Question

Item3 1.42 points PrintCheck my work Check My Work button is not enabled 3 Item 3 Item 3 1.42 points Lakeview Company completed the following two transactions. The annual accounting period ends December 31. On December 31, calculated the payroll, which indicates gross earnings for wages ($120,000), payroll deductions for income tax ($12,000), payroll deductions for FICA ($9,000), payroll deductions for American Cancer Society ($4,500), employer contributions for FICA (matching), and state and federal unemployment taxes ($1,050). Employees were paid in cash, but payments for the corresponding payroll deductions have not yet been made and employer taxes have not yet been recorded. Collected rent revenue of $6,750 on December 10 for office space that Lakeview rented to another business. The rent collected was for 30 days from December 12 to January 10 and was credited in full to Deferred Revenue. Required: 1. & 2. Prepare the journal entries to record payroll on December 31, the collection of rent on December 10 and adjusting journal entry on December 31. 3. Show how any of the liabilities related to these items should be reported on the company’s balance sheet at December 31.

Answer 1

Answer:

Lakeview Company

Journal entries

A. Payroll

Debit Wages with $94,500

Credit Cash with $94,500

(Being December wages paid employees in Cash)

B. Rent collection Journal Dec 10.

Debit cash with $6,750

Credit Deferred Revenue with $6,750

(Being 30 days rent collected in advance. Rent expires Jan 10)

C. Rent Collected (adjusted Journal)

Debit Deferred Revenue Account with $4,500

Credit Rent Account with $4,500

(Being rent income applicable to this years records)

3.. Liability recognition

Debit Employee income taxes with $12,000

Debit FICA employee deductions with $9,000

Debit employees contribution to cancer research with $4,500

Credit Employee income taxes payable account with $12,000

Debit FICA employee deductions payable account with $9,000

Debit employees contribution to cancer research payables account with $4,500

(Being deduction from employee December wages)

Debit FICA employer deductions with $9,000

Debit State & Fed unemployment taxes (employer) account with $1,050

Credit FICA employer deductions payable account with $9,000

Credit State & Fed unemployment taxes (employer) payable account with $1,050

(Being employer contribution and taxes incidental to December Wage payment)

In the Balance sheet.

Current liabilities.

Deferred Revenue = $2,250

Employee income taxes payable account = $12,000

FICA employee deductions payable account = $9,000

employees contribution to cancer research payables account = $4,500

FICA employer deductions payable account = $9,000

State & Fed unemployment taxes (employer) payable account = $1,050

Total current liability = $37,800