Question

junkman autos uses a separate checking account to pay their employees. the gross pay for the period was $1,000. however, after deductions were taken out, the net pay for the period was $820. the journal entry to record the issuance of payroll checks to their employees is:

Answer 1

The journal entry for Junkman Autos' payroll is a debit to Salaries and Wages Expense and Payroll Taxes Payable or other deductions for the gross amount and deductions, respectively, and a credit to Cash for the net pay amount. The example provided also explains how bank loans affect a bank's balance sheet and the overall money supply.

Step-by-step explanation:

The student's question relates to journal entries for payroll transactions. Junkman Autos has a total gross pay of $1,000, and after deductions, the net pay stands at $820. To record the disbursement of payroll, the journal entry would include a debit to Salaries and Wages Expense for the gross pay of $1,000, a debit to Payroll Taxes Payable or other deduction accounts for the total deductions of $180 ($1,000 - $820), and a credit to Cash or Payroll Checking Account for the net pay of $820. The difference reflects deductions such as Social Security, Medicare, and any other withholdings.

In the context of banking and loans, when Singleton Bank lends $9 million to Hank's Auto Supply, Singleton records the loan as an asset, and Hank's Auto Supply deposits the loan, which increases First National's deposits and reserves by $9 million. First National is required to hold 10% of the deposit as the required reserves and can lend the rest. This example illustrates the banking operations and their impact on the money supply in the economy.