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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

The totals line from Nix Company’s payroll register for the week ended March 31, 20--, is as follows:

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  Payroll taxes are imposed as follows: Social Security tax, 6.2%; Medicare tax, 1.45%; FUTA tax, 0.6%; and SUTA tax, 5.4%.

REQUIRED

  1. 1. a. Prepare the journal entry for payment of this payroll on March 31, 20--.

    b. Prepare the journal entry for the employer’s payroll taxes for the period ended March 31, 20--.

  2. 2. Nix Company had the following balances in its general ledger before the entries for requirement (1) were made:

    Employee federal income tax payable $2,500

    Social Security tax payable 2,008

    Medicare tax payable 470

    FUTA tax payable 520

    SUTA tax payable 4,510

    1. a. Prepare the journal entry for payment of the liabilities for federal income taxes and Social Security and Medicare taxes on April 15, 20--.
    2. b. Prepare the journal entry for payment of the liability for FUTA tax on April 30, 20--.
    3. c. Prepare the journal entry for payment of the liability for SUTA tax on April 30, 20--.
  3. 3. Nix Company paid a premium of $420 for workers’ compensation insurance based on the estimated payroll as of the beginning of the year. Based on actual payroll as of the end of the year, the premium is only $400. Prepare the adjusting entry to reflect the overpayment of the insurance premium at the end of the year (December 31, 20--).

1.

To determine

a. Prepare the journal entry for payment of this payroll on March 31, 20--

b. Prepare the journal entry for the employer’s payroll taxes for the period ended March 31, 20--

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.

a. Prepare the journal entry for payment of this payroll on March 31, 20--

DateAccount Title and explanationPost. refDebit ($)Credit ($)
March 31Wages and Salaries expense 5,500 
 Employee federal income tax payable  500.00
 FICA-Social Security taxes payable  341.00
 FICA-Medicare Taxes payable  79.75
 Health insurance premium payable  165.00
 Life insurance premium payable  200.00
 Cash  4,214.25
 (To record the payroll for the week ended March 31)   

Table (1)

  • Wages and Salaries expense is an expense account and it is increased. Hence, debit wages and salaries expense with $5,500.00
  • 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 $500.00
  • 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 $341.00
  • 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 $79.75.
  • Health insurance premium payable is a liability and it is increased. Hence, credit health insurance premium payable by $165.00.
  • Life insurance premium payable is a liability and it is increased...

2.

To determine

a. Prepare the journal entry for payment of the liabilities for federal income taxes and Social Security and Medicare taxes on April 15, 20--.

b. Prepare the journal entry for payment of the liability for FUTA tax on April 30, 20--.

c. Prepare the journal entry for payment of the liability for SUTA tax on April 30, 20--.

3.

To determine

Prepare the adjusting entry to reflect the overpayment of the insurance premium at the end of the year December 31, 20--.

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