Question

During the month of March, Oriole Company's employees earned wages of $80,000. Withholdings related to these wages were $6,120 for FICA, $9,600 for federal income tax, $4,000 for state income tax, and $480 for union dues. The company incurred no cost related to these earnings for federal unemployment tax but incurred $800 for state unemployment tax. Prepare the necessary March 31 journal entry to record salaries and wages expense and salaries and wages payable. Assume that wages earned during March will be paid during April.

Answer 1

Oriole company

The wage earned by the employees is $80,000. However certain deductions need to be recognized and made payable to respective statutory institutions.

After deductions the Employee should receive $59,800 (80,000 - 6,120 - 9,600 - 4,000 - 480)

Journal entries

1.

Debit Wage Account with $59,800

Debit FiCA (Employee) Account with $6,120

Debit Fed. income Tax (Employee) Account with $9,600

Debit State Income Tax (Employee) Account with $4,000

Debit Union Deductions (Employee) Account with $480

Credit Wages Payable Account with $80,000

(Being Wages earned in March and its distribution between accruals to employee and accruals to statutory bodies)

2.

Debit Employer state unemployment taxes Account with $800

Credit Employer state unemployment taxes Payable Account with $800

(Being employer contribution to unemployment taxes in March)