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Solved Problem 14.1 How many exemptions are permitted to be claimed on Form W-4 in the following cases: (a) Taxpayer and spouse (b) Taxpayer, spouse, and two children (c) Taxpayer, spouse, and mother she fully supported Solution: (a) 2; (b) 4; (c) 3 Solved Problem 14.2 Judy Bogan worked 44 hours during the rst week in February of the current year. The pay rate is $9 per hour. Withheld from her wages were FICA; federal income tax, $47; hospitalization, $7.20. Prepare the necessary payroll entry.
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CHAPTER 14: Payroll Solution: Salaries Expense 414* FICA Social Security Payable 25.67 FICA Medicare Payable 6.00 Federal Income Tax Payable 47.00 Hospitalization Payable 7.20 Salaries Payable 328.13 *40 hours times $9 = $360 (regular pay) 4 hours times $13.50 = $54 (overtime pay) $360 + $54 = $414 (total pay)
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Solved Problem 14.3 Based on the information in Solved Problem 14.2, what is the entry to record the employer s payroll tax if it is assumed the state tax rate is 4 percent and the federal unemployment rate is 0.8 per cent (Prior to payroll) earnings to date = $5,100. Solution: Payroll Tax Expense 51.54 FICA Social Security Payable 25.67 FICA Medicare Payable 6.00 Federal Unemployment Insurance Payable 3.31 State Unemployment Insurance Payable 16.56
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Property, Plant, and Equipment: Depreciation
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Fixed Assets Depreciation and Scrap Value Depreciation Methods Comparison of Methods Summary Solved Problems
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Tangible assets that are relatively permanent and are needed for the production or sale of goods or services are termed property, plant, and equipment (PP&E), or xed assets. These assets are not held for sale in the ordinary course of business. The broad group is usually separated into classes ac cording to the physical characteristics of the items, for example land, buildings, machinery and equip ment.
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Copyright 2004 by The McGraw-Hill Companies, Inc. Click here for terms of use.
CHAPTER 15: Property, Plant, and Equipment: Depreciation
The cost of PP&E includes all expenditures necessary to put the as set into position and make it ready for use.
Depreciation and Scrap Value
Though it may be long, the useful life of a xed asset is limited. Eventu ally the asset will lose all productive worth and will possess only salvage value or scrap value. The accrual basis of accounting demands a periodby-period matching of costs against derived revenues. Hence the cost of a xed asset (over its scrap value) is distributed over the asset s entire es timated lifetime. This spreading of the cost over the periods that receive bene ts is known as depreciation. To determine depreciation expense for a xed asset, we need the fol lowing information: 1. Cost. The total purchase price of the item, including its initial cost, transportation, sales tax, installation and any other expense to make it ready for use. 2. Estimated Useful Life. The projected life during which the busi ness expects the asset to function. This may be expressed in years, miles, units of production, or any other measure appropriate. 3. Residual Value. Also called scrap or salvage value, residual val ue is the estimated value of the asset when it is fully depreciated. When subtracted from the cost of the asset, it produces the depreciable cost. Depreciation decreases the xed asset s book value and also de creases capital. Depreciation is considered an operating expense of the business. It may be recorded by an entry at the end of each month or at the end of the year, usually depending on the frequency of preparing nancial statements. Fixed assets are recorded at cost and remain at that gure as long as they are held. The depreciation taken to date is shown as a credit in the contra asset account Accumulated Depreciation and is deducted from the asset account on the balance sheet. An offset (contra) account is an account with a credit balance that is offset against an asset account to produce the correct balance sheet book value. The offset account appears in the general ledger directly after its companion account. Generally, every depreciable asset has its own ac count and an accumulated depreciation account. To determine the asset s book, or carrying, value, the accumulated depreciation account is sub tracted from the asset account.
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