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Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in the ledger of Codigo Co. on December 1 of the current year: The following transactions relating to payroll, payroll deductions, and payroll taxes Occurred during December: Dec. 1. Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy. 1. Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees’ federal income tax due. 2. Issued Check No. 817 for $2,300 to Alvarez Bank to invest in a retirement savings account for employees. 12. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: The following transactions relating to payroll, payroll deductions, and payroll taxes Occurred during December: Dec. 1. Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy. 1. Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees’ federal income tax due. 2. Issued Check No. 817 for $2,300 to Alvarez Bank to invest in a retirement savings account for employees. 12. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: 12. Issued Check No. 822 in payment of the net amount of the biweekly payroll to fund the payroll bank account. 12. Journalized the entry to record payroll taxes on employees’ earnings of December12: social security tax, $1,452; Medicare tax, $363; state unemployment tax, $315; federal unemployment tax, $90. 15. Issued Check No. 830 to Alvarez Bank for $7,938, in payment of $2,904 of social security tax, $726 of Medicare tax, and $4,308 of employees’ federal income tax due. 26. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: 26. Issued Check No. 840 for the net amount of the biweekly payroll to fund the payroll bank account. Dec. 26. Journalized the entry to record payroll taxes on employees’ earnings of December 26: social security tax, $1,455; Medicare tax, $364; state unemployment tax, $150; federal unemployment tax, $40. 30. Issued Check No. 851 for $6,258 to State Department of Revenue, in payment of employees’ state income tax due on December 31. 30. Issued Check No. 852 to Alvarez Bank for $2,300 to invest in a retirement savings account for employees. 31. Paid $55,400 to the employee pension plan. The annual pension cost is $65,500. (Record both the payment and the unfunded pension liability.) Instructions 1. Journalize the transactions. 2. Journalize the following adjusting entries on December 31: a. Salaries accrued: sales salaries, $4,275; officers salaries, $2,175; office salaries, $825. The payroll taxes are immaterial and are not accrued. b. Vacation pay, $13,350.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 5PB
Textbook Problem
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Payroll accounts and year-end entries

The following accounts, with the balances indicated, appear in the ledger of Codigo Co. on December 1 of the current year:

Chapter 11, Problem 5PB, Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in , example  1

The following transactions relating to payroll, payroll deductions, and payroll taxes Occurred during December:

Dec. 1. Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy.

1. Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees’ federal income tax due.

2. Issued Check No. 817 for $2,300 to Alvarez Bank to invest in a retirement savings account for employees.

12. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: The following transactions relating to payroll, payroll deductions, and payroll taxes Occurred during December:

Dec. 1. Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy.

1. Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees’ federal income tax due.

  2. Issued Check No. 817 for $2,300 to Alvarez Bank to invest in a retirement savings account for employees.

  12. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

Chapter 11, Problem 5PB, Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in , example  2

12. Issued Check No. 822 in payment of the net amount of the biweekly payroll to fund the payroll bank account.

12. Journalized the entry to record payroll taxes on employees’ earnings of December12: social security tax, $1,452; Medicare tax, $363; state unemployment tax, $315; federal unemployment tax, $90.

15. Issued Check No. 830 to Alvarez Bank for $7,938, in payment of $2,904 of social security tax, $726 of Medicare tax, and $4,308 of employees’ federal income tax due.

26. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

Chapter 11, Problem 5PB, Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in , example  3

26. Issued Check No. 840 for the net amount of the biweekly payroll to fund the payroll bank account.

Dec. 26. Journalized the entry to record payroll taxes on employees’ earnings of December 26: social security tax, $1,455; Medicare tax, $364; state unemployment tax, $150; federal unemployment tax, $40.

30. Issued Check No. 851 for $6,258 to State Department of Revenue, in payment of employees’ state income tax due on December 31.

30. Issued Check No. 852 to Alvarez Bank for $2,300 to invest in a retirement savings account for employees.

31. Paid $55,400 to the employee pension plan. The annual pension cost is $65,500. (Record both the payment and the unfunded pension liability.)

Instructions

  1. 1. Journalize the transactions.
  2. 2. Journalize the following adjusting entries on December 31:
    1. a. Salaries accrued: sales salaries, $4,275; officers salaries, $2,175; office salaries, $825. The payroll taxes are immaterial and are not accrued.
    2. b. Vacation pay, $13,350.

1.

To determine

Prepare journal entries for the transactions.

Explanation of Solution

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.

Prepare journal entries for the transactions.

DateAccounts and ExplanationsDebit ($)Credit ($)
December 1Medical Insurance Payable2,520 
  Cash 2,520
  (To record the payment of medical insurance premium)  
December1Social Security Tax Payable2,913 
  Medicare Tax Payable728 
  Employees Federal Income Tax Payable4,490 
  Cash 8,131
  (To record the payment of withholdings taxes)  
December2Bond Deductions Payable2,300 
  Cash 2,300
  (To record investment in a retirement savings)  
December12Sales Salaries Expense14,500 
  Officers’ Salaries Expense7,100 
  Office Salaries Expense2,600 
  Social Security Tax Payable 1,452
  Medicare Tax Payable 363
  Employees Federal Income Tax Payable 4,308
  Employees State Income Tax Payable 1,089
  Bond Deductions Payable 1,150
  Medical Insurance Payable 420
  Salaries Payable 15,418
  (To record salaries expense and payroll deductions)  
December12Salaries Payable15,418 
  Cash 15,418
  (To record the payment of salaries)  
December12Payroll Tax Expense2,220 
  Social Security Tax Payable 1,452
  Medicare Tax Payable 363
  State Unemployment Tax Payable 315
  Federal Unemploymen...

2. a

To determine

Journalize the adjusting entry for accrued salaries on December 31.

2. b

To determine

Journalize the adjusting entry for vacation pay expense on December 31.

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