Question

Problem 11-6AA Entries for payroll transactions LO P2, P3, P5

Francisco Company has 20 employees, each of whom earns $3,000 per month and is paid on the last day of each month. All 20 have been employed continuously at this amount since January 1. On March 1, the following accounts and balances exist in its general ledger:

FICA—Social Security Taxes Payable, $7,440; FICA—Medicare Taxes Payable, $1,740. (The balances of these accounts represent total liabilities for both the employer's and employees' FICA taxes for the February payroll only.)

Employees' Federal Income Taxes Payable, $15,000 (liability for February only).

Federal Unemployment Taxes Payable, $720 (liability for January and February together).

State Unemployment Taxes Payable, $4,800 (liability for January and February together).

During March and April, the company had the following payroll transactions.

Mar.		15		Issued check payable to Swift Bank, a federal depository bank authorized to accept employers' payments of FICA taxes and employee income tax withholdings. The $24,180 check is in payment of the February FICA and employee income taxes.
		31		Recorded the journal entry for the March salaries payable. Then recorded the cash payment of the March payroll (the company issued checks payable to each employee in payment of the March payroll). The payroll register shows the following summary totals for the March pay period.

Salaries
Office Salaries			Shop Salaries		Gross Pay		FICA Taxes*		Federal Income Taxes		Net Pay
	$	24,000	$	36,000	$	60,000	$	3,720	$	15,000	$	40,410
							$	870

* FICA taxes are Social Security and Medicare, respectively.

		31		Recorded the employer's payroll taxes resulting from the March payroll. The company has a merit rating that reduces its state unemployment tax rate to 4.00% of the first $7,000 paid each employee. The federal rate is 0.60%.
Apr.		15		Issued check to Swift Bank in payment of the March FICA and employee income taxes.
		15		Issued check to the State Tax Commission for the January, February, and March state unemployment taxes. Filed the check and the first-quarter tax return with the Commission.
		30		Issued check payable to Swift Bank in payment of the employer's FUTA taxes for the first quarter of the year.
		30		Filed Form 941 with the IRS, reporting the FICA taxes and the employees' federal income tax withholdings for the first quarter.

Required:
Prepare journal entries to record the transactions and events for both March and April. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Journal entry worksheet

1. Mar 15. Record the cash payment of FICA (employees' and employer's) and employee income taxes of the month of February.

2. Mar 31. Record the (employee) payroll expenses and liabilities for the month of March.

3. Mar 31. Record the payment of payroll for March.

4. Mar 31. Record the employer’s payroll expenses and liabilities for the month of March.

5. Apr 15. Record the cash payment of FICA (employees' and employer's) and employee income taxes of the month of March.

6. Apr 15. Record the cash payment of SUTA taxes for the months of January, February and March.

7. Apr 30. Record the cash payment of FUTA taxes for the first quarter of the year.

8. Apr 30. Record the filing of Form 941 to the IRS, reporting the FICA taxes and the employees’ federal income tax withholdings for the first quarter.

Answer 1

The required journal entries should be prepared as follows:

	Date	Account Titles	Debit	Credit
1	Mar. 15	FICA—Social Security Taxes Payable	7440
		FICA—Medicare Taxes Payable	1740
		Employees' Federal Income Taxes Payable	15000
		Cash		24180
2	Mar. 31	Office Salaries Expense	24000
		Shop Salaries Expense	36000
		FICA—Social Security Taxes Payable		3720
		FICA—Medicare Taxes Payable		870
		Employees' Federal Income Taxes Payable		15000
		Salaries Payable		40410
3	Mar. 31	Salaries Payable	40410
		Cash		40410
4	Mar. 31	Payroll Tax Expense	5510
		FICA—Social Security Taxes Payable		3720
		FICA—Medicare Taxes Payable		870
		State Unemployment Taxes Payable ($1,000 x 20 x 4%)		800
		Federal Unemployment Taxes Payable ($1,000 x 20 x 0.60%)		120
5	Apr. 15	FICA—Social Security Taxes Payable ($3,720 + $3,720)	7440
		FICA—Medicare Taxes Payable ($870 + $870)	1740
		Employees' Federal Income Taxes Payable	15000
		Cash		24180
6	Apr. 15	State Unemployment Taxes Payable ($4,800 + $800)	5600
		Cash		5600
7	Apr. 30	Federal Unemployment Taxes Payable ($720 + $120)	840
		Cash		840
8	Apr. 30	No journal entry is required to record the filing of Form 941 to the IRS