Question

Background:

M & D Contractors has numerous employees who are paid on a weekly basis. Payroll information for the most recent week ending August 10, 2018 is given below:

Total Employee compensation                        $136,000

FICA social security tax rate                                   6.2%

FICA medicare tax rate                                         1.45%

Federal unemployment tax rate                              0.6%

State unemployment tax rate 5.4%

Federal income tax rate   15.0%

Of the total employee compensation, $136,000 is subject to the FICA taxes and $48,500 is subject to the unemployment taxes. Other expenses include health insurance costs of $60,000 (spilt 90% employer, 10% employee), charitable contributions made to the United Way of $12,500 (100% employee), and retirement benefits paid by the employer equal to 2% of the gross salaries.

Transactions:

08/10/2018

Recorded Salaries and Wages Expense accrual for the August 10 payroll. Employees will be paid on August 13. Prepare a compound entry for this transaction.

08/10/2018

Recorded payroll taxes for the August 10 payroll. Prepare a compound entry for this transaction.

08/10/2018

Recorded employee benefits expense for the August 10 payroll. Prepare a compound entry for this transaction.

08/13/2018

Paid employees from the August 10 payroll.

08/15/2018

Paid all withholdings and employer payroll taxes related to the August 10 payroll. Prepare a compound entry for this transaction.

Answer 1

	Journal Entries
Date	Account Titles	Debit	Credit
8/10/2018	Salaries and Wages Expenses	$136,000
	FICA Social Security tax withheld		$8,432
	FICA Medicare tax withheld		$1,972
	Federal income tax withheld		$20,400
	Health insurance payable		$6,000
	United Way Payable		$12,500
	Net Salaries Payable		$86,696
	Payroll taxes
8/10/2018	Payroll tax expense	$13,314
	FICA Social Security tax payable		$8,432
	FICA Medicare tax payable		$1,972
	Federal unemployment tax payable		$291
	State unemployment tax payable		$2,619
	Employee benefits
8/10/2018	Employee benefits expenses	$56,720
	Health insurance payable		$54,000
	Cash		$2,720
8/13/2018	Net salaries payable	$86,696
	Cash		$86,696
8/15/2018	FICA Social Security tax payable	$16,864
	FICA Medicare tax payable	$3,944
	Federal unemployment tax payable	$291
	State unemployment tax payable	$2,619
	Federal income tax withheld	$20,400
	United Way Payable	$12,500
	Health Insurance payable	$60,000
	Cash		$116,618