Question

MLS Company has five employees, each of whom earns $1,600 per month and is paid on the last day of each month. All five have been employed continuously at this amount since January 1. On June 1, the following accounts and balances exist in its general ledger:

a. FICA—Social Security Taxes Payable, $992; FICA—Medicare Taxes Payable, $232. (The balances of these accounts represent total liabilities for both the employer’s and employees’ FICA taxes for the May payroll only.)

b. Employees’ Federal Income Taxes Payable, $1,050 (liability for May only).

c. Federal Unemployment Taxes Payable, $66 (liability for April and May together).

d. State Unemployment Taxes Payable, $440 (liability for April and May together). During June and July, the company had the following payroll transactions.

June 15 Issued check payable to Security Bank, a federal depository bank authorized to accept employers’payments of FICA taxes and employee income tax withholdings. The $2,274 check is in payment of the May FICA and employee income taxes.

30 Recorded the journal entry for the June salaries payable. Then recorded the cash payment of the June payroll (the company issued checks payable to each employee in payment of the June payroll). The payroll register shows the following summary totals for the June pay periodp Gross FICA Income Net

Salaries Salaries Pay Taxes* Taxes Pay $3,800 $4,200 $8,000 $496 $1,050 $6,338 $116

* FICA taxes are Social Security and Medicare, respectively.

30 Recorded the employer’s payroll taxes resulting from the June payroll. The company has a merit rating that reduces its state unemployment tax rate to 4.0% of the first $7,000 paid each employee. The federal rate is 0.6%.

July 15 Issued check payable to Security Bank in payment of the June FICA and employee income taxes.

15 Issued check to the State Tax Commission for the April, May, and June state unemployment taxes. Filed the check and the second-quarter tax return with the State Tax Commission.

31 Issued check payable to Security Bank in payment of the employer’s FUTA taxes for the first quarter of the year.

31 Filed Form 941 with the IRS, reporting the FICA taxes and the employees’ federal income tax withholdings for the second quarter.

Required

Prepare journal entries to record the transactions and events for both June and July.

 

Answer 1

Date Particulars Debit Credit

June 15 FICA—Social Security Taxes Payable $992

FICA-Medicare Taxes Payable $232

Federal Income Taxes Payable $1,050

Cash $2,274

(To entry for payment of tax liability)

June 30 Office Salaries Expense $3,800

Shop Salaries Expense $4,200

FICA—Social Security Taxes Payable $496

FICA-Medicare Taxes Payable $116

Federal Income Taxes Payable $1,050

Salaries Payable $6,338

(To entry to record Salaries payable)

June 30 Salaries Payable $6,338

Cash $6,338

(To entry for the payment of salaries payable)

June 30 Payroll Taxes Expense $612

FICA—Social Security Taxes Payable $496

FICA-Medicare Taxes Payable $116

(To Entry to record payroll taxes expense)

July 15 FICA—Social Security Taxes Payable $992

FICA-Medicare Taxes Payable $232

Federal Income Taxes Payable $1,050

Bank $2,274

(To entry for payment of tax liability)

July 15 State Unemployment Tax Payable $1,586

Cash $1,586

(To entry for the payment of SUTA)

July 31 Federal Unemployment Tax Payable $668

Bank $668

(To entry for the payment of FUTA)

July 31 No entry required

 

 

 

 

Answer

The cash payroll account is debited with $6,338.