On September 1, Klondike Co. issued a 90-daynote with a face amount of $120.000

Question

On September 1, Klondike Co. issued a 90-daynote with a face amount of $120.000 to Arctic Apparel Co. formerchandise inventory.a. Determine the proceeds of the note,assuming the note carries an interest rate of 8%.b. Determine theproceeds of the note, assuming the note is discounted at 8%. DonTruett?s weekly gross earnings for the week ending December 18 were$1,680 and his federal income tax withholding was $298.51. Prior tothis week, Truett had earned $99,000 for the year. Assuming thesocial security is 6% on the first $100,000 of annual earnings andmedicare is 1.5% of all earnings, what is Truett?s net pay? Thepayroll register of Lowry Landscaping Co. indicates $1,260 ofsocial security withheld and $315 of Medicare tax withheld on totalsalaries of $21,000 for the period. Federal withholding for theperiod totaled $3,822. Provide the journal entry for the period?spayroll.

Explanation / Answer

1) 120000*(90/360)*.08=$2400 :
2) discounted 8%   proceeds=120000-(120000*.08*90/360)=$117600 : 3)99000+1680=100680.....meaning that only 1000 of this checkis subject to social security taxes 1000(.06)=60.......medicare is .015(1680)=25.2. : Truett's net pay = 1680-298.51-60-25.2=$1296.29 :
4)                                                                                       debit         credit Salariesexpense                                                           21000           FITpayable                                                                                3822           FICApayable                                                                             1260          Medicarepayable                                                                          315          Salaries payable (netpay)                                                         15603                         :
4)                                                                                       debit         credit Salariesexpense                                                           21000           FITpayable                                                                                3822           FICApayable                                                                             1260          Medicarepayable                                                                          315          Salaries payable (netpay)                                                         15603                        

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