, turn her out, drive off,
and the revolution of the wheels completes the process. See? No
chance for any freebooting germ! The result is simplicity itself—the
customer’s butter made actually on the way to his door.”
Mr. Cantle put his pen in his mouth, blotted what he had been at
work on, examined it cursorily but surely, rose, walked to the counter,
and presented a form to the petitioner, all something with the air of a
passionless police-inspector. He was a tall young man, loose-limbed,
and with all his hardness, like a melancholy Punch’s show character,
in his head. Much converse with cranks had engendered in him an
air of perpetual unspoken protest, of exasperated resignation. For he
was a trusted clerk in the office of the Commissioners of Patents for
Inventions.
“Exactly,” he mumbled over the goose-quill. “Thats a matter for
your provisional specification. Good morning.”
“It’s the most wonderful——”
“Of course—they all are. Good morning.”
“It will revolutionize——”
“Naturally. You will make your petition and declaration in the
proper forms. Good morning.”
The inventor essayed another effort or two, met with no response,
quavered out a sigh, packed up his treasure and vanished. The
sound of his exit neither relaxed nor deepened a wrinkle on the brow
of the neatly groomed Government official. He simply went on with
his work.
At half-past one o’clock, it being Saturday, he—we were going to
say “knocked off,” but the expression would be a libel on his
methodical refinement. He took a hansom—selecting a personably
horsed one—to his chambers in Adelphi Terrace; lunched off four
pâté de foie gras sandwiches, already awaiting him under a silver
cover, and a glass of chablis; changed his dress for a river suit of
sober-tinted flannel and a Panama hat; charged himself with a
morocco handbag, also ready prepared; drove to Waterloo, and took
a first-class ticket, and the train—he favoured the South-Western
because it was the quieter line of two in this connexion—to Windsor.
Arrived there, he was hailed and joined by a friend on the platform.
“Glad you’re come, Ned. I’m off colour a bit. You never are.”
It was hardly an attractive reception. Mr. Cantle glanced
interrogatively at his companion, the Honourable Ivo Monk, son of
Lord Prior.
“No?” he said. “What’s disturbing you, Monk?”
“O, the devil, I think!” said the young man peevishly. “Come along,
do, out of this.”
Together they walked down to the river in almost absolute silence.
Mr. Cantle had agreed to join his friend for an agreeable week-end
on the water. It looked promising. He thought a little, and came to a
characteristically uncompromising decision.
“Is it anything to do with Miss Varley?”
“Yes, it is.”
“She—they have a houseboat here, haven’t they?”
“Yes.”
“Close by?”
“More or less. Just above Datchet.”
“Then, I think, perhaps I’d better——”
“Then, I think, perhaps, you’d not. You don’t know anything about
it. It’s not what you suppose.”
“O!”
A punt, in luxurious keeping with the tastes of its owner, awaited
them at the steps. It was equipped with a number of little lockers for
wine and food, a wealth of the downiest cushions, and an adjustable
tilt with brass hoops for “roughing it” at nights on the water. For the
Honourable Ivo was at the moment an aquatic gipsy, wandering at
large and at whim, and scorning the effeminate pillow.
They loitered through Romney lock, talking commonplaces, and
below relinquished their poles and sat and drifted until the reeds held
them up. It was a fair, sweet afternoon, full of life and merriment,
and, in view of the crowding craft, the remotest from ghostliness.
“Would you like to see her?” said Mr. Monk suddenly and
unexpectedly.
Cantle was never to be taken off his guard.
“If it will please you, it will please me,” he said.
They resumed the poles and made forward. To their left a little
sludgy creek went up among the osiers; and, anchored at its mouth,
rocked the vulgarest little apology for a houseboat. It seemed just
one cuddy, mounted on a craft like a bomb-ketch, which it filled from
stem to stern; and what with its implied restrictedness, and dingy
appearance, and stump of a chimney, one could not have imagined
a less inviting prison in which to make out a holiday. Yet there was a
lord to this squalid baby galliot, and to all appearance a very
contented one, as he sat smoking a pipe, with his legs dangling over
the side. Monk nodded to him, and the man nodded back with a grin.
“Who’s that?” asked Mr. Cantle, when out of earshot.
“O, a crank! You should recognize the breed better than I do.”
Mr. Cantle, thoughtfully nursing his jaw, with a frown on his face,
had left off punting.
“Don’t you know him?” he said suddenly.
“We exchange civilities,” answered the other; “the freemasonry of
the river, you understand. There’s the Varleys’ boat.”
Forging under the Victoria Bridge, they had come in view of a long
line of houseboats moored under the left bank against a withy bed,
opposite the Home Park. At one of these, hight the “Mermaid,” very
large and handsome, they came to, and fastening on, stepped
aboard. A sound of murmuring ceased with their arrival, and Cantle
had hardly become aware of two figures seated in the saloon, before
he was being introduced to one of them.
Miss Varley was certainly “interesting”—tall and “English,” but with
an exhausted air, and her eyes superhumanly large. She greeted the
stranger sweetly, and her fiancé with a rather full, pathetic look.
“Mamma’s resting a little,” she said, in a bodiless voice, “and
Nanna’s been reading to me. Papa comes down by the seven
o’clock train.”
“And what’s Nanna been reading?” asked the young man.
The old nurse held up the volume. It was the Holy Book. Monk
ground his teeth.
“Hush, Master Ivo!” whispered the woman. “You only distress her.”
“I’d rather see her reading a yellow-back on a July day on the
river.”
The girl put a hand on his arm. “When the call has come? When
my days are numbered, Ivo?” she said.
He almost burst out in an oath.
“I’d rather, if I were you, be recognized and called by my own
name and nature,” he said bitterly. “But it’s all nonsense, Netta. Do,
for God’s sake, believe it!”
He was so obviously overwrought, the situation was so painful,
that his friend persuaded him, on personal grounds, to leave. They
punted across, dropped down a distance, and brought up under the
bank in a quiet spot.
“Very well,” said Cantle. “You’ll tell me, perhaps, what’s the
matter?”
“Can’t you see? She’s dying.”
He dropped his face into his hands, with a groan of impotent
suffering.
“There’s some mystery here,” said his friend quietly.
Monk looked up, and burst out in a sudden lost fury—
“There is, by God! Jack the Skipper!”
Cantle was rolling a cigarette imperturbably.
“Who’s—Jack the Skipper?” he drawled.
“I wish you could tell me,” cried the other. “I wish you could show
these the way to his throat!” He held out his hands. “They’d fasten!”
he whispered.
He came all of a sudden, quite quietly, and sat by his friend. “Its
been going on for three weeks now,” he said rapidly. “They call him
that about here—a sort of skit on the other—the other beast, you
know. He appears at night—a sort of ghoulish, indescribable
monster, black and huge and dripping, and utters one beastly sound
and disappears. Nobody’s been able to trace him, or see where he
comes from or goes to. He just appears in the night, in all sorts of
unexpected places—houseboats, and bungalows, and shanties by
the water—and terrifies some lonely child or woman, and is gone.
The devil!—O, the devil! We’ve made parties and hunted him, to no
good. It’s a regular reign of terror hereabouts. People don’t dare
being left alone after dark. He frightened the little Cunningham child
into a fit, and it’s not expected to recover. Mrs. Bancock died of an
apoplexy after seeing it. And the worst of it is, a deadly superstition’s
seized the place. Its visit’s got to be supposed to presage death, and
——” He seized Cantle’s hand convulsively.
“Damn it! It’s unnatural, Ned! The river’s haunted—here, in
Cockney Datchet—in the twentieth century! You don’t believe in such
things—tell me you don’t! But Netta——”
His head sank on his breast. Cantle blew out a placid whiff of
smoke.
“But—Miss Varley?” he said.
“You know—you’ve heard, at least,” said the other, “what she was.
The thing suddenly stood before her, when she was alone, one night.
Well—you see what she is now.”
“I don’t see, nevertheless, why she don’t——”
“Pack and run? No more do I. Put it to her if you like. I’ve said my
say. But she’s in the grip—thinks she’s had her call—and there’s no
moving her. Cantle, she’s just dying where she stands.”
Cantle’s cigarette made a tiny arc of light, and hissed in the river.
He had heard of epidemic hysteria. The world was full of cranks.
“Now,” he said, “drop the subject, please. Shall I tell you of some
fools I’ve come across in my time?”
He related some of his experiences in the Patent Office. The most
impudent invention ever proposed, he said, was a burglar’s tool for
snipping out and holding by suction in one movement a disk of
window glass. His dry self-confidence had a curiously reassuring
effect on the other. While they ate and drank and smoked and talked,
the life of the river had become gradually attenuated and delivered to
silence; a mist rose and hung above the water; sounds died down
and ceased, concentrating themselves into the persistent dismal yelp
of a dog somewhere on the bank above; the lights in the houseboats
thinned to isolated sparks—twelve o’clock clanged from a distant
tower.
Then, all at once, he was alert and quietly active.
“Monk, listen to me: I’m going to cure Miss Varley.”
“Ned!”
“Take the paddle and work up—up the river, do you hear? I’ll sit
forward.”
The ghost of a red moon was rising in the east. They slipped on
with scarce a sound. A sort of lurid glaze enamelled the water. All of
a sudden a sleek bulk rose ahead right in their path, wallowed a
moment like a porpoise, and disappeared.
“Good God!” cried Monk, in a choking voice, half rising from his
seat.
“Keep down!” whispered his friend.
“Cantle! Did you see it? Cantle! It was he!”
“Keep down!”
They paddled on, past the last of the boats, through the bridge, on
as far as the squat little bomb-ketch bulking black and menacing at
the mouth of the creek.
“Hold on!” whispered Cantle. “Run her out of sight into the reeds.
We must wade on board there.”
“There? That fellow Spindler’s boat?”
“Of course, now. That was his name.”
“What do you mean?”
“You’ll soon know.”
They accomplished the feat, though near mud-foundered by the
way, and scrambled, dripping, on board. The door of the cuddy
yielded to their touch. Monk was beginning to gather dim light.
“Don’t let me,” he whispered, almost sobbing. “Keep my hands off
him.”
“Leave him to me,” said Cantle gravely.
Not a sound of life greeted them. They stole into the cabin and
closed the door, almost, upon themselves.
“We must yield him to-night for the sake of to-morrow,” murmured
Cantle.
“Ned! If he goes again——”
“Hush! It’s not probable he’d risk a second visit, knowing her
watched.”
The crack brightened as the moon rose: glowed into a ribbon of
light. Suddenly Cantle gripped the other’s wrist.
A stealthy puddling, sucking sound close by reached their ears.
Over the side came swarming a great shapeless fishy creature,
which settled with a sludgy wallop on the little triangle of foredeck
almost at their feet. Monk gave a soft, awful gasp, and, with the
sound, Cantle had dashed open the door and flung himself upon the
monster.
“Quick!” he cried; “you’ve got matches! Light a candle—lamp—
anything! Lie still, Mr. Spindler. It’s all up. I know you and your
Marine Secret Service suit! A knife now, Monk! Out he comes.”
He was merciless with the blade when he got it, slashing and
cutting at the oilskin suit, splitting it from top to toe. Mr. Spindler’s red
beard and extravagant face came out of it like a death’s-head out of
its chrysalis.
“There goes the proud monument of a lifetime,” said the madman.
He had made no effort to resist. The first blow at this darling of his
invention had seemed to hamstring him, morally and materially.
For he was just one of Mr. Cantle’s cranks—had once invented a
submarine travelling suit, with which he had hoped to inaugurate a
new system of Secret Service for the Admiralty. It was an ingenious
enough device, with some scheme of floating valves through which
to breathe; but the authorities, after holding him on and off, would
have none of it. Then the fate of many inventors had befallen him.
Between practical ruin and a moral sense of wrong, he had gone
crazy, and vowed warfare on the mankind which had discarded him.
It should comprehend, too late, the uses of instant appearance and
disappearance to which his invention could be put. He went mad,
and ended his days in an asylum.
On the Monday morning Mr. Cantle posted back to the Patent
Office; on the Tuesday Miss Varley was reading De Maupassant’s
“Mademoiselle Fifi” under the awning of the “Mermaid’s” roof; and on
the Wednesday Mr. Ivo Monk got her to name the day.

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Accounting Principle 6th Edition

Weygandt Test Bank

CURRENT LIABILITIES AND PAYROLL

SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S

Note: AN = Analysis AP = Application E = Evaluation

Note: E = Easy M = Medium H=Hard

1. Account for determinable or certain current liabilities. Liabilities are present

3. Account for contingencies. A contingency is an existing condition or situation that is

Solution Exercise 1 (10 min.)

b. Property taxes payable ($6,200 x 5÷12) ........................................ $ 2,583

c. Prepaid property taxes ($6,200 x 3÷12) ........................................ $ 1,550

Solution Exercise 2 (5 min.)

b. $2,350,000 × .13 = $305,500 is the HST (Harmonized Sales Tax) liability.

Solution Exercise 3 (10 min.)

b. May 31 Interest Expense ........................................................... 900

c. Aug 31 Interest Expense ........................................................... 1,350

d. Oct 1 Notes Payable ............................................................... 90,000

Solution Exercise 4 (15 min.)

Jun 30 Property Tax Expense ($32,000 × 6÷12 - $7,500).............. 8,500

Sep 30 Property Tax Expense ($32,000 × 3÷12) ........................... 8,000

Dec 31 Property Tax Expense ($32,000 × 3÷12) ........................... 8,000

Solution Exercise 5 (5 min.)

Mar 5 Cash………….. .................................................................. 10,290

Mar 15 Supplies………. ................................................................. 3,500

Mar 31 Accounts Payable .............................................................. 3,500

Solution Exercise 6 (25 min.)

Apr 5 Accounts Receivable – Customer A ................................... 75,600

Apr 6 Sales Returns and Allowances ($72,000 x ½) .................... 36,000

Apr 13 Cash ($75,600-37,800) ...................................................... 37,800

Apr 25 Accounts Receivable – Customer B ................................... 102,900

Apr 28 Cash………….. .................................................................. 22,000

Apr 30 Interest Expense ($36,500 x 5% x 1÷12) ........................... 152

Solution Exercise 7 (12 min.)

2. Wages Expense ............................................................................ 21,000

3. Vacation Benefits Expense ........................................................... 4,200

4. Loss from Lawsuit ......................................................................... 750,000

5. Interest Expense ($10,000 × 8% × 2 ÷ 12) .................................... 133

Solution Exercise 8 (10 min.)

Aug 31 Redemption Rewards Liability ....................................... 755

b. Redemption Reward Liability ($2,500-755).................................... $1,745

Solution Exercise 9 (10 min.)

1. Total liability .................................................................................. $ 15,000

Solution Exercise 10 (10 min.)

Warranty Liability........................................................................... 7,200

b. 2,500 units × 6% = 150 units

Warranty Expense......................................................................... 18,000

Sales and warranty information for 2014 is as follows:

Solution Exercise 11 (5 min.)

Related to the cost of the maintenance contract on monitor B

To record actual warranty costs on monitor A

b. $8,960 – $4,000 = $4,960

Solution Exercise 12 (10-13 min.)

Sales Discounts for Redemption Rewards .................................... 12,800

Liability end of January = $12,800

Sales Discounts for Redemption Rewards .................................... 6,520

Redemptions Rewards Liability ..................................................... 6,750

Liability end of February ($12,800 + $6,520 – $6,750) = $12,570

Solution Exercise 13 (10 min.)

2. An entry is required because the loss is likely and estimable.

4. 10 employees × $100 × 1 day = $1,000.

Solution Exercise 14 (12 min.)

Solution Exercise 15 (10 min.)

5. Correct. No entry can be created if the amount cannot be reasonable estimated.