Question

Spirit Corporation reported the following payroll-related costs for the month of February:

Gross pay (wages expense)	$	247,000
Social Security and Medicare taxes		18,896
Federal and state unemployment taxes		15,500
Workers' compensation insurance		8,500
Group health and life insurance benefits		12,000
Employee pension plan benefits		25,900
Total payroll costs for February	$	327,796

Spirit’s insurance premiums for workers’ compensation and group health and life insurance were paid for in a prior period and recorded initially as prepaid insurance expense. Withholdings from employee wages in February were as follows:

State income tax withholdings	$	5,875
Federal income tax withholdings		56,000
Social Security and Medicare tax withholdings		18,896

a-c.	Record Spirit’s payroll entries for the month of February. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet dynamic data to be inserted dynamic data to be inserted Record gross wages, employee withholdings and employee take-home pay for February. Note: Enter debits before credits. Transaction General Journal Debit Credit <td style="width: 20px; visibility: hidden;">&nbsp;</td> a. <span class="left_blue_button small_button_bg">&nbsp;</span> <span class="left_grey_button small_button_bg">&nbsp</span> <span class="left_grey_button small_button_bg">&nbsp</span> sheet is drawn here

d.	Do the amounts withheld from Spirit’s employees represent taxes levied on Spirit Corporation?

Yes No

Answer 1

A.

Wages Expense	247000
State Income Tax payable		5875
Federal income tax payable		56000
Social security and medicare tax payable		18896
Cash (wages payable)		166229
(To record gross wages, employee withholdings, and employee take-home pay)

B.

Payroll Tax expense	42896
Social security and medicare taxes		18896
Federal and state unemployment Taxes		15500
Prepaid worker's compensation insurance		8500
(To record employer’s payroll tax expense for February)

C.

Group Health and life insurance expense	12000
Employee Pension Plan Expense	25900
Prepaid Group and Health Insurance		12000
Cash (No Pension benefit amount withheld)		25900
(To record employee benefit expense for February)

D. No, Amounts that are withheld with the Spirit employees do not represent taxes levied on Spirit Corp. It’s the tax levied on employees of Spirit for various benefits and therefore needs to be deducted from employee earnings