Dec. 1 Borrowed $24,000 from the Icecap Bank for three years, at 3% interest. Interest is due on the first day of every month, starting on January 1 next year.

Dec. 5 Hired seven elves to package toys (they start work tomorrow) and nine reindeer to deliver them on Christmas Eve.

Dec. 24 Since they were hired, the seven elves have worked for 14 days each, 7 hours per day, and today Santa pays them $25 per hour.

Dec. 24 As the North Pole is in Canada, Santa has deducted the following in total from the elves' pay: EIT $2750; CPP $625; and EI $400. The appropriate employer portion is also accrued

Dec. 26 The deliveries were successful and the reindeer are paid with apples, oats, honey, and whatever milk and cookies Santa was able to take away.

Dec. 28 Santa's accountants, Scrooge, Grinch & Partners, tell Santa that he owes $9500 for last year's income taxes. He has not paid this amount yet. It will be paid in April.

Dec. 31 The first interest amount on the loan, due tomorrow, is accrued.

Jan. 1 The bank deducts the interest from Santa's account.

Jan. 15 Santa pays Revenue Canada the amount owed with respect to the elves' payroll.

Use an accounting chart to analyze the above transactions, and then answer the following questions.

1. How much interest does Santa pay on January 1?

2. How much, in total, was the elves' gross pay on December 24?

3. How much did Santa pay the elves on December 24?

4. How much does Santa pay Revenue Canada on January 15, with respect to the elves' December payroll?

5. How does Santa record the December 1 transaction?

a) no entry needed until the loan is paid

b) Increase both Cash and Accounts Payable

c) Increase both Cash and Bank Loan Payable

d) Increase both Cash and Retained Earnings

e) Increase both Cash and Owner's Equity

6. Which of the above items are events, not transactions, and require no entry?

a) December 5, 24, and 26

b) December 5 and 26 only

c) December 5, 26, and 28

d) December 24, 26, and 28

e) All of the items are transactions which require entries.

7. How does Santa record the December 28 transaction?

a) Increase both Income Tax Payable and EIT Expense

b) Increase both EIT Payable and EIT Expense

c) Increase both EIT Payable and Income Tax Expense

d) Increase both Income Tax Payable and Income Tax Expense

e) Increase Income Tax Expense and Decrease Cash

8. How does Santa record the interest accrual on December 31?

a) Increase both Accounts Payable and Bank Fee Expense

b) Increase both Interest Payable and Interest Expense

c) Increase both Accounts Payable and Interest Expense

d) Increase both Bank Loan Payable and Interest Expense

e) no entry required

f) Increase both Interest Payable and Bank Fee Expense

9. How does Santa record the interest payment on January 1?

a) Decrease both Interest Expense and Cash

b) Decrease both Accounts Payable and Cash

c) Decrease both Bank Loan Payable and Cash

d) Decrease Interest Payable, Bank Loan Payable, and Cash

e) Decrease both Interest Payable and Cash

10. Which accounts will be affected, and how, by the January 15 payment? Select all that apply.

a) Employee Benefits Expense decreases

b) Wages Expense increases

c) EI Payable decreases

d) Wages Payable increases

e) CPP Payable increases

f) Wages Expense decreases

g) Cash increases

h) CPP Payable decreases

i) EIT Payable increases

j) Employee Benefits Expense increases

k) Cash decreases

l) EIT Payable decreases

m) EI Payable increases

n) Wages Payable decreases

Answer rating: 100% (QA)

1 Santa pays 72 in interest on January 1 2 The elves gross pay on December 24 is 5600 3 Santa pays the elves 4200 on December 24 4 Santa pays Revenue Canada 1600 on January 15 with respect to the elve... View the full answer