Question

Payroll Accounts and Year-End Entries

The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:

211	Salaries Payable	—
212	Social Security Tax Payable	$11,628
213	Medicare Tax Payable	3,060
214	Employees Federal Income Tax Payable	18,870
215	Employees State Income Tax Payable	18,360
216	State Unemployment Tax Payable	1,938
217	Federal Unemployment Tax Payable	612
218	Bond Deductions Payable	4,000
219	Medical Insurance Payable	35,500
411	Operations Salaries Expense	1,235,000
511	Officers Salaries Expense	806,000
512	Office Salaries Expense	205,000
519	Payroll Tax Expense	175,440

The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 2	Issued Check No. 410 for $ 4,000 to Jay Bank to purchase U.S. savings bonds for employees.
Dec. 2	Issued Check No. 411 to Jay Bank for $ 33,558 in payment of $11,628 of social security tax, $3,060 of Medicare tax, and $18,870 of employees' federal income tax due.
Dec. 13	Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

Salary distribution:
Operations	$56,000
Officers	37,000
Office	9,000	102,000
Deductions:
Social security tax	6,120
Medicare tax	1,530
Federal income tax withheld	18,870
State income tax withheld	4,590
Savings bond deductions	2,000
Medical insurance deductions	5,916	39,026
Net amount		62,974

Dec. 13	Issued Check No. 420 in payment of the net amount of the biweekly payroll.
Dec. 13	Journalized the entry to record payroll taxes on employees' earnings of December 13: social security tax, $6,120; Medicare tax, $1,530; state unemployment tax, $480; federal unemployment tax, $160.
Dec. 16	Issued Check No. 424 to Jay Bank for $ 34,170, in payment of $12,240 of social security tax, $3,060 of Medicare tax, and $18,870 of employees' federal income tax due.
Dec. 19	Issued Check No. 429 to Sims-Walker Insurance Company for $ 35,500, in payment of the semiannual premium on the group medical insurance policy.
Dec. 27	Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

Salary distribution:
Operations	$54,000
Officers	37,000
Office	9,000	100,000
Deductions:
Social security tax	6,000
Medicare tax	1,500
Federal income tax withheld	18,300
State income tax withheld	4,500
Savings bond deductions	2,000	32,300
Net amount		67,700

Dec. 27	Issued Check No. 541 in payment of the net amount of the biweekly payroll.
Dec. 27.	Journalized the entry to record payroll taxes on employees' earnings of December 27: social security tax, $6,000; Medicare tax, $1,500; state unemployment tax, $240; federal unemployment tax, $80.
Dec. 27	Issued Check No. 543 for $ 27,450 to State Department of Revenue in payment of employees' state income tax due on December 31.
Dec. 31	Issued Check No. 545 to Jay Bank for $ 4,000 to purchase U.S. savings bonds for employees.
Dec. 31	Paid $54,000 to the employee pension plan. The annual pension cost is $70,000. (Record both the payment and unfunded pension liability.)

Required:

1. Journalize the transactions. If an amount box does not require an entry, leave it blank. For December 13th transactions, (a.) record the payroll and (b.) payment of salaries. For December 27th transactions, (a.) record the payroll, (b.) payment of salaries, (c.) record the taxes, and (d.) payment of taxes.

2a. Journalize the following adjusting entry on December 31. Salaries accrued: operations salaries, $5,400; officers salaries, $3,700; office salaries, $900 . The payroll taxes are immaterial and are not accrued. If an amount box does not require an entry, leave it blank.

2b. Journalize the following adjusting entry on December 31: Vacation pay, $18,900.

Answer 1

Date	General Journal	Debit	Credit
Dec. 2	Bond Deductions payable	4000
	Cash		4000
	(To record payment for purchase of bonds)
Dec. 2	Social security tax payable	11628
	Medicare tax payable	3060
	Employees federal income tax payable	18870
	Cash		33558
	(To record payment of payroll liabilities)
Dec. 13	Operations salaries expense	56000
	Officers salaries expense	37000
	Office salaries expense	9000
	Social security tax payable		6120
	Medicare tax payable		1530
	Employees federal income tax payable		18870
	Employees state income tax payable		4590
	Bond Deductions payable		2000
	Medical insurance payable		5916
	Salaries payable		62974
	(To record biweekly payroll)
Dec. 13	Salaries payable	62974
	Cash		62974
	(To record payment of biweekly payroll)
Dec. 13	Payroll tax expense	8290
	Social security tax payable		6120
	Medicare tax payable		1530
	State unemployment tax payable		480
	Federal unemployment tax payable		160
	(To record biweekly payroll tax expense)
Dec. 16	Social security tax payable	12240
	Medicare tax payable	3060
	Employees federal income tax payable	18870
	Cash		34170
	(To record payment of payroll liabilities)
Dec. 19	Medical insurance payable	35500
	Cash		35500
	(To record payment of group medical insurance premium)
Dec. 27	Operations salaries expense	54000
	Officers salaries expense	37000
	Office salaries expense	9000
	Social security tax payable		6000
	Medicare tax payable		1500
	Employees federal income tax payable		18300
	Employees state income tax payable		4500
	Bond Deductions payable		2000
	Salaries payable		67700
	(To record biweekly payroll)
Dec. 27	Salaries payable	67700
	Cash		67700
	(To record payment of biweekly payroll)
Dec. 27	Payroll tax expense	7820
	Social security tax payable		6000
	Medicare tax payable		1500
	State unemployment tax payable		240
	Federal unemployment tax payable		80
	(To record biweekly payroll tax expense)
Dec. 27	Employees state income tax payable	27450
	Cash		27450
	(To record payment of employees' state income tax liability)
Dec. 31	Bond Deductions payable	4000
	Cash		4000
	(To record payment for purchase of bonds)
Dec. 31	Pension expense	70000
	Cash		54000
	Accrued pension liability		16000
	(To record pension expense)
Dec. 31	Operations salaries expense	8560
	Officers salaries expense	5600
	Office salaries expense	1400
	Salaries payable		15560
	(To record accrued salaries)
Dec. 31	Vacation pay expense	18900
	Vacation payable		18900
	(To record accrued vacation pay)