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Chapter 13: Q8BE (page 692)

Mayaguez Corporation provides its officers with bonuses based on net income. For 2017, the bonuses total $350,000 and are paid on February 15, 2018. Prepare Mayaguez鈥檚 December 31, 2017, adjusting entry and the February 15,2018, entry.

Short Answer

Expert verified

On December 31,2017, salaries and wages expense will be debited and salaries and wages payable will be credited by $350,000, respectively.

On February 15,2018, salaries and wages payable will be debited and cash will be credited by $350,000, respectively.

Step by step solution

01

Explanation on salaries and wages payable

Salaries and wages payable are the accrued expenses related to salaries, wages or bonuses, which will be paid in future. It is reported as current liability.

02

Journal entries

Date

Accounts & Explanations

Debit

Credit

Dec.31,2017

Salaries and Wages Expense

$350,000

Salaries and Wages Payable

$350,000

To record accrued bonuses

Feb.15, 2018

Salaries and Wages Payable

$350,000

Cash

$350,000

To record payment of bonuses

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Most popular questions from this chapter

Question: (Lessee-Lessor Entries, Operating Lease) Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year noncancelable contract starting January 1, 2017. Terms of the lease require payments of \(33,000 each January 1, starting January 1, 2017. Cleveland will pay insurance, taxes, and maintenance charges on the crane, which has an estimated life of 12 years, a fair value of \)240,000, and a cost to Cleveland of \(240,000. The estimated fair value of the crane is expected to be \)45,000 at the end of the lease term. No bargain-purchase or -renewal options are included in the contract. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is reasonably certain, and no uncertainties exist relative to unreimbursable lessor costs. Abriendo鈥檚 incremental borrowing rate is 10%, and Cleveland鈥檚 implicit interest rate of 9% is known to Abriendo.

Instructions

  1. Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by both the lessee and the lessor.

Question: Explain how trading debt securities are accounted for and reported?

Assume the same information as in IFRS 17-12 except that Roosevelt has an active trading strategy for these bonds.

The fair value of the bonds at December 31 of each end-year is as follows.

2017 \(534,200 2020 \)517,000

2018 \(515,000 2021 \)500,000

2019 $513,000

Instructions

(a) Pepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2017.

(c) prepare the journal entry to record the recognition of fair value for 2018.

Which types of investments are valued at amortized cost? Explain the rationale for this accounting.

Why is the liabilities section of the balance sheet of primary significance to bankers?
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