Final answer:
The correct journal entry to record the employee's pay at Redmont company, with $30,000 in gross salaries and withholds for income and FICA taxes, would include a debit to Salaries and Wages Expense for the gross amount of $30,000 and a credit for that same amount to Salaries and Wages Payable, with further credits for taxes withheld. Option C is correct..
Step-by-step explanation:
The discussed scenario involves the recording of payroll transactions in the accounting journal for Redmont company, which has incurred but not yet paid employee salaries. The gross salaries and wages are $30,000, with $4,500 withheld for income taxes and $2,000 for FICA taxes. When creating a journal entry, the total gross wages are expensed, and the liabilities for both taxes withheld and net pay to the employees are recorded.
The correct entry would include a debit to Salaries and Wages Expense for $30,000 to reflect the total cost incurred by the company. Then, there would be two credit entries: one for Income Taxes Payable for $4,500 and another for FICA Taxes Payable for $2,000, to account for the amounts withheld from the employees’ wages. The remaining credit would be to Salaries and Wages Payable for the net amount due to the employees, which is the gross amount minus the withholdings ($30,000 - $4,500 - $2,000 = $23,500).
Therefore, the correct journal entry would involve C. a credit to Salaries and Wages Payable for $30,000 for the gross wages, and not for the net amount after deductions.