Question

During January, Luxury Cruise Lines incurs employee salaries of $1.3 million. Withholdings in January are $99,450 for the employee portion of FICA, $195,000 for federal income tax, $81,250 for state income tax, and $13,000 for the employee portion of health insurance (payable to Blue Cross/Blue Shield). The company incurs an additional $80,600 for federal and state unemployment tax and $39,000 for the employer portion of health insurance.

Required:
Record the necessary journal entries.

Answer 1

To record the salaries and withholding amounts for Luxury Cruise Lines, two journal entries are made. The first is for salaries and employee withholdings, and the second is for the employer's expenses including federal and state unemployment tax and health insurance. The amounts are based on the given figures for January.

Step-by-step explanation:

To record the necessary journal entries for Luxury Cruise Lines regarding employee salaries and withholdings, we need to account for various types of taxes and expenses. The following two journal entries should be made:

First Entry: Recording the Salaries and Withholdings:

Debit Salaries and Wages Expense $1,300,000

Credit Withholdings for FICA $99,450

Credit Withholdings for Federal Income Tax $195,000

Credit Withholdings for State Income Tax $81,250

Credit Withholdings for Health Insurance $13,000

Credit Salaries and Wages Payable $911,300 (Balancing figure)

Second Entry: Recording the Employer's Taxes and Insurance:

Debit Payroll Tax Expense $80,600 (for federal and state unemployment tax)

Debit Health Insurance Expense $39,000 (employer portion)

Credit Unemployment Tax Payable $80,600

Credit Health Insurance Payable $39,000

These entries take into account the salaries and related withholdings and taxes for the month of January as specified in the question provided by the student.

Answer 2

Date Account Title Debit Credit

Jan. 31 Salary Expenses $1,300,000

Accounts Payable - Insurance $13,000

FICA Tax Payable $99,450

Income Tax payable $276,250

Salaries Payable $911,300

Working:

Income tax payable = Federal income + State income

= 195,000 + 81,250 = $276,250

Date Account Title Debit Credit

Jan. 31 Salaries Expenses $39,000

Accounts Payable $39,000

Date Account Title Debit Credit

Jan. 31 Payroll Tax expenses $180,005

FICA Tax Payable $99,450

Federal and State Unemployment Tax $80,600