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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

Kovarik Company had the following payroll for the week ended March 21:

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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 March 21.
  2. 2. The entry to record the employer’s payroll taxes as of March 21, assuming that the total payroll is subject to the FICA taxes (combined Social Security and Medicare) and that $4,965 is subject to unemployment taxes.
  3. 3. The payment of the employees on March 23. (Assume that the company has transferred cash to Cash—Payroll Bank Account for this payroll.)

To determine

Prepare necessary journal entry to record the given transaction.

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 payroll entry as of March 21.

DateAccount Title and explanationDebit ($)Credit ($)
March 21Sales Salaries expense7,620.00 
 Office salaries expense1,790.00 
      Employee federal income tax payable 1,094.00
      FICA-Social Security taxes payable    583.42
      FICA-Medicare Taxes payable 136.45
      Employee’s charitable payable 153.00
      Salaries payable 7,443.13
 (To record payroll for the week ended March 21.)  

Table (1)

  • Sales Salaries expense is an expense account and it is increased. Hence, debit Sales Salaries expense with $7,620.00.
  • Office salaries expense is an expense account and it is increased. Hence, debit office salaries expense with $1,790.00.
  • 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 $1,094.00.
  • 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 $583.42.
  • 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 $136.45.
  • Employee’s charitable payable is a liability and it is increased. Hence, credit employee’s charitable payable by $153.00.
  • Salaries payable is a liability and it is increased. Hence, credit salaries payable by $7,443.13

Prepare journal entry to record the employer’s payroll taxes as of March 21 by assuming that total payroll is subject to the FICA taxes and that $4,965 is subject to unemployment taxes.

DateAccount Title and explanationDebit ($)Credit ($)
March 21Payroll tax expense1,017.77 
 

     FICA-Social Security taxes payable

     ($9,410×6

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