Question

During the month of March, Blossom Company’s employees earned wages of $60,000. Withholdings related to these wages were $4,590 for Social Security (FICA), $7,031 for federal income tax, $2,906 for state income tax, and $375 for union dues. The company incurred no cost related to these earnings for federal unemployment tax but incurred $656 for state unemployment tax.

1. 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.
2. Prepare the entry to record the company’s payroll tax expense.

Answer 1

Blossom Company must debit Salaries and Wages Expense for $60,000 and credit several liability accounts for the withholdings for social security, income taxes, and union dues, as well as the Salaries and Wages Payable. For payroll tax expense, it would debit Payroll Tax Expense and credit State Unemployment Tax Payable for the state unemployment tax incurred.

Step-by-step explanation:

Journal Entry for Salaries and Wages Expense

To record the salaries and wages expense for the month of March for Blossom Company, we would make the following journal entry on March 31:

• Debit Salaries and Wages Expense $60,000
• Credit Social Security Tax Payable $4,590
• Credit Federal Income Tax Payable $7,031
• Credit State Income Tax Payable $2,906
• Credit Union Dues Payable $375
• Credit Salaries and Wages Payable $45,098 ($60,000 total wages - $4,590 - $7,031 - $2,906 - $375)

Journal Entry for the Company’s Payroll Tax Expense

To record the company's payroll tax expense, we have the following:

Debit Payroll Tax Expense $656

Credit State Unemployment Tax Payable $656

In this case, the company did not incur any federal unemployment tax.

Answer 2

1.

March 31,

DR Salaries and Wages Expense ....................$60,000

CR FICA taxes payable ........................................................$4,590

CR Federal income tax payable .........................................$7,031

CR State income tax payable ..............................................$2,906

CR Union dues payable .......................................................$375

CR Salaries and Wages payable ..........................................$45,098

Working

Salaries and Wages payable = 60,000 - 4,590 - 7,031 - 2,906 - 375

= $45,098

2.

DR Payroll taxes payable ...................................$5,246

FICA taxes payable .................................................................$4,590

State unemployment taxes payable ....................................$656

Working

Payroll taxes payable = 4,590 + 656

= $5,246