The following data are taken from Fremont Wholesale Company’s May payroll: Admin

Question

The following data are taken from Fremont Wholesale Company’s May payroll: Administrative salaries $34,000 Sales salaries 47,000 Custodial salaries 7,000 Total payroll $88,000 Salaries subject to 1.45 percent Medicare tax $88,000 Salaries subject to 6.2 percent Social Security tax 74,000 Salaries subject to federal unemployment taxes 14,000 Salaries subject to state unemployment taxes 20,000 Federal income taxes withheld from all salaries 17,800 Assume that the company is subject to a two percent state unemployment tax (due to a favorable experience rating) and a 0.6 percent federal unemployment tax. Required Record the following in general journal form on May 31: a. Accrual of the monthly payroll. b. Payment of the net payroll. c. Accrual of employer’s payroll taxes. d. Payment of these payroll-related liabilities. (Assume that all are settled at the same time.) Round your answers to the nearest dollar.

Explanation / Answer

Journal Entries for the Payroll Amount$ Date Particulars Debit   Credit 31-May Adminisrtartive Salaries A/c Dr       34,000 Sales Salaries A/c Dr       47,000 Custodial Salaries A/c Dr        7,000 To Salaries Payable A/c       88,000 ( Being amount of Salries payable for the Departments Adminisrtartive, Sales & Custodial respectively ) 31-May Salaries Payable A/c Dr.       24,148 To Medicare tax A/c        1,276 To Social Security tax A/c        4,588 To Federal unemployment taxes A/c            84 To State unemployment taxes A/c           400 To Federal income taxes A/c       17,800 ( Being amount all the applicable Taxes payable Transfered for with helding) 31-May Salaries Payable A/c       63,852 To Bank A/c       63,852 ( Being Net Salary amount payable made the payment ) 31-May Medicare tax A/c Dr        1,276 Social Security tax A/c Dr        4,588 Federal unemployment taxes A/c Dr            84 State unemployment taxes A/c Dr           400 Federal income taxes A/c Dr       17,800 To Bank A/c       24,148 Being amount paid for the Taxes With helded) Workings Amount$ S.no Particulars Tax Rate Amount Tax 1 Medicare tax 1.45% 88000 1276 2 Social Security tax 6.20% 74000 4588 3 Federal unemployment taxes 0.60% 14000 84 4 State unemployment taxes 2% 20000 400 5 Federal income taxes 17800

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