Chapter 10Supplemental InstructionIowa State UniversityLeader: Chen GuoCourse: ACCT 284 ADInstructor: ClemDate: November 10, 20091. The balance sheet for Shaver Corporation reported the following: total assets, $225,000; noncurrent assets, $164,389; current liabilities, $33,300; total stockholders' equity, $104,000; net income, $4,810; interest expense, $5,420; income before income taxes, $5,290.Compute Shaver's current ratio and times interest earned ratio. 2. Clem Company issued $360,000, 6-year, 9 percent bonds on January 1, 2007. The bonds soldfor $331,200. Interest is payable annually on January 1.Using effective-interest amortization, prepare journal entries to record (a) the bond issuance on January 1, 2007, (b) the accrual of interest on December 31, 2007, and (c) the payment of interest on January 1, 2008. The market interest rate on the bonds is 10 percent. 3. Greener Pastures Corporation borrowed $4,600,000 on November 1, 2007. The note carried a7 percent interest rate with the principal and interest payable on June 1, 2008.Show the accounting equation effects (+ for increase, – for decrease, and NE for no effect) and prepare the journal entries for (a) the note issued on November 1 and (b) the interest accrual on December 31. Supplemental Instruction1060 Hixson-Lied Student Success Center v 294-6624 v www.si.iastate.edu4. Assume an employee of Rocco Rock Company earns $1,800 of gross wages during the current pay period, and is required to remit to the government $180 for income tax and $90 for FICA. Consider the following two procedures for paying the employee:Procedure 1 (Withholdings) Procedure 2 (No Withholdings)Rocco Rock Company pays the employee net wages of $1,530 and will remit incometaxes and FICA on behalf of the employee.Rocco Rock Company pays the employee gross wages of $1,800 and the employee is responsible for remitting income taxes and FICA himself.a. Ignoring employer payroll taxes, under each procedure calculate (a) the total labor cost for the company, and (b) the amount of cash the employee will have after satisfying all responsibilities to the government.b. Prepare the journal entries required by the employer under procedure 1, assuming that theemployee is paid in cash, but the withholdings and matching employer FICA contributionhave not been
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