Final answer:
The question involves calculating payroll deductions and creating journal entries for an employer's payroll and taxes. The payroll entry debits 'Wages Expense' and credits 'Social Security Payable,' 'Medicare Payable,' 'Federal Taxes Payable,' and 'Cash/Wages Payable.' The payroll tax expense entry includes debits to 'Payroll Tax Expense' and credits to the respective payroll liabilities, including unemployment taxes.
Step-by-step explanation:
To address the student's question regarding journalizing the entries for the payroll and payroll tax expense of Widmer Company, we need to calculate the specific tax amounts and then create the corresponding accounting entries.
Firstly, to record the payroll for the week we debit 'Wages Expense' for the gross amount and credit all deductions and liabilities accordingly. For Widmer Company, with gross wages of $320,000:
- Social security tax: $320,000 x 6.0% = $19,200
- Medicare tax: $320,000 x 1.5% = $4,800
- Withheld for federal taxes: $46,000
The journal entry to record the payroll would be (not considering other possible deductions like state income tax or voluntary deductions):
Dr Wages Expense $320,000
Cr Social Security Payable $19,200
Cr Medicare Payable $4,800
Cr Federal Taxes Payable $46,000
Cr Cash/Wages Payable $250,000
The employer's payroll tax expense for social security and Medicare taxes is calculated in the same way as that withheld from employee wages. Additionally, we have unemployment taxes:
- State unemployment tax: $48,000 x 5.4% = $2,592
- Federal unemployment tax: $48,000 x 0.8% = $384
The journal entry to record the payroll tax expense would be:
Dr Payroll Tax Expense $26,976
Cr Social Security Payable $19,200
Cr Medicare Payable $4,800
Cr State Unemployment Payable $2,592
Cr Federal Unemployment Payable $384