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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

On January 21, the column totals of the payroll register for Great Products Company showed that its sales employees had earned $14,960, its truck driver employees had earned $10,692, and its office employees had earned $8,670. Social Security taxes were withheld at an assumed rate of 6.2 percent, and Medicare taxes were withheld at an assumed rate of 1.45 percent. Other deductions consisted of federal income tax, $3,975, and union dues, $560. Determine the amount of Social Security and Medicare taxes withheld and record the general journal entry for the payroll, crediting Salaries Payable for the net pay. All earnings were taxable. Round amounts to the nearest penny.

To determine

Prepare journal entry to record the necessary payroll transaction by ascertaining that social security and Medicare tax are being withheld.

Explanation

Payroll:

Payroll refers to the total amount that is required to be paid by the company to its employees during a week, month or other period. It is the financial record of the wages and bonus, net pay, salary and deductions of a company’s employees.

Prepare journal entry to record the necessary payroll transaction by ascertaining that social security and Medicare tax are being withheld.

DateAccount Title and explanationDebit ($)Credit ($)
January  21Sales Salary expense14,960.00 
 Driver salary expense10,692.00 
 Office salary expense8,670.00 
 Employee federal income tax payable 3,975.00
 FICA-Social Security taxes payable (1) 2,127.96
 FICA-Medicare Taxes payable (2) 497.67
 Employees union dues payable 560.00
 Salaries payable  27,161.37
 (To record the payroll for the month ended January 21)  

Table (1)

  • Sales Salary expense is an expense account and it is increased. Hence, debit wages and sales salary expense with $14,960.00.
  • Driver salary expense is an expense account and it is increased. Hence, debit wages and driver salary expense with $10,692.00.
  • Office salary expense is an expense account and it is increased. Hence, debit wages and office salary expense with $8,670.00.
  • Employee Federal income tax payable is a liability and there is an increase in the value of liability. Hence, credit the employee Federal income tax payable by $3,975.00
  • FICA tax – social and security tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax – social and security tax payable by $2,127.96.
  • FICA tax – medical tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax – medical tax payable by $497...

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