Ergo Company has one employee who is paid a salary of $8,500 per month. Payroll
ID: 2516098 • Letter: E
Question
Ergo Company has one employee who is paid a salary of $8,500 per month. Payroll information for the first month of the year is:
Federal and state income tax withheld
$1,275
FICA (social security and Medicare)
7.65%
Federal unemployment (FUTA and SUTA) tax rate (on the 1st $7,000 of wages)
6.2%
Insurance Premiums (paid by Employees)
$400
Part I: Prepare Ergo’s journal entry to record the first month’s salary expense and employee withholdings. Payroll tax expense will be recorded in part 2.
Date
Account Name
Debit
Credit
Part 2: Prepare Ergo’s journal entry to record employer payroll taxes for the first month’s payroll.
Date
Account Name
Debit
Credit
Notes Receivable
On September 1, 2016, Hare Today pet-supply store Co. borrowed $9,000 from Gone Tomorrow Bank, signing a 6-month, 4-percent note. Interest is to be paid at maturity. Hare Today and Gone Tomorrow both have a December 31 year-end.
1. Record the journal entry for the transaction for Hare Today on September 1, 2016.
2. Record the appropriate adjusting entry related to the note by Hare Today on December 31, 2016.
3. Record the journal entry for the receipt of the amount due to Hare Today at the note’s maturity on March 1, 2017.
Date
Account Name
Debit
Credit
Notes Payable
On September 1, 2016, Hare Today pet-supply store Co. borrowed $9,000 from Gone Tomorrow Bank, signing a 6-month, 4-percent note. Interest is to be paid at maturity. Hare Today and Gone Tomorrow both have a December 31 year-end.
1. Record the journal entry for the transaction for Gone Tomorrow on September 1, 2016.
2. Record the appropriate adjusting entry related to the note by Gone Tomorrow on December 31, 2016.
3. Record the journal entry for the payment of the amount due to Gone Tomorrow at the note’s maturity on March 1, 2017.
Date
Account Name
Debit
Credit
Federal and state income tax withheld
$1,275
FICA (social security and Medicare)
7.65%
Federal unemployment (FUTA and SUTA) tax rate (on the 1st $7,000 of wages)
6.2%
Insurance Premiums (paid by Employees)
$400
Explanation / Answer
Date Account name Debit Credit Wage expense 8500 Fedral and state income taxes payable 1275 FICA taxes payable (8500*7.65%) 650.25 Insuarance payable 400 Cash 6174.75 (record the first month’s salary expense and employee withholdings) Payroll tax expenses 1084.25 FICA taxes payable (8500*7.65%) 650.25 Federal unemployment taxes payable (7000*6.2%) 434 (record employer payroll taxes for the first month’s payroll) Notes receivable Date Account name Debit Credit 2016 Sept 1. Notes receivable 9000 Cash 9000 (Notes issued to Hare today) Dec 31. Interest receivable (9000*4%*4/12) 120 Interest revenue 120 (Interest on note for 4 months accrued) 2017 Mar 1. Cash 9180 Notes receivable 9000 Interest receivable 120 Interest revenue (9000*4%*2/12) 60 (Notes matured)
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