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Mooney Labs had the following payroll for the week ended February 28: Assumed tax rates are as follows: a. FICA: Social Security, (employer) 6.2 percent (0.062) and (employee) 6.2 percent (0.062) on the first $118,500 for each employee, and Medicare, 1.45 percent (0.0145) on all earnings for each employee. b. State unemployment tax, 5.4 percent (0.054) on the first $7,000 for each employee. c. Federal unemployment tax, 0.6 percent (0.006) on the first $7,000 for each employee. Required Record the following entries in general journal form: 1. The payroll entry as of February 28. 2. The entry to record the employer’s payroll taxes as of February 28 assuming that the total payroll is subject to the FICA taxes (combined Social Security and Medicare) and that $5,490 is subject to unemployment taxes. 3. The payment to the employees on March 2. (Assume that the company has transferred cash to Cash—Payroll Bank Account for this payroll.)

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College Accounting (Book Only): A ...

13th Edition
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Publisher: South-Western College Pub
ISBN: 9781337280570
BuyFind

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
Publisher: South-Western College Pub
ISBN: 9781337280570

Solutions

Chapter
Section
Chapter 8, Problem 1PA
Textbook Problem

Mooney Labs had the following payroll for the week ended February 28:

Chapter 8, Problem 1PA, Mooney Labs had the following payroll for the week ended February 28: Assumed tax rates are as

Assumed tax rates are as follows:

  1. a. FICA: Social Security, (employer) 6.2 percent (0.062) and (employee) 6.2 percent (0.062) on the first $118,500 for each employee, and Medicare, 1.45 percent (0.0145) on all earnings for each employee.
  2. b. State unemployment tax, 5.4 percent (0.054) on the first $7,000 for each employee.
  3. c. Federal unemployment tax, 0.6 percent (0.006) on the first $7,000 for each employee.

Required

Record the following entries in general journal form:

  1. 1. The payroll entry as of February 28.
  2. 2. The entry to record the employer’s payroll taxes as of February 28 assuming that the total payroll is subject to the FICA taxes (combined Social Security and Medicare) and that $5,490 is subject to unemployment taxes.
  3. 3. The payment to the employees on March 2. (Assume that the company has transferred cash to Cash—Payroll Bank Account for this payroll.)

Expert Solution
To determine

Prepare necessary journal entry to record the given transaction.

Explanation of Solution

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 payroll entry as of February 28.

DateAccount Title and explanationDebit ($)Credit ($)
February 28Technician’s Salaries expense6,955.00 
 Office salaries expense2,260.00 
      Employee federal income tax payable 1,145.00
      FICA-Social Security taxes payable    571.33
      FICA-Medicare Taxes payable 133.62
      Employee’s charitable payable 165.00
      Salaries payable 7,200.05
 (To record payroll for the week ended February 28.)  

Table (1)

  • Technician’s salaries expense is an expense account and it is increased. Hence, debit technician’s salaries expense with $6,955.00.
  • Office salaries expense is an expense account and it is increased. Hence, debit office salaries expense with $2,260.00.
  • 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 $1,145.00.
  • 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 $571.33.
  • 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 $133.62.
  • Employee’s charitable payable is a liability and it is increased. Hence, credit employee’s charitable payable by $165.00
  • Salaries payable is a liability and it is increased. Hence, credit salaries payable by $7,200.05.

Prepare journal entry to record the employer’s payroll taxes as of February 28 by assuming that total payroll is subject to the FICA taxes and that $5,490 is subject to unemployment taxes.

DateAccount Title and explanationDebit ($)Credit ($)
February 28Payroll tax expense1,034.35 
 

     FICA-Social Security taxes payable

     ($9,215×6

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