Question

The two employees of Silver Co. receive various fringe benefits. Silver Co. provides vacation at the rate of $335 per day. Each employee earns one day of vacation per month worked. In addition, Silver Co. pays a total amount of $690 per month in medical insurance premiums. Silver also contributes a total amount of $440 per month into an employee retirement plan. The federal unemployment tax rate is 6%, while the state tax rate is 4%. Unemployment taxes apply to the first $7,000 of earnings per employee. Assume a Social Security tax rate of 6% and a Medicare tax rate of 1.5%. Prepare the monthly journal entry for the accrued fringe benefits.

Answer 1

The journal entry for the monthly fringe benefits of Silver Co. employees includes vacation pay of $335 per employee, $690 in total medical insurance premiums, and $440 in retirement plan contributions, along with employer portions of Social Security and Medicare taxes calculated on the monthly gross pay.

Step-by-step explanation:

When calculating the monthly journal entry for accrued fringe benefits for employees of Silver Co., we must consider several cost factors, including vacation pay, medical insurance premiums, retirement plan contributions, unemployment taxes, Social Security, and Medicare.

The employees earn vacation pay at $335 per day and are entitled to one day of vacation per month, resulting in an accrued expense of $335 per employee per month. Additionally, Silver Co. pays $690 per month in total for medical insurance premiums and contributes $440 per month into a retirement plan.

Unemployment taxes are not relevant to the journal entry for accrued fringe benefits if the employees' earnings have exceeded the $7,000 threshold because these are paid annually or after a specific income has been reached, not accrued monthly. For Social Security at a 6% rate and Medicare at a 1.5% rate, the employer portion must be calculated on the monthly gross pay.