Question

Question: The following monthly data are taken from Ramirez Company at July 31: sales salaries, $200,000; office

salaries, $160,000; federal income taxes withheld, $90,000; state income taxes withheld, $20,000; Social

Security taxes withheld, $22,320; Medicare taxes withheld, $5,220; medical insurance premiums, $7,000;

life insurance premiums, $4,000; union dues deducted, $1,000; and salaries subject to unemployment

taxes, $50,000. The employee pays 40% of medical and life insurance premiums.

Prepare journal entries to record: (1) accrued payroll, including employee deductions, for July;

(2) cash payment of the net payroll (salaries payable) for July; (3) accrued employer payroll taxes, and

other related employment expenses, for July—assume that FICA taxes are identical to those on employees

and that SUTA taxes are 5.4% and FUTA taxes are 0.6%; and (4) cash payment of all liabilities related

to the July payroll.

Answer 1

Step 1: Definition of the accrued payroll expenses

Accrued payroll expenses are those expenses those are due but not paid.

Step 2: Entries for the accrued payroll expenses

Date	Particulars	Debit	Credit
July 31	Sales Salaries Expense	$200,000
	Office Salaries Expense	$160,000
	Employee Federal Income Tax Payable		$90,000
	Employee State Income Tax Payable		$20,000
	FICA- Social Security Tax Payable		$22,300
	FICA- Medicare Tax Payable		$5,220
	Employees Medical Insurance Payable		$2,800
	Employees Life Insurance Payable		$1,600
	Employees Union Dues Payables		$1,000
	Salaries Payable		$217,080
	(Being entry for the accrued payroll and deductions)

 

Step 3: Entry for the payment of salaries

Date	Particulars	Debit	Credit
July 31	Salaries Payable	$217,080
	Cash		$217,080
	(Being entry for the payment of salaries payable)

 

Step 4: Entry for the record of payroll expenses

Date	Particulars	Debit	Credit
July 31	Payroll Taxes Expense	$51,900
	FICA- Social Security Tax Payable		$22,300
	FICA- Medicare Tax Payable		$20,000
	Employees Medical Insurance Payable		$4,200
	Employees Life Insurance Payable		$2,400
	State Unemployment Taxes Payable		$2,700
	Federal Unemployment Taxes Payable		$300
	(Being entry for the payroll expense)

 

Step 5: Entry for the payment of payroll expenses

Date	Particulars	Debit	Credit
July 31	Employee Federal Income Tax Payable	$90,000
	Employee State Income Tax Payable	$20,000
	FICA- Social Security Tax Payable	$44,600
	FICA- Medicare Tax Payable	$10,440
	Employees Medical Insurance Payable	$7,000
	Employees Life Insurance Payable	$4,000
	Employees Union Dues Payables	$1,000
	State Unemployment Taxes Payable	$2,700
	Federal Unemployment Taxes Payable	$300
	Cash		$180,040
	(Being payment of payroll expenses)

 

 

Answer:

The total payroll expenses of the month are $180,040.