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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Wallace Corporation summarizes the following information from its weekly payroll records during April.

Chapter 9, Problem 7RE, Wallace Corporation summarizes the following information from its weekly payroll records during

Prepare the two journal entries to record the payment of the payroll and the accrual of its payroll taxes for April. Assume an 8% FICA rate for both employees and the employer. Also assume a 5.4% state unemployment tax rate, a 0.6% federal unemployment tax rate, and that all wages are subject to all payroll taxes. Round to the nearest dollar.

To determine

Prepare necessary entries to record the payroll and its accrual for the month of April by assuming FICA tax for both employer and employee is 8%, 5.4 % for state unemployment tax rate, 0.6% for federal unemployment tax rate and all wages are subject to 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.

Prepare necessary entries to record the payroll and its accrual for the month of April by assuming FICA tax for both employer and employee is 8%, 5.4 % for state unemployment tax rate, 0.6% for federal unemployment tax rate and all wages are subject to payroll taxes.

DateAccount Title and explanationDebit ($)Credit ($)
 Salaries expense70,000 
      FICA taxes payable 5,600
      Federal income tax withholdings payable 5,110
      State income taxes withholdings payable 2,000
 Cash 57,290
 (To record the salaries and employee withholding items)  

Table (1)

  • Salaries expense is an expense account and it is increased. Hence, debit salaries expense with $70,000.
  • FICA tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax payable by $5,600.
  • Federal income tax withholdings payable is a liability and there is an increase in the value of liability. Hence, credit the federal income tax withholdings payable by $5,110.
  • State income tax withholdings payable is a liability and there is an increase in the value of liability...

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