ACC 377 Lecture Notes - Lecture 3: Earned Income Tax Credit
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PREPARE THE JOURNAL ENRTRIES FOR THE FOLLOWING (0NLY FROM TRANSACTON 28 TO 45
| During July 2017, the following transactions, prepared by Maddie's Cleaning Service, were completed: | ||
| Transaction | Date | Description |
| 1 | July 1 | Began her business by contributing a computer valued at $500 and rug cleaner at $6,200 and depositing $2X,XXX (XXXX- represents the last 4 digits of your Bronc's identification number) in a checking account in the name of the corporation in exchange for 6,000 shares, $1 par value shares of capital stock. |
| 2 | 1 | Received $10,000 proceeds from an unsecured, 11%, 5 year, interest only bank loan, due July 1, 2017. The proceeds will be used to pay daily operations of the company. Interest will be paid monthly on the fifth of each month; next payment day is June 5th August 5. |
| 1 | Purchased 30 shares of Facebook stock for market rate as of July 1, 2017. MCS paid $12.00 brokerage fee. Use the Short-term Investment (Available For Sale) account. | |
| 3 | 2 | Paid $1,500 for 3 floor waxer/buffer machines. |
| 4 | 2 | Purchased a used truck for $18,000 in exchange for a 3 year zero-interest bearing $25,000 note to Jim's Auto Sales. |
| 5 | 3 | Purchased cleaning supplies for $6,500. These supplies will not be resoldâuse the Cleaning Supplies Inventory account, 2%/15, net 30. The company uses the period inventory method. |
| 6 | 3 | Paid cash for an exclusive 3 yr right to sell cleaning products from Brite Nâ Clean Supply company, $8,900. |
| 7 | 3 | Purchased 350 cans of cleaning product, XB4, on account, for resale purposes only, from Brite Nâ Clean. Each can costs $8.00. Total shipping costs were $15.00, also included in the amount owedâuse the Merchandise Inventory Account. |
| 8 | 4 | Signed a two year lease agreement for storge and office location. Paid 3 months of rent in advance, $3,000, plus security deposit of $1,000, total $4,000 |
| 9 | 5 | Paid $4,800 on a one-year insurance policy, effective July 1. |
| 10 | 7 | Hired 5 workers at $15.50 per hour. |
| 11 | 8 | Jim Bob Grocery Store paid Maddie's $5,900 in advance for cleaning services to be performed monthly. |
| 12 | 12 | Billed customers $22,300 for cleaning services. |
| 13 | 15 | Paid gas and oil for the month on the truck, $600. |
| 14 | 18 | Paid amount owed on cleaning supplies purchased on July 3rd. |
| 15 | 18 | Billed customers $16,500 for cleaning services. |
| 16 | 18 | Purchased 40 cans of cleaning product, XB4, $400, for resale purposes only on account. The costs include total shipping costs of $30.00. |
| 17 | 18 | Paid $5,000 to employees, with withholding of $960 for federal income taxes, $150 for state income taxes, $310 for social security, $725 for Medicare tax, and $100 for city income tax. Use Employee Tax Withheld account for all withholding. |
| 18 | 18 | Accrue employer tax (related to July 18th payroll) of $1,352. These taxes include employer portion of FICA and Medicare tax and state and federal unemployment tax. Use Employer Tax Payable account. |
| 19 | 21 | Collected $25,400 from customers billed on July 12. |
| 20 | 22 | Sold 200 cans of cleaning product, XB4, to T. Jones Cleaning on account for $30.00 each. Maddie'sâs Cleaning Services, Inc. uses a perpetual inventory method for its merchandise inventory sales and determines costs using LIFO in-first out (LIFO) costing method. Shipping costs were 5%. Costs were charged to T. Jones Cleaning. |
| 21 | 24 | Using Ms. Colbertâs credit card, purchased a used cleaning cart used to carry cleaning supplies to each office, $400. |
| 22 | 25 | Purchased a computer to support office activities, $2,000. |
| 23 | 30 | Bank returned a check for $125 from Tang Juice Company for services paid on July 21st. The bank charges Maddie'sâs Cleaning Services $5.00 service fee for the NSF check. |
| 24 | 30 | Paid withholding tax for July 18th payroll, including employer tax. |
| 25 | 30 | Sold one of the floor polisher purchased on July 1 for $850. Record all depreciation related to equipment. |
| 26 | 31 | Declared and paid a $.25 per share cash dividend. |
| After talking with the client, Ms. Ratcher prepared the following information related to July transactions (use July 31 for the date of transactions): | ||
| 28 | 1 | Earned but unbilled fees at July 31 were $4,245. |
| 29 | 2 | All equipment is depreciated over 5 years, using the straight line method. Depreciate all equipment as if purchased on July 1. |
| 30 | 3 | An inventory count shows $1,700 of cleaning supplies (not for resale) on hand at July 31. |
| 31 | 4 | Record the amortization of the franchise. |
| 32 | 5 | Accrued but unpaid employee salaries were $5,000 with withholding of $880 for federal income taxes. Calculate the payroll using 6.2% FICA tax, 3% for state income taxes, 1.45% Medicare tax, and 2% for city income tax. Record the payroll, using Employee Tax Withheld account for all withholding taxes. |
| 33 | 6 | Accrued employer payroll tax of $800.00 |
| 34 | 7 | Record the rent expiration for the month. |
| 35 | 8 | Record the interest incurred on the note for the month. |
| 36 | 9 | Record amortization of the zero-interest bearing note. |
| 37 | 10 | MCS charged Jim Bob's Grocery $2,800 for services rendered during the month. (See earlier transaction). |
| 39 | 11 | Calculate the change in value of Facebook stock based on market prices as of July 31, 2017. |
| 40 | 12 | One-twelfth of the insurance expired. |
| 41 | 13 | Accrue income taxes for the period. The company expects to pay income taxes at a 18% rate. Note: you must calculate income before you can determine the amount for this adjusting entry. |
| 42 | 14 | Based on an aging of the accounts receivables, Ms. Colbert estimates that 5.5% of outstanding accounts receivables will be uncollectible. |
| 43 | Based on the bank reconciliation performed by John, the other new staff member at Daniel and Jacob, LLC, the following adjusting entries should be made: | |
| 44 | --- A check from Elton Inc. was returned for non sufficient funds (NSF) for $1,000. The check was included in the deposit made on July 21st . | |
| 45 | --- The deposit made on July 21st for cash receipts was recorded $24,400, but bank correctly counted the deposit to be $25,400. | |
Argue either in favor or against the estate tax. Then, respond to at least two other students' posts in the following manner:
Support one studentâs argument with additional information or examples.
Counter one studentâs argument with information and/or examples.
Student 1 answer : Samantha
Samantha Caterina 5 posts
Re:Module 7 DQ 2
The estate tax is very tricky, it can be argued both ways, for and against. For arguments sake I would be in favor of the estate tax. Currently for 2017 the federal estate tax threshold is 5.49 million. This is only targeting the wealthiest of people. The estate tax will tax any amount of an estate above this. It makes up for a small portion of the total tax collected by the federal government but it is still a substantial amount. The estate tax can be different in each state therefore being taxed more if the threshold is smaller. It is argued that the successful decedent should not be penalized for being successful I would not agree this is true. They are no longer the owner of the estate and the money would just be passed to a beneficiary. The beneficiary then has the rights to do what they please with the money. This can cause the beneficiaries to become non-productive members of society. If the estate tax was taken out tax would have to be made up somewhere, therefore cause middle class taxpayers to pay more taxes. The estate tax does not target the average person only the wealthiest are affected by it. I do not think the estate tax needs to be taken out of order.
https://www.forbes.com/sites/kellyphillipserb/2014/10/06/guest-post-pros-and-cons-of-the-federal-estate-tax/#6e3c8eb975a6
Student answer Andrea:
Andrea Robinson-Parker 4 posts
Re:Module 7 DQ 2
The estate tax was once known as the death tax, there is a pun in there somewhere. Firstly, it is associated with the inheritance of a dead relative and secondly, it can be the death of small family businesses. I believe that this tax is essential for our country to survive. Bob Rywick, in his article, Pros and Cons of the Federal Estate Tax argues both sides of the coin. I agree with his pro stance and here is why:
Revenue from the estate tax will create around $200 billion revenue in the next several years. There has been a great increase in wealth in the recent past and this number may climb.
The estate tax will help to dilute the concentration of wealth. This concentration can be damaging to our free democratic society.
Many wealthy people donate large sums to charities each year to lower their tax bracket. If there was no estate tax, these donations would most likely drop off significantly.
Small business, (making less than $5,000,000) will not be affected. There are also rules set in place to protect farms regarding the valuation of farm land.
Less than 2/10 of 1% of the descendants dying each year will be affected by this tax, based on the current exemption amount.
Lastly, I personally believe that estate planning can alleviate some of these taxes. Estate taxes should not be confused with gift taxes. This is an option that can protect inheritances.
Student Answer
Lakisha Minniefield 3 posts
Re:Module 7 DQ 2
I am against âestate taxâ and feel that when the property value goes up, it will increase my mortgage payment each year. I agree with Justin Haskins article regarding scrapping property taxes because as a property owner, charging fees for a specific service should be allowable. Also, property owners should be able to choose where the property taxes should be allocated especially when it comes down to our public education. I have two children who are autistic and in the past it was very difficult to find a school who had the staff to supply all of their educational special needs. Even though we live in the best neighbors that were very costly, the schools zone in the area had 2 out of 10 rating so I would have to transfer my children our of the district in order to get better services. Currently, my husband is getting ready for retirement out of the military and we have looked at all 50 states within the United States to see which state would give us the most exemptions when purchasing a home. The state we chose to move back to is Texas because of the no state property taxes. Property tax for the state of Texas brings in the most money of all taxes available to local government to pay for schools, roads, police and firemen, emergency response services, libraries, parks and other services provided by local government. The state also has a variety of partial or total (absolute) exemptions from appraised property values used to determine local property taxes. A partial exemption removes a percentage or a fixed dollar amount of a property's value from taxation. A total (absolute) exemption excludes the entire property from taxation. Since we will be on a fixed income, Texas property tax exemptions for disabled veterans was the best out of all 50 states. However, we will still have to look for a county with low property tax rate. Since I am already a disabled veteran, Texas has a property tax exempt chart for qualifying disabled veterans.
The exemption amount that a qualified disabled veteran receives depends on the veteran's disability rating from the branch of the armed service.
| Disability Exemption | |
| Disability Rating | Exemption Amount Up To |
| 10% to 29% | $5,000 from the property's value |
| 30% to 49% | $7,500 from the property's value |
| 50% to 69% | $10,000 from the property's value |
| 70% to 100% | $12,000 from the property's value |
*The Texas Comptroller website lists all of the benefits for disabled veterans regarding property tax exemptions.
Even as a disabled veteran, I would still have to pay property tax but the exemption will only exempt the amount of the disability rating off the value of property. Disabled veterans who are 100% total and permanently disable will be exempt from paying all property taxes. Financially, my family will still have to find a home affordable in a safe neighborhood, public education is rated above 7 out of 10 and choose a county that property taxes are low.
Reference:
https://www.comptroller.texas.gov/taxes