Question

Paul Company completed the salary and wage payroll for the month of March. The payroll provided the following details: Salaries and wages earned by employees $ 200,000 Employee income taxes withheld 40,000 Employee government insurance premiums withheld 1,000 FICA payroll taxes* 15,000 *Assessed on both employer and employee (i.e., $15,000 each). Required: 1. Prepare the journal entry to record the payroll for March, including employee deductions. Assume employees have been paid but that Paul has yet to transfer any withholdings to the government. 2. Prepare the journal entry to record the employer's payroll taxes, which have not yet been paid to the government. 3. Provide a combined journal entry to show the payment of all amounts owed to governmental agencies.

Answer 1

Payroll taxes are taxes that employers pay on employees' wages. The journal entries for recording the payroll and employee deductions, employer's payroll taxes, and payment to governmental agencies are provided.

Step-by-step explanation:

Payroll taxes are taxes that employers are required to pay when they pay salaries to their staff. These taxes are imposed on both employers and employees and are collected and paid to the taxing jurisdiction by the employers. The payroll taxes assessed on employees' wages include employee income taxes withheld, employee government insurance premiums withheld, and FICA payroll taxes.

1. The journal entry to record the payroll for March, including employee deductions, would be:

• Debit Salaries and Wages Expense $200,000
• Credit Employee Income Taxes Payable $40,000
• Credit Employee Government Insurance Premiums Payable $1,000
• Credit Social Security Taxes Payable $7,500
• Credit Medicare Taxes Payable $1,500

2. The journal entry to record the employer's payroll taxes would be:

• Debit Payroll Taxes Expense $15,000
• Credit Social Security Taxes Payable $7,500
• Credit Medicare Taxes Payable $1,500
• Credit Employer's Share of Social Security Taxes Payable $7,500
• Credit Employer's Share of Medicare Taxes Payable $1,500

3. The combined journal entry to show the payment of all amounts owed to governmental agencies would be:

• Debit Employee Income Taxes Payable $40,000
• Debit Employee Government Insurance Premiums Payable $1,000
• Debit Social Security Taxes Payable $7,500
• Debit Medicare Taxes Payable $1,500
• Debit Employer's Share of Social Security Taxes Payable $7,500
• Debit Employer's Share of Medicare Taxes Payable $1,500
• Credit Cash $200,000

Learn more about Payroll taxes here:

Answer 2

1. March 31

Dr Salary and Wage Expense $200,000

Cr Liability for Income Tax withheld $40,000

Cr FICA Taxes $15,000

Liability for insurance premiums withheld-employees $1,000

Cr Cash $144,000

2. Dr Payroll Tax Expense $15,000

Cr FICA payable $15,000

3. March

Dr Liability for income tax withheld $40,000

Dr Liability for insurance premium $1,000

Dr FICA taxes payable - Employees $15,000

Dr FICA taxes payable - Employers $15,000

Cr Cash $71,000

Step-by-step explanation:

1. Preparation of the journal entry to record the payroll for March

March 31

Dr Salary and Wage Expense $200,000

Cr Liability for Income Tax withheld $40,000

Cr FICA Taxes $15,000

Liability for insurance premiums withheld-employees $1,000

Cr Cash ($200,000-$56,000)$144,000

(To record wages to employees)

2. Preparation of the journal entry to record the employer's payroll taxes

March 31

Dr Payroll Tax Expense $15,000

Cr FICA payable $15,000

(Employer Payroll taxes on February payroll)

3. Preparation of the journal entry to show the payment of all amounts owed to governmental agencies

March

Dr Liability for income tax withheld $40,000

Dr Liability for insurance premium $1,000

Dr FICA taxes payable - Employees $15,000

Dr FICA taxes payable - Employers $15,000

Cr Cash $71,000

($40,000+$1,000+$15,000+$15,000)

(Remittance of payroll taxes and deduction for February payroll)