BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
389 views

Payroll and Payroll Taxes Rand Company’s payroll on December 31 of the current year is as follows:

  • total payroll, $500,000
  • payroll in excess of $128,400 to each employee, $350,000
  • payroll in excess of $7,000 to each employee, $400,000
  • income taxes withheld, $85,000
  • union dues withheld, $10,000
  • tax rates: State unemployment tax, 5.4%; FICA tax, 8% for employees and 8% for employers for any amounts over $117,000; federal unemployment tax, 0.6%

Required:

Prepare the journal entries for Rand’s payroll and payroll taxes.

To determine

Prepare the journal entry to record the Company R’s payroll and payroll taxes.

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.

Payroll tax:

Payroll tax refers to the tax that are equally contributed by employees and employer based on the salary and wages of an employee. Payroll tax includes taxes like federal tax, local income tax, state tax, social security tax and federal and state unemployment tax.

Prepare journal entry to record salaries expense of the current year.

DateAccount titles and explanationDebit ($)Credit($)
December 31Salaries expenses500,000  
Federal income taxes withholding payable 85,000
F.I.C.A taxes payable12,000
Union dues payable 10,000
 Cash  393,000
 (To record salaries and employees withholding items)  

Table (1)

  • Salaries expense is an expense and it decreases the value of equity. Thus, it is debited
  • Federal income taxes withholding payable, F.I.C.A taxes payable, Union dues payable are liabilities, and it is increased. Thus, it is credited.
  • Cash is an asset, and it is decreased. Therefore, it is credited.

Working note (1):

Calculate the amount of F.I.C.A (Federal Insurance Contribution Act) tax payable.

F.I.C.A tax payable =[ Total payroll Any amount over $117,000]×Tax rate=[$500,000$350,000]×8%=$12,000

Prepare journal entry for payroll tax expense of the current year.

DateAccount titles and explanationDebit ($)Credit($)
December 31Payroll Tax expenses18,000 
     F

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Describe the major types of retail stores. Give an example of each.

Foundations of Business (MindTap Course List)

Differentiate between ROE and ROIC.

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

VALUATION Of A CONSTANT GROWTH STOCK A stock is expected to pay a dividend of 0.50 at the end of the year (that...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)