Explanation Payroll Taxes Payable: Payroll Tax payable is the tax expenses which becomes accrued and is imposed on the income of the employees and are calculated as a percentage of the salary. It includes Medicare taxes, FICA taxes, State unemployment taxes, and Federal unemployment taxes. It is an expense on the income statement which becomes an expense at the time when the employee’s wages and salaries have been expensed. Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. Following is the Journal entry for recoding salary accrual: Date Particulars Post ref. Debit ($) Credit ($) Salaries Expense 1,200,00 FICA Taxes Payable 74,400 Medicare Tax Payable 17,400 Federal Income Tax Payable 360,000 State & Local Income Tax Payable 96,000 Salaries Payable 652,200 ( beingsalary expenses recoded ) Table (1) Payroll Tax expenses are the expenses on salary which the company has to incur. Payroll Tax Expense is being paid hence debited. FICA Taxes Payable is a liability for the company. Company is paying FICA tax at the rate 6.2% of the total payroll indicating increasing liability, hence credited. Medicare Tax Payable is a liability for the company. Medicare Tax rate is 1.45% and is being paid indicating increasing liability hence credited with $17,400. Federal Income Taxes Payable is a liability for the company.30% Federal Income tax is also being paid by the company hence credited with $360,000. State & Local Taxes Payable is a liability for the company. 8% state and local taxes are also being paid by the company hence, credited. Salaries Payable Taxes Payable is also a liability for the company. Remaining is the salaries payable after deducting all the taxes from the payroll and is credited with $652,200. Following is the journal entry to record accrued salaries: Date Particulars Post ref. Debit ($) Credit ($) Payroll Tax expense 93,800 FICA Taxes Payable 74,400 Medicare Tax Payable 17,400 FUTA Tax Payable 600 State Unemployment Tax Payable 1,400 ( being payroll expenses accrued) Table (2) Payroll Tax expense is an expense for the company. Payroll expense is being paid indicating decreasing expense hence debited with $93,800. FICA Taxes Payable is a liability for the company. 6.2% FICA tax is being paid indicating increasing liability hence credited with $74,400. Medicare Tax Payable is a liability for the company. Medicare Tax is also being paid by the company at the rate of 1.45% indicating increasing liability, hence credited...

3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

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Chapter 13, Problem 13.19BE

To determine

To prepare: The journal for recording the bi-weekly salary accrual and payment and also for payroll tax expense.

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Chapter 13, Problem 13.18BE

Chapter 13, Problem 13.20BE

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Stone's gross pay for the week is $1,400. Stone's year-to-date pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is 6% and that Stone's year-to-date pay has not yet exceeded the $7,000 cap. What is the amount of state and federal unemployment tax that his employer must record as payroll tax expense and pay to the federal and state governments? OA. $104.30 OB. $84.00 OC. $188.30 O D. $197.61

William Corp. pays its employees every two weeks. Employee wages earned over a two-week period is $250,000. All wages are subject to social security and Medicare taxes, while $50,000 of wages are subject to federal and state unemployment taxes. Tax rates are the following: • Social security tax 6.0%• Medicare tax 1.5%• State unemployment compensation tax 5.4%• Federal unemployment compensation tax 0.8% Additionally, the total amount withheld from wages for federal income taxes is $75,000 and the total amount withheld for state income taxes is $12,500. ________________________________________ When William Corp. records the journal entry to recognize payroll every two weeks, Payroll Tax Expense will be: Question 30 options: Debited for $75,000 Credited for $12,500 Debited for $12,500 Credited for $75,000 Neither debited nor credited

William Corp. pays its employees every two weeks. Employee wages earned over a two-week period is $250,000. All wages are subject to social security and Medicare taxes, while $50,000 of wages are subject to federal and state unemployment taxes. Tax rates are the following: • Social security tax 6.0%• Medicare tax 1.5%• State unemployment compensation tax 5.4%• Federal unemployment compensation tax 0.8% Additionally, the total amount withheld from wages for federal income taxes is $75,000 and the total amount withheld for state income taxes is $12,500. ________________________________________ When William Corp. records the journal entry to recognize payroll tax expense every two weeks, Social Security Tax Payable will be: Neither debited nor credited Debited for $15,000 Credited for $15,000 Credited for $3,750 Debited for $3,750

Chapter 13 Solutions

Intermediate Accounting

Ch. 13 - Prob. 13.1Q Ch. 13 - Prob. 13.2Q Ch. 13 - Prob. 13.3Q Ch. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5Q Ch. 13 - Prob. 13.6Q Ch. 13 - Prob. 13.7Q Ch. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q

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The journal for recording the bi-weekly salary accrual and payment and also for payroll tax expense.

Solution Summary: The author describes journaling as the process of recording the transactions of an organization in a chronological order.

To prepare: The journal for recording the bi-weekly salary accrual and payment and also for payroll tax expense.

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Chapter 13 Solutions