Vacation Destinations offers its employees the option of contributing up to 7% o
ID: 2466377 • Letter: V
Question
Vacation Destinations offers its employees the option of contributing up to 7% of their salaries to a voluntary retirement plan, with the employer matching their contribution. The company also pays 100% of medical and life insurance premiums. Assume that no employee's cumulative wages exceed the relevant wage bases. Payroll information for the first biweekly payroll period ending February 14 is listed below.
1) Record the employee salary expense, withholdings, and salaries payable.
2) Record the employer-provided fringe benefits.
3) Record the employer payroll taxes.
Vacation Destinations offers its employees the option of contributing up to 7% of their salaries to a voluntary retirement plan, with the employer matching their contribution. The company also pays 100% of medical and life insurance premiums. Assume that no employee's cumulative wages exceed the relevant wage bases. Payroll information for the first biweekly payroll period ending February 14 is listed below.
Explanation / Answer
1)
Dr. Salaries Exp $ 1,500,000
Cr. Income tax payable $375,000
Cr. Accounts payable (Retirement plan) $63,000
Cr. FICA tax payable $114,750
Cr. Salaries payable (Balance) $947,250
2)
Dr. Salaries Exp $100,500
Cr. Accounts payable (Medical insurence) $31,500
Cr. Accounts payable (Life insurance) $6,000
Cr. Accounts payable (Retirement plan) $63,000
3)
Dr. Payroll tax EXP $207,750
Cr. FICA tax payable $114,750
Cr. Federal and state unemployment tax $93,000
FICA TAX = $1500,000 * (6.2+1.45)/100 = $114,750
Federal and state unemployment tax = $1500,000 * 6.2% = $93,000
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