Gross pay (wages expense) $ 250,000 Social Security and Medicare taxes 19,125 Fe

Question

Gross pay (wages expense) $ 250,000 Social Security and Medicare taxes 19,125 Federal and state unemployment taxes 15,500 Workers' compensation insurance 8,500 Group health and life insurance benefits 10,000 Employee pension plan benefits 22,875 Total payroll costs for February $ 326,000 Gruver's insurance premiums for workers' compensation and group health and life insurance were paid for in a prior period and recorded initially as prepaid insurance expense. Withholdings from employee wages in February were as follows: State income tax withholdings $ 5,875 Federal income tax withholdings 56,000 Social Security and Medicare tax withholdings 19,125 a. Record Gruver's gross wages, employee withholdings, and employee take-home pay for February. (Omit the "$" sign in your response.) General Journal Debit Credit b. Record Gruver's payroll tax expense for February. (Omit the "$" sign in your response.) General Journal Debit Credit c. Record Gruver's employee benefit expenses for February. (Omit the "$" sign in your response.) General Journal Debit Credit d. Do the amounts withheld from Gruver's employees represent taxes levied on Gruver Corporation? Yes no

Explanation / Answer

a. Wages Expense ……………………………………………………….. 250,000 State Income Tax Payable …………………………………….. 5,875 Federal Income Tax Payable ……………………………………. 56,000 Social Security and Medicare Taxes Payable ……………… 19,125 Cash (or Wages Payable) ………………………………………….. 169,000 To record gross wages, employee withholdings, and employee take-home pay in February. b. Payroll Tax Expense ………………………………………………………. 43,125 Social Security and Medicare Taxes Payable ……………… 19,125 Federal and State Unemployment Taxes Payable ………… 15,500 Prepaid Workers’ Compensation Insurance ……………… 8,500 To record employer payroll tax expense in February, $8,500 of which is the expiration of prepaid workers’ compensation insurance premiums. c. Employee Health and Life Insurance Expense ………………………. 10,000 Pension Expense …………………………………………………. 22,875 Prepaid Employee Health and Life Insurance ………………. 10,000 Cash (or Pension Liability) ………………………………. 22,875 To record employee benefit expenses in February, $10,000 of which is the expiration of prepaid employee health and life insurance premium. d. The $56,000 amount withheld from the employees’ gross wages does not represent a tax levied on the employer. The $56,000 is simply a portion of the gross wage expense that must be sent directly to the proper tax authorities, rather than paid to the employees. In the company’s balance sheet, these withholdings represent current liabilities until the actual payment to various tax authorities is made.

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