Question

It is August 2020. You are calculating the monthly paycheck, including employee withholding, and employer payroll related expenses for Bonnie Bigwig. Her pay through July is $110,000. Her August gross pay $20,000. Her Federal income tax withholding is at the 25% rate, her state withholding is at the 5% rate. (Ignore local income tax.) Her health insurance (all paid by the company) is $1,500 / month. She contributes $1,000 / month to the United Way.

Give the journal entry to pay Bonnie. Also, give the journal entry to record the employer payroll related expenses.

Answer 1

Solution

Payroll entries :

In general, Payroll entries are the entries which records the compensation paid to the employees.

JOURNAL ENTRY FOR PAYROLL EXPENSES:

1. Accrued payroll entry

Direct labor expense

Salary expense account (current month salary)

To Accrued salary account (gross salary)

To Accrued payroll taxes (Here, it is ignored)

2. Salary paid to employee

  Accrued salary account

To cash account

A. JOURNAL ENTRY TO PAY BONNIE : (DEBIT AMOUNT) (CREDIT AMOUNT)

Accrued salary account    $130500       -

To cash account    -       $130500

B. JOURNAL ENTRY FOR PAYROLL EXPENSES :

Health insurance expense account   $1500       -

Salary expense account ($110000 + $20000)    $130000       -

To contribution - $1000

To Accrued salary account   -       $130500

NOTE :

Bonnie contributes $1000/ month to the United way. The contribution should be deducted from the salary.