Question

2. SHOW ALL WORK According to a summary of the payroll of Scotland Company, salaries for the period were $500,000. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (5.4%) and federal (0.8%) unemployment taxes. All earnings are subject to social security tax of 6.0% and Medicare tax of 1.5%.

(a) Journalize the entry to record the accrual of payroll. If required, round your answers to the nearest cent.

(b) Journalize the entry to record the accrual of payroll taxes. If required, round your answers to the nearest cent.

Answer 1

Given, Payroll of Scotland company has salaries of $500,000 for the period.

Federal Income Tax Withheld was $98,000

$15,000 was subject to State (5.4%) and Federal (0.8%) Unemploymaent Taxes

All Earnings are subject to Social SEcurity tax for 6.0% and Medicre Tax of 1.5%

(a) Journalize the entry to record the accrual of payroll.

Calculations:

1) Social Securities TAx Payable = $500,000 * ˆ6% = $30,000

2) Medicare Tax Payable = $500,000 * 1.5% = $7,500

3)Salaries Payable = Total Salaries - Federal Withodling Tax Payable - Social Securities Tax PAyable - Medicare Tax Payable

= $500,000 - $98,000 - $30,000 -$7,500

Salaries Payable = $364,500

Journal Entries for the period
Particulars	Debit	Credit
Salaries Expense A/c	$500,000
Federal Witholding Taxes Payable		$98,000
Social Securities Tax Payable		$30,000
Medicare Tax Payable		$7,500
Salaries Payable		$364,500
[ To record Accrual of Payroll]

b) Journalize the entry to record the accrual of payroll taxes.

Calculations:

1) State Unemployment Taxes Payable = $15,000 * 5.4% = $810

2) Federal Unemployment Taxes Payable = $15,000 * 0.8% = $120

Journal Entries for the period
Particulars	Debit	Credit
Payroll Tax Expenses	$38,430
Social Securities Tax Payable A/c		$30,000
Medicare Tax Payable A/c		$7,500
State Unemployment Tax (SUTA) Payable A/c		$810
Federal Unemployment Tax (FUTA) Payable A/c		$120
[ To record accrual of payroll taxes]