Analyzing Accounts

INTRODUCTION AND INSTRUCTIONS
Pacilio Security Services, Inc. provides security services for concerts and other events. The company has been in business for two years. For Years 3 through 11 complete the following:
a. Record the transactions in general journal form. When necessary, round all amounts to the nearest whole dollar.
b. Post the transactions to T-accounts and determine the account balances.
c. Prepare a trial balance.
d. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 3.
e. Prepare the closing entries and post to the T-accounts.
f. Prepare a post-closing trial balance.
To assist you, a beginning of the year trial balance is provided for each year.
YEAR 3 ACCOUNTING PERIOD
Reference: Chapters 1―3
The account balances of Pacilio Security Services, Inc. as of January 1, Year 3, are shown here:
Cash $8,900
Accounts Receivable 1,500
Supplies 65
Prepaid Rent 800
Land 4,000
Accounts Payable 1,050
Unearned Revenue 200
Salaries Payable 1,200
Notes Payable 2,000
Common Stock 8,000
Retained Earnings 2,815
During Year 3, Pacilio Security Services experienced the following transactions:

1. Paid the salaries payable from Year 2.
2. Paid the balance of $2,000 on the debt owed to the Small Business Government Agency. The loan is interest-free.
3. Performed $32,000 of security services for numerous local events during the year; $21,000 was on account and $11,000 was for cash.
4. On May 1, paid $3,000 for 12 months’ rent in advance.
5. Purchased supplies on account for $700.
6. Paid salaries expense for the year of $9,000.
7. Incurred other operating expenses on account, $4,200.
8. On October 1, Year 3, a customer paid $1,200 for services to be provided over the next 12 months.Page 715
9. Collected $19,000 of accounts receivable during the year.
10. Paid $5,950 on accounts payable.
11. Paid $1,800 of advertising expenses for the year.
12. Paid a cash dividend to the shareholders of $4,650.
13. The market value of the land was determined to be $5,500 at December 31, Year 3.
    Adjustments
14. There was $120 of supplies on hand at the end of the year.
15. Recognized the expired rent.
16. Recognized the earned revenue from Year 2 and transaction no. 8.
17. Accrued salaries were $1,000 at December 31, Year 3.
    YEAR 4 ACCOUNTING PERIOD
    Reference: Chapter 4
    The account balances of Pacilio Security Services, Inc. as of January 1, Year 4, are shown here:
    Cash $12,500
    Accounts Receivable 3,500
    Supplies 120
    Prepaid Rent 1,000
    Land 4,000
    Unearned Revenue 900
    Salaries Payable 1,000
    Common Stock 8,000
    Retained Earnings 11,220
    In Year 4, Pacilio Security Services decided to expand its business to sell security systems and offer 24-hour alarm monitoring services. It plans to phase out its current service of providing security personnel at various events. The following summary transactions occurred during Year 4:
18. Paid the salaries payable from Year 3.
19. Acquired an additional $42,000 cash from the issue of common stock.
20. Rented a larger building on May 1; paid $6,000 for 12 months’ rent in advance.
21. Paid $800 cash for supplies to be used over the next several months by the business.
22. Purchased alarm systems for resale at a cost of $12,000. The alarm systems were purchased on account with the terms 2/10, n/30.
23. Returned alarm systems that had a cost of $240.
24. Installed alarm systems during the year for a total sales amount of $20,000. The cost of these systems amounted to $9,440. Sales of $15,000 were on account, while $5,000 were cash sales.
25. Paid the installers and other employees a total of $9,500 in salaries.
26. Sold $36,000 of monitoring services for the year. The services are billed to the customers each month.
27. Paid cash on accounts payable. The payment was made before the discount period expired. At the time of purchase, the inventory had a cost of $8,000.
28. Paid cash to settle additional accounts payable. The payment was made after the discount period expired. At the time of purchase, the inventory had a cost of $2,780.Page 716
29. Collected $43,000 of accounts receivable during the year.
30. Performed $12,000 of security services for area events; $9,000 was on account and $3,000 was for cash.
31. Paid advertising cost of $1,620 for the year.
32. Paid $1,100 for utilities expense for the year.
33. Paid a dividend of $12,000 to the shareholders.
    Adjustment Information
34. Supplies of $150 were on hand at the end of the year.
35. Recognized the expired rent for the year.
36. Recognized the balance of the unearned revenue; cash was received in Year 3.
37. Accrued salaries at December 31, Year 4, were $1,500.
    YEAR 5 ACCOUNTING PERIOD
    Reference: Chapter 5
    The account balances of Pacilio Security Services, Inc. as of January 1, Year 5, are shown here:
    Cash $62,860
    Accounts receivable 20,500
    Supplies 150
    Prepaid rent 2,000
    Merchandise inventory (9 @ $240) 2,160
    Land 4,000
    Accounts payable 980
    Salaries payable 1,500
    Common stock 50,000
    Retained earnings 39,190
    During Year 5, Pacilio Security Services experienced the following transactions:
38. Paid the salaries payable from Year 4.
39. On January 15, purchased 20 standard alarm systems for cash at a cost of $250 each.
40. On February 1, paid the accounts payable of $980, but not within the discount period. (The company uses the gross method.)
41. On March 1, leased a business van. Paid $4,800 for one year’s lease in advance.
42. Paid $7,200 on May 1 for one year’s rent on the office in advance.
43. Purchased with cash $500 of supplies to be used over the next several months by the business.
44. Purchased with cash another 25 alarm systems on August 1 for resale at a cost of $260 each.
45. On September 5, purchased on account 30 standard alarm systems at a cost of $265 each.
46. Installed 60 standard alarm systems for $33,000. Sales of $22,000 were on account, while $11,000 were cash sales. (Note: Be sure to record cost of goods sold using the perpetual FIFO method.)
47. Made a full refund to a dissatisfied customer who returned her alarm system. The sale had been a cash sale for $550 with a cost of $260.
48. Paid installers and other employees a total of $21,000 cash for salaries.
49. Sold $45,000 of monitoring services during the year. The services are billed to the customers each month.
50. Sold an additional monitoring service for $1,200 for one year’s service. The customer paid the full amount of $1,200 on October 1.
51. Collected $74,000 of accounts receivable during the year.Page 717
52. Paid an additional $6,000 to settle some of the accounts payable.
53. Paid $3,500 of advertising expense during the year.
54. Paid $2,320 of utilities expense for the year.
55. Paid a dividend of $15,000 to the shareholders.
    Adjustments
56. There was $200 of supplies on hand at the end of the year.
57. Recognized the expired rent for both the van and the office building for the year.
58. Recognized the revenue earned from transaction 13.
59. Accrued salaries at December 31, Year 5, were $1,000.
    YEAR 6 ACCOUNTING PERIOD
    Reference: Chapter 6
    The account balances of Pacilio Security Services, Inc. as of January 1, Year 6, are shown here:
    Cash $ 74,210
    Accounts Receivable 13,500
    Supplies 200
    Prepaid Rent 3,200
    Merchandise Inventory (24 @ $265; 1 @ $260) 6,620
    Land 4,000
    Accounts Payable 1,950
    Unearned Revenue 900
    Salaries Payable 1,000
    Common Stock 50,000
    Retained Earnings 47,880
    During Year 6, Pacilio Security Services experienced the following transactions:
60. Paid the salaries payable from Year 5.
61. On March 1, Year 6, Pacilio established a $100 petty cash fund to handle small expenditures.
62. Paid $4,800 on March 1, Year 6, for a one-year lease on the company van in advance.
63. Paid $7,200 on May 2, Year 6, for one year’s office rent in advance.
64. Purchased $400 of supplies on account.
65. Purchased 100 alarm systems for $28,000 cash during the year.
66. Sold 102 alarm systems for $57,120. All sales were on account. (Compute cost of goods sold using the FIFO cost flow method.)
67. Paid $2,100 on accounts payable during the year.
68. Replenished the petty cash fund on August 1. At this time, the petty cash fund had only $7 of currency left. It contained the following receipts: office supplies expense, $23; cutting grass, $55; and miscellaneous expense, $14.
69. Billed $52,000 of monitoring services for the year.
70. Paid installers and other employees a total of $25,000 cash for salaries.
71. Collected $89,300 of accounts receivable during the year.
72. Paid $3,600 of advertising expense during the year.
73. Paid $2,500 of utilities expense for the year.
74. Paid a dividend of $10,000 to the shareholders.
    Adjustments
75. There was $160 of supplies on hand at the end of the year.
76. Recognized the expired rent for both the van and the office building for the year. (The rent for both the van and the office remained the same for Year 5 and Year 6.)Page 718
77. Recognized the balance of the revenue earned in Year 6 where cash had been collected in Year 5.
78. Accrued salaries at December 31, Year 6, were $1,400.
    Special Instructions for Year 6
79. Record the given transactions in general journal form.
80. Post the transactions to the T-accounts.
81. Prepare a bank reconciliation at the end of the year. The following information is available for the bank reconciliation:
    A. Checks written but not paid by the bank, $8,350.
    B. A deposit of $6,500 made on December 31, Year 6, had been recorded but was not shown on the bank statement.
    C. A debit memo for $55 for a new supply of checks. (Hint: Use Office Supplies Expense account.)
    D. A credit memo for $30 for interest earned on the checking account.
    E. An NSF check for $120.
    F. The balance shown on the bank statement was $80,822.
82. Record and post any adjustments necessary from the bank reconciliation.
83. Prepare a trial balance.
84. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows.
85. Close the temporary accounts to retained earnings.
86. Post the closing entries to the T-accounts and prepare a post-closing trial balance.
    YEAR 7 ACCOUNTING PERIOD
    Reference: Chapter 7
    The account balances of Pacilio Security Services, Inc. as of January 1, Year 7, are shown here:
    Cash $78,972
    Petty Cash 100
    Accounts Receivable 33,440
    Supplies 160
    Prepaid Rent 3,200
    Merchandise Inventory (23 @ $280) 6,440
    Land 4,000
    Accounts Payable 250
    Salaries Payable 1,400
    Common Stock 50,000
    Retained Earnings 74,662
    During Year 7, Pacilio Security Services experienced the following transactions:
87. Paid the salaries payable from Year 6.
88. Paid $4,800 on March 1, Year 7, for one year’s lease in advance on the company van.
89. Paid $8,400 on May 2, Year 7, for one year’s office rent in advance.
90. Purchased $550 of supplies on account.
91. Paid cash to purchase 105 alarm systems at a cost of $285 each.
92. Pacilio has noticed its accounts receivable balance is growing more than desired and some collection problems exist. It appears that uncollectible accounts expense is approximately 3 percent of total credit sales. Pacilio has decided it will, starting this year, adopt the allowance method of accounting for uncollectible accounts. It will record an adjusting entry to recognize the estimate at the end of the year.Page 719
93. In trying to collect several of its delinquent accounts, Pacilio has learned that these customers have either declared bankruptcy or moved and left no forwarding address. These uncollectible accounts amount to $1,900.
94. Sold 110 alarm systems for $63,800. All sales were on account. (Compute cost of goods sold using the FIFO cost flow method.)
95. Paid the balance of the accounts payable.
96. Pacilio began accepting credit cards for some of its monitoring service sales. The credit card company charges a fee of 4 percent. Total monitoring services for the year were $68,000. Pacilio accepted credit cards for $24,000 of this amount. The other $44,000 was sales on account.
97. On July 1, Year 7, Pacilio replenished the petty cash fund. The fund contained $21 of currency and receipts of $50 for yard mowing, $22 for office supplies expense, and $9 for miscellaneous expenses.
98. Collected the amount due from the credit card company.
99. Paid installers and other employees a total of $45,000 cash for salaries.
100. Collected $116,800 of accounts receivable during the year.
101. Paid $9,500 of advertising expense during the year.
102. Paid $5,200 of utilities expense for the year.
103. Paid a dividend of $20,000 to the shareholders.
     Adjustments
104. There was $250 of supplies on hand at the end of the year.
105. Recognized the expired rent for both the van and the office for the year.
106. Recognized the uncollectible accounts expense for the year using the allowance method.
107. Accrued salaries at December 31, Year 7, were $2,100.
     YEAR 8 ACCOUNTING PERIOD
     Reference: Chapter 8
     The account balances of Pacilio Security Services, Inc. as of January 1, Year 8, are shown here:
     Cash $93,708
     Petty cash 100
     Accounts receivable 22,540
     Allowance for doubtful accounts 1,334
     Supplies 250
     Prepaid rent 3,600
     Merchandise inventory (18 @ $285) 5,130
     Land 4,000
     Salaries payable 2,100
     Common stock 50,000
     Retained earnings 75,894
     During Year 8, Pacillo Security Services experienced the following transactions:
108. Paid the salaries payable from Year 7.
109. Purchased equipment and a van for a lump sum of $36,000 cash on January 2, Year 8. The equipment was appraised for $10,000 and the van was appraised for $30,000.
110. Paid $9,000 on May 1, Year 8, for one year’s office rent in advance.
111. Purchased $300 of supplies on account.
112. Purchased 120 alarm systems at a cost of $280 each. Paid cash for the purchase.
113. After numerous attempts to collect from customers, wrote off $2,350 of uncollectible accounts receivable.Page 720
114. Sold 115 alarm systems for $580 each. All sales were on account. (Be sure to compute cost of goods sold using the FIFO cost flow method)
115. Billed $86,000 of monitoring services for the year. Credit card sales amounted to $36,000, and the credit card company charged a 4 percent fee. The remaining $50,000 were sales on account.
116. Replenished the petty cash fund on June 30. The fund had $12 cash and receipts of $45 for yard mowing, $28 for office supplies expense, and $11 for miscellaneous expenses.
117. Collected the amount due from the credit card company.
118. Paid installers and other employees a total of $52,000 cash for salaries.
119. Collected $115,500 of accounts receivable during the year.
120. Paid $12,500 of advertising expense during the year.
121. Paid $6,800 of utilities expense for the year.
122. Sold the land, which was originally purchased for $12,000.
123. Paid the accounts payable.
124. Paid a dividend of $10,000 to the shareholders.
     Adjustments
125. Determined that $180 of supplies were on hand at the end of the year.
126. Recognized the expired rent for both the old van and the office building for the year. The lease on the van was not renewed. Rent paid on March 1, Year 7, for the van was $4,800.
127. Recognized uncollectible accounts expense for the year using the allowance method. Pacilio estimates that 3 percent of sales on account will not be collected.
128. Recognized depreciation expense on the equipment and the van. The equipment has a five-year life and a $2,000 salvage value. The van has a four-year life and a $6,000 salvage value. The company uses double-declining-balance for the van and straight-line for the equipment.
129. Accrued salaries at December 31, Year 8, were $1,500.
     YEAR 9 ACCOUNTING PERIOD
     Reference: Chapter 9
     The account balances of Pacilio Security Services, Inc. as of January 1, Year 9, are shown here:
     Cash $93,380
     Petty Cash 100
     Accounts receivable 21,390
     Allowance for doubtful accounts 2,485
     Supplies 180
     Prepaid rent 3,000
     Merchandise inventory (23 @ $280) 6,440
     Equipment 9,000
     Van 27,000
     Accumulated depreciation 14,900
     Salaries payable 1,500
     Common stock 50,000
     Retained earnings 91,605
     During Year 9, Pacilio Security Services experienced the following transactions:
130. Paid the salaries payable from Year 8.
131. Paid $9,000 on May 2, Year 9, for one year’s office rent in advance.
132. Purchased $425 of supplies on account.
133. Purchased 145 alarm systems at a cost of $290 each. Paid cash for the purchase.Page 721
134. After numerous attempts to collect from customers, wrote off $2,060 of uncollectible accounts receivable.
135. Sold 130 alarm systems for $580 each plus sales tax of 5 percent. All sales were on account. (Be sure to compute cost of goods sold using the FIFO cost flow method.)
136. Billed $107,000 of monitoring services for the year. Credit card sales amounted to $42,000, and the credit card company charged a 4 percent fee. The remaining $65,000 were sales on account. Sales tax is not charged on this service.
137. Replenished the petty cash fund on June 30. The fund had $5 cash and has receipts of $60 for yard mowing, $15 for office supplies expense, and $17 for miscellaneous expenses.
138. Collected the amount due from the credit card company.
139. Paid the sales tax collected on $69,600 of the alarm sales.
140. Paid installers and other employees a total of $65,000 for salaries for the year. Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income taxes withheld amounted to $7,500. Cash was paid for the net amount of salaries due.
141. Pacilio now offers a one-year warranty on its alarm systems. Paid $1,950 in warranty repairs during the year.
142. On September 1, borrowed $12,000 from State Bank. The note had an 8 percent interest rate and a one-year term to maturity.
143. Collected $136,100 of accounts receivable during the year.
144. Paid $15,000 of advertising expense during the year.
145. Paid $7,200 of utilities expense for the year.
146. Paid the payroll taxes, both the amounts withheld from the salaries plus the employer share of Social Security tax and Medicare tax, on $60,000 of the salaries plus $7,000 of the federal income tax that was withheld. (Unemployment taxes were not paid at this time.)
147. Paid the accounts payable.
148. Paid a dividend of $10,000 to the shareholders.
     Adjustments
149. There was $165 of supplies on hand at the end of the year.
150. Recognized the expired rent for the office building for the year.
151. Recognized uncollectible accounts expense for the year using the allowance method. The company revised its estimate of uncollectible accounts based on prior years’ experience. This year, Pacilio estimates that 2.75 percent of sales on account will not be collected.
152. Recognized depreciation expense on the equipment and the van. The equipment has a five-year life and a $2,000 salvage value. The van has a four-year life and a $6,000 salvage value. The company uses double-declining-balance for the van and straight-line for the equipment. (A full year’s depreciation was taken in Year 8, the year of acquisition.)
153. The alarm systems sold in transaction 6 were covered with a one-year warranty. Pacilio estimated that the warranty cost would be 3 percent of alarm sales.
154. Recognized the accrued interest on the note payable at December 31, Year 9.
155. The unemployment tax on salaries has not been paid. Recorded the accrued unemployment tax on the salaries for the year. The unemployment tax rate is 4.5 percent. ($14,000 of salaries is subject to this tax.)
156. Recognized the employer Social Security and Medicare payroll tax that has not been paid on $5,000 of salaries expense.
     YEAR 10 ACCOUNTING PERIOD
     Reference: Chapter 10
     The account balances of Pacilio Security Services, Inc. as of January 1, Year 10, are shown here:Page 722
     Cash $122,475
     Petty cash 100
     Accounts receivable 27,400
     Allowance for doubtful accounts 4,390
     Supplies 165
     Prepaid rent 3,000
     Merchandise inventory (38 @ $290) 11,020
     Equipment 9,000
     Van 27,000
     Accumulated depreciation 23,050
     Sales tax payable 290
     Employee income tax payable 500
     FICA—Social Security tax payable 600
     FICA—Medicare tax payable 150
     Warranty payable 312
     Unemployment tax payable 630
     Interest payable 320
     Notes payable 12,000
     Common stock 50,000
     Retained earnings 107,918
     During Year 10, Pacilio Security Services experienced the following transactions:
157. Paid the sales tax payable from Year 9.
158. Paid the balance of the payroll liabilities due for Year 9 (federal income tax, FICA taxes, and unemployment taxes).
159. On January 1, Year 10, purchased land and a building for $150,000. The building was appraised at $125,000 and the land at $25,000. Pacilio paid $50,000 cash and financed the balance. The balance was financed with a 10-year installment note. The note had an interest rate of 7 percent and annual payments of $14,238 due on the last day of the year.
160. On January 1, Year 10, issued $50,000 of 6 percent, five year bonds. The bonds were issued at 98.
161. Purchase $660 of supplies on account.
162. Purchased 170 alarm systems at a cost of $300. Cash was paid for the purchase.
163. After numerous attempts to collect from customers, wrote off $2,450 of uncollectible accounts receivable.
164. Sold 160 alarm systems for $580 each plus sales tax of 5 percent. All sales were on account. (Be sure to compute cost of goods sold using the FIFO cost flow method.)
165. Billed $120,000 of monitoring services for the year. Credit card sales amounted to $36,000, and the credit card company charged a 4 percent fee. The remaining $84,000 were sales on account. Sales tax is not charged on this service.
166. Replenished the petty cash fund on June 30. The fund had $11 cash and receipts of $65 for yard mowing and $24 for office supplies expense.
167. Collected the amount due from the credit card company.
168. Paid the sales tax collected on $85,000 of the alarm sales.
169. Collected $167,000 of accounts receivable during the year.
170. Paid installers and other employees a total of $82,000 for salaries for the year. Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income taxes withheld amounted to $9,600. The net amount of salaries was paid in cash.
171. Paid $1,250 in warranty repairs during the year.
172. On September 1, paid the note and interest owed to State Bank.
173. Paid $18,000 of advertising expense during the year.
174. Paid $5,600 of utilities expense for the year.
175. Paid the payroll liabilities, both the amounts withheld from the salaries plus the employer share of Social Security tax and Medicare tax, on $75,000 of the salaries plus $8,600 of the federal income tax that was withheld. (Disregard unemployment taxes in this entry.)Page 723
176. Paid the accounts payable.
177. Paid bond interest and amortized the discount.
178. Paid the annual installment on the amortized note.
179. Paid a dividend of $10,000 to the shareholders.
     Adjustments
180. There was $210 of supplies on hand at the end of the year.
181. Recognized the expired rent for the office building for the year.
182. Recognized the uncollectible accounts expense for the year using the allowance method. Pacilio now estimates that 1.5 percent of sales on account will not be collected.
183. Recognized depreciation expense on the equipment, van, and building. The equipment has a 5-year life and a $2,000 salvage value. The van has a 4-year life and a $6,000 salvage value. The building has a 40-year life and a $10,000 salvage value. The company uses double-declining-balance for the van and straight-line for the equipment and the building. The equipment and van were purchased in Year 8 and a full year of depreciation was taken for both in Year 8.
184. The alarms systems sold in transaction 8 were covered with a one-year warranty. Pacilio estimated that the warranty cost would be 2 percent of alarm sales.
185. The unemployment tax on the three employees has not been paid. Record the accrued unemployment tax on the salaries for the year. The unemployment tax rate is 4.5 percent and gross wages for all employees exceeded $7,000.
186. Recognized the employer Social Security and Medicare payroll tax that has not been paid on $7,000 of salaries expense.
     YEAR 11 ACCOUNTING PERIOD
     Reference: Chapter 11
     The account balances of Pacilio Security Services, Inc. as of January 1, Year 11, are shown here:
     Cash $ 113,718
     Petty cash 100
     Accounts receivable 39,390
     Allowance for doubtful accounts 4,662
     Supplies 210
     Merchandise inventory (48 @ $300) 14,400
     Equipment 9,000
     Van 27,000
     Building 125,000
     Accumulated depreciation 28,075
     Land 25,000
     Sales tax payable 390
     Employee income tax payable 1,000
     FICA—Social Security tax payable 840
     FICA—Medicare tax payable 210
     Warranty payable 918
     Unemployment tax payable 945
     Notes payable—Building 92,762
     Bonds payable 50,000
     Discount on bonds payable 800
     Common stock 50,000
     Retained earnings 124,816
     During Year 11, Pacilio Security Services experienced the following transactions:
187. Paid the sales tax payable from Year 10.
188. Paid the balance of the payroll liabilities due for Year 10 (federal income tax, FICA taxes, and unemployment taxes).
189. Issued 5,000 additional shares of the $5 par value common stock for $8 per share and 1,000 shares of $50 stated value, 5 percent cumulative preferred stock for $52 per share.Page 724
190. Purchased $500 of supplies on account.
191. Purchased 190 alarm systems at a cost of $310. Cash was paid for the purchase.
192. After numerous attempts to collect from customers, wrote off $3,670 of uncollectible accounts receivable.
193. Sold 210 alarm systems for $600 each plus sales tax of 5 percent. All sales were on account. (Be sure to compute cost of goods sold using the FIFO cost flow method.)
194. Billed $125,000 of monitoring services for the year. Credit card sales amounted to $58,000, and the credit card company charged a 4 percent fee. The remaining $67,000 were sales on account. Sales tax is not charged on this service.
195. Replenished the petty cash fund on June 30. The fund had $10 cash and receipts of $75 for yard mowing and $15 for office supplies expense.
196. Collected the amount due from the credit card company.
197. Paid the sales tax collected on $105,000 of the alarm sales.
198. Collected $198,000 of accounts receivable during the year.
199. Paid installers and other employees a total of $96,000 for salaries for the year. Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income taxes withheld amounted to $10,600. No employee exceeded $110,000 in total wages. The net salaries were paid in cash.
200. On October 1, declared a dividend on the preferred stock and a $1 per share dividend on the common stock to be paid to shareholders of record on October 15, payable on November 1, Year 11.
201. Paid $1,625 in warranty repairs during the year.
202. On November 1, Year 11, paid the dividends that had been previously declared.
203. Paid $18,500 of advertising expense during the year.
204. Paid $6,100 of utilities expense for the year.
205. Paid the payroll liabilities, both the amounts withheld from the salaries plus the employer share of Social Security tax and Medicare tax, on $88,000 of the salaries plus $9,200 of the federal income tax that was withheld.
206. Paid the accounts payable.
207. Paid bond interest and amortized the discount. The bond was issued in Year 10 and pays interest at 6 percent.
208. Paid the annual installment of $14,238 on the amortized note. The interest rate for the note is 7 percent.
     Adjustments
209. There was $190 of supplies on hand at the end of the year.
210. Recognized the uncollectible accounts expense for the year using the allowance method. Pacilio now estimates that 1 percent of sales on account will not be collected.
211. Recognized depreciation expense on the equipment, van, and building. The equipment, purchased in Year 8, has a 5-year life and a $2,000 salvage value. The van has a 4-year life and a $6,000 salvage value. The building has a 40-year life and a $10,000 salvage value. The company uses straight-line for the equipment and the building. The van is fully depreciated.
212. The alarm systems sold in transaction 7 were covered with a one-year warranty. Pacilio estimated that the warranty cost would be 2 percent of alarm sales.
213. The unemployment tax on the three employees has not been paid. Record the accrued unemployment tax on the salaries for the year. The unemployment tax rate is 4.5 percent and gross wages for all three employees exceeded $7,000.
214. Recognized the employer Social Security and Medicare payroll tax that has not been paid on $8,000 of salaries expense.

Sample Solution