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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 9, Problem 14E
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Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 22GI
Problem 23GI
Problem 24GI
Problem 25GI
Problem 26GI
Problem 27GI
Problem 28GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
Problem 18E
Problem 19E
Problem 20E
Problem 21E
Problem 22E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 12P
Problem 13P
Problem 14P
Problem 15P
Problem 16P
Problem 17P
Problem 18P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 8C
Problem 10C
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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

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