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Entries for payroll and payroll taxes The following information about the payroll for the week ended December 30 was obtained from the records of Saine Co.: Salaries: Deductions: Sales salaries $625,000 Income tax withheld $232,260 Warehouse salaries 240,000 U.S. savings bonds 35,500 Office salaries 320,000 Group insurance 53,325 $1,185,000 Tax rates assumed: Social security, 6% Medicare, 1.5% State unemployment (employer only), 5.4% Federal unemployment (employer only), 0.8% Instructions 1. Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries: A. December 30, to record the payroll. B. December 30, to record the employer’s payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $30,000 is subject to unemployment compensation taxes. 2. Assuming that the payroll for the last week of the year is to be paid on January 4 of the following fiscal year, journalize the following entries: A. December 30, to record the payroll. B. January 4, to record the employer’s payroll taxes on the payroll to be paid on January 4. Because it is a new fiscal year, all $1,185,000 in salaries is subject to unemployment compensation taxes.

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Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFindarrow_forward

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 10, Problem 10.2BPR
Textbook Problem
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Entries for payroll and payroll taxes

The following information about the payroll for the week ended December 30 was obtained from the records of Saine Co.:

Salaries:   Deductions:  
Sales salaries $625,000 Income tax withheld $232,260
Warehouse salaries 240,000 U.S. savings bonds 35,500
Office salaries 320,000 Group insurance 53,325
  $1,185,000    

Tax rates assumed:

Social security, 6%

Medicare, 1.5%

State unemployment (employer only), 5.4%

Federal unemployment (employer only), 0.8%

Instructions

1.    Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries:

A. December 30, to record the payroll.

B. December 30, to record the employer’s payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $30,000 is subject to unemployment compensation taxes.

2.    Assuming that the payroll for the last week of the year is to be paid on January 4 of the following fiscal year, journalize the following entries:

A. December 30, to record the payroll.

B. January 4, to record the employer’s payroll taxes on the payroll to be paid on January 4. Because it is a new fiscal year, all $1,185,000 in salaries is subject to unemployment compensation taxes.

1.

A.

To determine

Payroll: The total payment that a company is required to pay to its employee for the services received is called as payroll.

Payroll withholding deduction: The amounts which the employer withheld from employees’ gross pay to deduct taxes such as federal income tax, state income tax, local income tax, and social security tax are called payroll withholding deduction.

Employer payroll taxes: The taxes which the employer must pay to the employees with their salaries is called employer payroll taxes. Such taxes are not withheld from employees’ gross earnings but instead they are paid by employer.

To Journalize: The entry to record the payroll on December 30.

Explanation of Solution

Working notes:

Calculate the amount of social security taxes payable as below:

Social security taxes=$1,185,000×6%=$71,100 (1)

Calculate the amount of Medicare taxes payable as below:

Medicare taxes payable=$1,185,000×1.5%=$17,775 (2)

  • Sales salaries expense is an expense and it decreases equity value

B.

To determine

To Journalize: The employer’s payroll taxes expense on December 30.

2.

A.

To determine

To Journalize: The entry to record the payroll on December 30.

B.

To determine

To Journalize: The employer’s payroll taxes expense on January 5.

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Chapter 10 Solutions

Corporate Financial Accounting
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