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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 Pharrell Co.: Salaries: Deductions: Soles salaries $402,000 Income tax withheld $135,975 Warehouse salaries 210,000 Social security tax withheld 46.620 Office salaries *65,000 Medicare tax withheld 11.655 $777,000 Retirement savings 17.094 Group insurance 13.986 $225,330 Tax rates assumed: Social security, 6% Medicare, 1.5% State unemployment (employer only). 5.4% Federal unemployment (employer only). 0.6% 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, $40,000 is subject to unemployment compensation taxes. 2. Assuming that the payroll for the last week of the year is to be paid on January 5 of the following fiscal year, journalize the following entries: a. December 30, to record the payroll. b. January 5, to record the employer's payroll taxes on the payroll to be paid on January 5. Because it is a new fiscal year, all salaries are subject to unemployment compensation taxes.

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Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 11, Problem 11.2APR
Textbook Problem

Entries for payroll and payroll taxes

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

Salaries:   Deductions:  
Soles salaries $402,000 Income tax withheld $135,975
Warehouse salaries 210,000 Social security tax withheld 46.620
Office salaries *65,000 Medicare tax withheld 11.655
  $777,000 Retirement savings 17.094
    Group insurance 13.986
      $225,330

Tax rates assumed:

Social security, 6%

Medicare, 1.5%

State unemployment (employer only). 5.4%

Federal unemployment (employer only). 0.6%

Instructions

  1. 1. Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries:
    1. a. December 30, to record the payroll.
    2. 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, $40,000 is subject to unemployment compensation taxes.
  2. 2. Assuming that the payroll for the last week of the year is to be paid on January 5 of the following fiscal year, journalize the following entries:
    1. a. December 30, to record the payroll.
    2. b. January 5, to record the employer's payroll taxes on the payroll to be paid on January 5. Because it is a new fiscal year, all salaries are subject to unemployment compensation taxes.

Expert Solution

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=$777,000×6%=$46,620 (1)

Calculate the amount of Medicare taxes payable as below:

Medicare taxes payable=$777,000×1.5%=$11,655 (2)

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

2. a

To determine

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

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Chapter 11 Solutions

Accounting
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