Question

Electronics Service Co. pays salaries monthly on the last day of the month. The following information is available from Electronics for the month ended December 31, Year 1:

Administrative salaries	$	80,000
Sales salaries		68,000
Office salaries		49,000

Assume the Social Security tax rate is 6.0 percent on the first $110,000 of salaries and the Medicare tax rate is 1.5 percent on all salaries. Duke reached the $110,000 amount in September. His salary in December amounted to $10,000 and is included in the $80,000. No one else will reach the $110,000 amount for the year. None of the employee salaries are subject to unemployment tax in December.

Other amounts withheld from salaries in December were as follows:

Federal income tax	$	16,000
State income tax		5,200
Employee savings plan		3,500

a. Prepare the journal entry to record the payment of payroll on December 31, Year 1. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare the journal entry to record the payroll tax expense for Electronics Service Co. for December Year 1. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Electronics Service Co. pays salaries monthly on the last day of the month.The salaries for the Administrative , sales and office peronnels has been given.

Total Gross salary = Administrative salary + Sales salaries + Office salaries = $ 80000 + 68000 + 49000

Gross salary = $ 197,000 .

FICA - Social security tax rate = 6.0% , and it will be applied on the gross pay , upto a limit of each employee of $ 110000, here Duke a administrative persons salary has exceeded the limit, so social security taxes will not be withheld for $ 10000, out of the gross pay.

Thus Social security tax = $ 187000 * 6.0% ( 197000 - 10000 )

Social security taxes withheld = $ 11,220

medicare taxes withheld = $ 197000 * 1.5% = $ 2,995

Based on the above information the journal entry for the accrual of salary will be as follows:

Here the journal entry for accrual is also given for better understanding, and the gross salary is combined for each pay to administrative, sales and office salaries.

Date	Accounts title and Explanation	Debit	Credit
Dec .31	Salary Expenses	$1,97,000
	Social security taxes Payable		$11,220
	Medicare tax payable		$2,955
	Federal Income tax withholding Payable		$16,000
	State Income tax withholding Payable		$5,200
	Employees Saving plan withheld payable		$3,500
	Net Salary Payable		$1,58,125
	( To record accrual of salary expenses)

A )  Prepare the journal entry to record the payment of payroll on December 31, Year 1 : the payment entry for the payroll will be debit to the payable and credit to the cash account.

Date	Accounts title and Explanation	Debit	Credit
Dec .31	Net Salary Payable	$1,58,125
	Cash		$1,58,125
	( To record payment of payroll)

B )

Payroll tax expenses include the employers contribution to the Social security and medicare taxes, which will be equal to the employees, ie Social security taxes = $ 11,220 and Medicare taxes = $ 2955

Here None of the employee salaries are subject to unemployment tax in December.so No FUTA aor SUTA taxes will be payable : thus journal entry will be as follows: Here only accrual entry is made, please comment if payment entry is also required will update the answer.

Date	Accounts title and Explanation	Debit	Credit
Dec .31	Employer's Payroll tax Expenses	$14,175
	Social security Taxes Payable - Employer		$11,220
	Medicare tax payable - Employer		$2,955
	( To record Employers payroll expenses)