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Cornerstones of Financial Accounti...
Payroll Accounting and Discussion of Labor Costs
Blitzen Marketing Research paid its weekly and monthly payroll on January 31. The following information is available about the payroll:
Blitzen will pay both the employer’s taxes and the taxes withheld on April 15.
Required:
1. Prepare the journal entries to record the payroll payment and the incurrence of the associated expenses and liabilities. ( Note: Round to nearest penny.)
2. What is the employees' gross pay? What amount does Blitzen pay in excess of gross pay as a result of taxes? ( Note: Provide both an absolute dollar amount and as a percentage of gross pay, rounding to two decimal places.)
3. How much is the employees' net pay as a percentage of total payroll related expenses? ( Note: Round answer to two decimal places.)
4. CONCEPTUAL CONNECTION If another employee can be hired for $60,000 per year, what would be the total cost of this employee to Blitzen?
(a)
Introduction:
Employers withhold a part of employee’s gross pay and pay a part from their end as employee’s share of taxes and employers’ share of taxes respectively to the concerned authority.
To prepare:
Journal entries.
(a) For employer:
Social security taxes, Medicare taxes and federal income taxes which were withheld, have now been paid. This decreases the liability as well as cash. Thus, their respective liability accounts will be debited and cash will be credited.
Social Security Taxes withheld =
Medicare taxes withheld =
Federal income taxes withheld = $108,500
Total cash paid = Wage Expense − (Social Security Taxes withheld + Medicare taxes withheld + Federal income taxes withheld)
Total cash paid = $237,480 − ($14,723
(b)
Introduction:
Employers withhold a part of employee’s gross pay and pay a part from their end as employee’s share of taxes and employers’ share of taxes respectively to the concerned authority.
To calculate:
Gross pay and amount excess of gross pay.
(c)
Introduction:
Employers withhold a part of employee’s gross pay and pay a part from their end as employee’s share of taxes and employers’ share of taxes respectively to the concerned authority.
To calculate:
Net pay as percent of total payroll related expenses.
(d)
Introduction:
Employers withhold a part of employee’s gross pay and pay a part from their end as employee’s share of taxes and employers’ share of taxes respectively to the concerned authority.
To calculate:
Total cost of hiring new employee.
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