91Ó°ÊÓ

An employee earns \(\$ 22\) per hour and \(11 / 2\) times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 50 hours during the week, and that the gross pay prior to the current week totaled \(\$ 42,710\). Assume further that the social security tax rate was \(6.0 \%\) (on earnings up to \(\$ 100,000\) ), the Medicare tax rate was \(1.5 \%\), and federal income tax to be withheld was \(\$ 236\). a. Determine the gross pay for the week. b. Determine the net pay for the week.

Audio-Wave Company warrants its products for one year. The estimated product warranty is \(2 \%\) of sales. Assume that sales were \(\$ 85,000\) for January. In February, a customer received warranty repairs requiring \(\$ 210\) of parts and \(\$ 135\) of labor. a. Journalize the adjusting entry required at January 31 , the end of the first month of the current year, to record the accrued product warranty. b. Journalize the entry to record the warranty work provided in February.

Urban-Wear Clothes Co. had the following current assets and liabilities for two comparative years: \begin{tabular}{lrr} & Dec. 31, 2008 & Dec. 31, 2007 \\ \hline Current assets: & & \\ Cash & \(\$ 140,000\) & \(\$ 205,000\) \\ Accounts receivable & 250,000 & 245,000 \\ Inventory & 300,000 & 180,000 \\ \(\quad\) Total current assets & \(\$ 690,000\) & \(\$ 630,000\) \\ Current liabilities: & & \\ Current portion of long-term debt & \(\$ 50,000\) & \(\$ 50,000\) \\ Accounts payable & 200,000 & 190,000 \\ Accrued expenses payable & 140,000 & 135,000 \\ \(\quad\) Total current liabilities & \(\$ 390,000\) & \(\$ 375,000\) \\ \hline \end{tabular} a. Determine the quick ratio for December 31, 2008 and \(2007 .\) b. Interpret the change in the quick ratio between the two balance sheet dates.