Question

For the year ended December 31, 2017, Denkinger Electrical Repair Company reports the following summary payroll data.

Gross earnings:
Administrative salaries $188,500
Electricians’ wages 342,000
Total $530,500
Deductions:
FICA taxes $35,065
Federal income taxes withheld 160,000
State income taxes withheld (3%) 15,915
United Fund contributions payable 25,594
Health insurance premiums 19,500
Total $256,074

Denkinger Company’s payroll taxes are Social Security tax 6.2%, Medicare tax 1.45%, state unemployment 2.5% (due to a stable employment record), and 0.8% federal unemployment. Gross earnings subject to Social Security taxes of 6.2% total $441,500, and gross earnings subject to unemployment taxes total $136,500.

(a)

Prepare a summary journal entry at December 31 for the full year’s payroll.
(b)

Journalize the adjusting entry at December 31 to record the employer’s payroll taxes.

Answer 1

Answer&Explanation:

We debit the wages expense, credit all the deduction as payable and cash for the net pay.

Wages Expense 530,500 credit

Cash 274,426 credit

FICA tax payable 35,065 credit

Wages Federal income payable 160,000 credit

Wages State Income payabe 15,915 credit

Health insurance payable 19,500 credit

United Fund payable 25,594 credit

--payroll for the year--

We debit payroll tax expense and credit all type of taxes as payable:

Payroll tax expense 39569,75 debit

OASDI payable 27,373 credit (441,500)

Medicare payable 7692,25 credit (530,500 x 1.45%)

SUTA payable 3,412.5 credit (136,500 x 2.5%)

FUTA payable 1,092 credit (136,500 x0.8%)

--employer payroll taxes--

We debit all payables taxes and credit cash for the total

Wages Federal income payable 160,000 debit

Wages State Income payabe 15,915 debit

Health insurance payable 19,500 debit

United Fund payable 25,594 debit

FUTA payable 1,092 debit

SUTA payable 3,412.5 debit

Medicare payable 7692,25 debit

OASDI payable 27,373 debit

Cash 295,644.75 credit

--payment of payroll and deduction--