The local restaurant, Momma’s Haute Cooking, has asked you to help with its book
ID: 2577997 • Letter: T
Question
The local restaurant, Momma’s Haute Cooking, has asked you to help with its bookkeeping. Since you have just completed an introductory accounting course and know exactly what must be done, you agree. The bookkeeping is for the year ending December 31.
During the year Momma’s had the following transactions:
Purchased food on credit for $30,000.
At year end, $10,000 in wages were incurred but not paid until the following January.
Taxes on the wages were Federal income $1,200, Social Security of $620 (employee portion) and Medicare taxes of $145 were withheld from employees.
Year estimated income taxes unpaid were $42,850.
The employers share of Social Security and Medicare taxes were $620 and $145, respectively.
Borrowed a 90 day note 9% $25,000 note on December 1st.
Prepare the entries to record these transactions.
Explanation / Answer
Account Debit Credit Merchandise inventory 30000 Accounts payable 30000 [Purchased food on credit] Wages expense 10000 Federal income tax 1200 Social security tax payable 620 Medicare tax payable 145 Wages payable 8035 (balance) [Entry to record wage expense] Income tax expense 42850 Income taxes payable 42850 [Estimated tax payable entry] Payroll tax expense/wage expense 765 Social security tax payable 620 Medicare tax payable 145 [Payroll tax entry] Cash 25000 Note payable 25000 [Borrowed money] Interest expense 187.5 Interest payable 187.5 [1 month interest accured on note payable= 25000*9%*1/12]
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