Question 1:
Bonds payable various issues Atom Endeavour Co. issued $500 million face amount of 9% bonds when market interest rates were 9.14% for bonds of similar risk and other characteristics.
Required:
a. How much interest will be paid annually on these bonds?
b. Were the bonds issued at a premium or discount? Explain your answer.
c. Will the annual interest expense on these bonds be more than, equal to, or less than the amount of interest paid each year? Explain your answer.
Question 2: Other accrued liabilities payroll and payroll taxes. The following summary data for the payroll period ended December 27, 2012, are available for Cayman Coating Co.:
Gross pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,000
FICA tax withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Income tax withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,320
Group hospitalization insurance. . . . . . . . . . . . . . . . . . . . . . . . . 1,270
Employee contributions to pension plan . . . . . . . . . . . . . . . . . . ?
Total deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,825
Net pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Additional information
For employees, FICA tax rates for 2012 were 5.65% on the first $110,100 of each employee s annual earnings and 1.45% on any earnings in excess of $110,100. However, no employees had accumulated earnings for the year in excess of the $110,100 limit.
For employers, FICA tax rates for 2012 were 7.65% on the first $110,100 of each employee s annual earnings and 1.45% on any earnings in excess of $110,100.
The federal and state unemployment compensation tax rates are 0.6% and 5.4%, respectively. These rates are levied against the employer for the first $7,000 of each employee s annual earnings. Only $9,000 of the gross pay amount for the December 27, 2012, pay period was owed to employees who were still under the annual limit.
Required:
Assuming that Cayman Coating Co. s payroll for the last week of the year is to be paid on January 3, 2013, use the horizontal model (or write the journal entry) to record the effects of the December 27, 2012, entries for
a. Accrued payroll.
b. Accrued payroll taxes.