1 . ( TCO C ) Redstone Company spent $ 190,000 developing a new process , $ 45,000 in legal fees to obtain a patent , and $ 91,000 to market the process that was patented . How should these costs be accounted for in the year they are incurred ?
2 . ( TCO D ) Total payroll of Watson Co . was $ 920,000 , of which $ 160,000 represented amounts paid in excess of $ 100,000 to certain employees . The amount paid to employees in excess of $ 7,000 was $ 720,000 . Income taxes withheld were $ 225,000 . The state unemployment tax is 1.2 %, the federal unemployment tax is . 8 %, and the FICA tax is 7.65 % on an employee ’ s wages to $ 100,000 and 1.45 % in excess of $ 100,000 .
( a ) Prepare the journal entry for the wages and salaries paid . ( b ) Prepare the entry to record the employer payroll taxes .
3 . ( TCO D ) Hurst , Incorporated sold its 8 % bonds with a maturity value of $ 3,000,000 on August 1 , 2009 for $ 2,946,000 . At the time of the sale , the bonds had 5 years until they reached maturity . Interest on the bonds is payable semiannually on August 1 and February 1 . The bonds are callable at 104 at any time after August 1 , 2011 . By October 1 , 2011 , the market rate of interest has declined and the market price of Hurst ' s bonds has risen to a price of 101 . The firm decides to refund the bonds by selling a new 6 % bond issue to mature in 5 years . Hurst begins to reacquire its 8 % bonds in the market and is able to purchase $ 500,000 worth at 101 . The remainder of the outstanding bonds is reacquired by exercising the bonds ' call feature . In the final analysis , how much was the gain or