Question

Following are some transactions and events of Business Solutions.
  

Feb.		26		The company paid cash to Lyn Addie for eight days' work at $140 per day.
Mar.		25		The company sold merchandise with a $2,002 cost for $2,870 on credit to Wildcat Services, invoice dated March 25.

Required:
1. Assume that Lyn Addie is an unmarried employee. Her $1,120 of wages are subject to no deductions other than FICA Social Security taxes, FICA Medicare taxes, and federal income taxes. Her federal income taxes for this pay period total $112. Compute her net pay for the eight days' work paid on February 26. (Round your answer to 2 decimal places. Do not round intermediate calculations.)

	Net pay

2. Record the journal entry to reflect the payroll payment to Lyn Addie as computed in part 1. (Round your answers to 2 decimal places. Do not round intermediate calculations.)

Journal entry worksheet

Record the payroll expenses and liabilities for the eight days’ work paid on February 26.

Note: Enter debits before credits.

	Date General Journal Debit Credit Feb 26, 2018

3. Record the journal entry to reflect the (employer) payroll tax expenses for the February 26 payroll payment. Assume Lyn Addie has not met earnings limits for FUTA and SUTA (the FUTA rate is 0.6% and the SUTA rate is 4% for the company. (Round your answers to 2 decimal places. Do not round intermediate calculations.)

Journal entry worksheet

Record the employer’s payroll expenses and liabilities for the eight days’ work paid on February 26.

Note: Enter debits before credits.

	Date General Journal Debit Credit Feb 26, 2018

4. Record the entries for the merchandise sold on March 25 if a 4% sales tax rate applies. (Round your answers to the nearest whole dollar.)

Journal entry worksheet

Record the sales revenue of $2,870 on account to Wildcat Services together with 4% sales tax on every dollar of merchandise sold.

Note: Enter debits before credits.

	Date General Journal Debit Credit Mar 25, 2018

Journal entry worksheet

Record the cost of goods sold of $2,002.

Note: Enter debits before credits.

	Date General Journal Debit Credit Mar 25, 2018

Answer 1

1) Net pay = Gross pay - Federal income taxes withheld - FICA Social Security taxes - FICA Medicare taxes = 1120 - 112 - (1120*6.2%) - (1120*1.45%) = 1120 - 112 - 69.44 - 16.24 = $922.33

2) Journal entry of Payroll payment :

Date	Accounts Titles	Debit $	Credit $
Feb 26 2018	Salary	1120
	Federal Income tax withheld		112
	FICA Social Security taxes		69.44
	FICA Medicare taxes		16.24
	Cash		922.33
	(being payroll payments)

3) Journal entry of Payroll expenses :

Date	Accounts Titles	Debit $	Credit $
Feb 26 2018	Payroll expenses	137.20
	FICA Social Security taxes payable		69.44
	FICA Medicare taxes payable		16.24
	FUTA Unemployment payable(0.6%)		6.72
	SUTA Unemployment payable (4%)		44.80
	(being payroll expenses made due)

4) Journal Entries:

Date	Accounts Titles	Debit $	Credit $
Mar 25 2018	Accounts Receivable	2870
	Sales Revenue (2870 - 110)		2760
	Sales Tax (2870 * 4 / 104)		110
	(being sales made with sales taxes)
Mar 25 2018	COGS	2002
	F G Inventory		2002
	(being cost of sales booked)