Question

Lakeview Company completed the following two transactions. The annual accounting period ends December 31.

On December 31, calculated the payroll, which indicates gross earnings for wages ($100,000), payroll deductions for income tax ($10,000), payroll deductions for FICA ($7,500), payroll deductions for American Cancer Society ($3,750), employer contributions for FICA (matching), and state and federal unemployment taxes ($875). Employees were paid in cash, but payments for the corresponding payroll deductions have not yet been made and employer taxes have not yet been recorded.

Collected rent revenue of $6,375 on December 10 for office space that Lakeview rented to another business. The rent collected was for 30 days from December 12 to January 10 and was credited in full to Deferred Revenue.

Required:

1. & 2. Prepare the journal entries to record payroll on December 31, the collection of rent on December 10 and adjusting journal entry on December 31.

3. Show how any of the liabilities related to these items should be reported on the company’s balance sheet at December 31.

Answer 1

Date	General Journal	Debit	Credit
Dec-31	Salaries and Wages Expenses	$100,000
	Withheld Income Taxes Payable		$10,000
	Charitable Contributions Payable		$3750
	FICA Payable		$7500
	Cash		$78,750
Dec-31	Payroll Tax Expense	$8375
	FICA Payable		$7500
	State And federal Unemployment Taxes Payable		$875
Dec-10	Cash	$6375
	Unearned Rent Revenue		$6375
Dec-31	Unearned Rent Revenue(6375*20/30)	$4250
	Rent Revenue		$4250

Lakeview Company
Balance Sheet Liabilities side
Payroll Deductions for Income Tax	$10,000
Payroll Deduction for FICA	$7500
Payroll Deduction for American Cancer Society	$3750
Employer Contribution for FICA and State Federal Unemployment Taxes	$875
Unearned Rent Revenue	$2125
Total	$24,250