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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

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

JOURNALIZING AND POSTING PAYROLL ENTRIES Oxford Company has five employees. All are paid on a monthly basis. The fiscal year of the business is June 1 to May 31.

The accounts kept by Oxford Company include the following:

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The following transactions relating to payrolls and payroll taxes occurred during June and July:

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REQUIRED

  1. 1. Journalize the preceding transactions using a general journal.
  2. 2. Open T accounts for the payroll expenses and liabilities. Enter the beginning balances and post the transactions recorded in the journal.

1.

To determine

Prepare journal entry to record the given transactions.

Explanation

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 the payment of payroll tax of May on June 15.

DateAccount Title and explanationPost. refDebit ($)Credit ($)
June 15Employee Federal income tax payable2112,018.00 
 FICA-Social Security taxes payable2122,735.00 
 FICA-Medicare Taxes payable213641.00 
 Cash101 5,394.00
     
 (To record the deposit of employee federal income tax and Social security and Medicare taxes)   

Table (1)

  • Employee federal income tax payable is a liability and it is decreased. Hence, debit employee federal income tax payable by $2,018.00.
  • FICA tax – social and security tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – social and security tax payable by $2,735.00.
  • FICA tax – medical tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – medical tax payable by $641.00.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $5,394.00.

Prepare journal entry to record the June payroll.

DateAccount Title and explanationPost. refDebit ($)Credit ($)
June 30Wages and Salaries expense51122,050.00 
 Employee federal income tax payable211 1,920.00
 FICA-Social Security taxes payable212 1,367.10
 FICA-Medicare Taxes payable213 319.73
 Savings bonds deductions payable218 787.50
 Cash101 17,655.67
 (To record the payroll for the week ended June 30)   

Table (2)

  • Wages and Salaries expense is an expense account and it is increased. Hence, debit wages and salaries expense with $22,050.00.
  • 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 $1,920.00.
  • 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 $1,367.10.
  • 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 $319.73.
  • Savings bonds deductions payable is a liability and it is increased. Hence, credit savings bonds deductions payable by $787.50.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $17,655.67.

Prepare journal entry to record the purchase of bonds for employees.

DateAccount Title and explanationPost. refDebit ($)Credit ($)
June 30Savings bonds deductions payable2181,575.00 
     Cash101 1,575.00
 (To record the purchase of U.S savings bonds for employees.)   

Table (3)

  • Savings bonds deductions payable is a liability and it is decreased. Hence, debit savings bonds deductions payable by $1,575.00.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $1,575.00.

Prepare journal entry to record the employer payroll tax expense...

2.

To determine

Prepare T-Account for the payroll expenses and liabilities.

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