1.
A.
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.
1.
A.
Answer to Problem 10.2BPR
Prepare
Date | Accounts and Explanation | Post Ref | Debit ($) | Credit ($) | |||
December 30 | Sales Salaries Expense | 625,000 | |||||
Warehouse Salaries Expense | 240,000 | ||||||
Office salaries Expense | 320,000 | ||||||
Social Security Taxes Payable (1) | 71,100 | ||||||
Medicare Taxes Payable (2) | 17,775 | ||||||
Employees Income Taxes Payable | 232,260 | ||||||
Bond Deductions Payable | 35,500 | ||||||
Group Insurance Payable | 53,325 | ||||||
Salaries Payable | 775,040 | ||||||
(To record salaries expense and payroll withholdings) | |||||||
Table (1)
Explanation of Solution
Working notes:
Calculate the amount of social security taxes payable as below:
Calculate the amount of Medicare taxes payable as below:
- Sales salaries expense is an expense and it decreases equity value. So, debit it by $625,000.
- Warehouse salaries expense is an expense and it decreases equity value. So, debit it by $240,000.
- Office salaries expense is an expense and it decreases equity value. So, debit it by $320,000.
- Social security taxes payable is a liability and it is increased. So, credit it by $71,100.
- Medicare taxes payable is a liability and it is increased. So, credit it by $17,775.
- Employee income taxes payable is a liability and it is increased. So, credit it by $232,260.
- Bond Deductions payable is a liability and it is increased. So, credit it by $35,500.
- Group insurance payable is a liability and it is increased. So, credit it by $53,325.
- Salaries payable is a liability and it is increased. So, credit it by $775,040.
B.
To Journalize: The employer’s payroll taxes expense on December 30.
B.
Answer to Problem 10.2BPR
Prepare journal entry to record employer’s payroll taxes expense on December 30.
Date | Accounts and Explanation | Post Ref | Debit ($) | Credit ($) | |||
December | 30 | Payroll Tax Expense | 90,735 | ||||
Social Security Taxes Payable (1) | 71,100 | ||||||
Medicare Taxes Payable (2) | 17,775 | ||||||
Federal |
240 | ||||||
State Unemployment Taxes Payable (4) | 1,620 | ||||||
(To record employer’s payroll taxes expense) | |||||||
Table (2)
Explanation of Solution
Calculate the amount of Federal unemployment taxes as below:
Calculate the amount of State unemployment taxes as below:
- Payroll tax expense is an expense and it decreases equity value. So, debit it by $90,675.
- Social security taxes payable is a liability and it is increased. So, credit it by $71,100.
- Medicare taxes payable is a liability and it is increased. So, credit it by $17,775.
- Federal unemployment taxes payable is a liability and it is increased. So, credit it by $240.
- State unemployment taxes payable is a liability and it is increased. So, credit it by $1,620.
2.
A.
To Journalize: The entry to record the payroll on December 30.
2.
A.
Answer to Problem 10.2BPR
Prepare journal entry to record the payroll on December 30.
Date | Accounts and Explanation | Post Ref | Debit ($) | Credit ($) | |||
December 30 | Sales Salaries Expense | 625,000 | |||||
Warehouse Salaries Expense | 240,000 | ||||||
Office salaries Expense | 320,000 | ||||||
Social Security Taxes Payable (5) | 71,100 | ||||||
Medicare Taxes Payable (6) | 17,775 | ||||||
Employees Income Taxes Payable | 232,260 | ||||||
Bond Deductions Payable | 35,500 | ||||||
Group Insurance Payable | 53,325 | ||||||
Salaries Payable | 775,040 | ||||||
(To record salaries expense and payroll withholdings) | |||||||
Table (3)
Explanation of Solution
Working notes:
Calculate the amount of social security taxes payable as below:
Calculate the amount of Medicare taxes payable as below:
- Sales salaries expense is an expense and it decreases equity value. So, debit it by $625,000.
- Warehouse salaries expense is an expense and it decreases equity value. So, debit it by $240,000.
- Office salaries expense is an expense and it decreases equity value. So, debit it by $320,000.
- Social security taxes payable is a liability and it is increased. So, credit it by $71,100.
- Medicare taxes payable is a liability and it is increased. So, credit it by $17,775.
- Employee income taxes payable is a liability and it is increased. So, credit it by $232,260.
- Bond Deductions payable is a liability and it is increased. So, credit it by $35,500.
- Group insurance payable is a liability and it is increased. So, credit it by $53,325.
- Salaries payable is a liability and it is increased. So, credit it by $775,040.
B.
To Journalize: The employer’s payroll taxes expense on January 5.
B.
Answer to Problem 10.2BPR
Prepare journal entry to record employer’s payroll taxes expense on January 5.
Date | Accounts and Explanation | Post Ref | Debit ($) | Credit ($) | |||
January | 5 | Payroll Tax Expense | 162,345 | ||||
Social Security Taxes Payable (5) | 71,100 | ||||||
Medicare Taxes Payable (6) | 17,775 | ||||||
Federal Unemployment Taxes Payable (7) | 9,480 | ||||||
State Unemployment Taxes Payable (8) | 63,990 | ||||||
(To record employer’s payroll taxes expense) | |||||||
Table (4)
Explanation of Solution
Calculate the amount of Federal unemployment taxes as below:
Calculate the amount of State unemployment taxes as below:
- Payroll tax expense is an expense and it decreases equity value. So, debit it by $159,975.
- Social security taxes payable is a liability and it is increased. So, credit it by $71,100.
- Medicare taxes payable is a liability and it is increased. So, credit it by $17,775.
- Federal unemployment taxes payable is a liability and it is increased. So, credit it by $9,480.
- State unemployment taxes payable is a liability and it is increased. So, credit it by $63,990.
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