Question

Emily Turnbull, president of Aerobic Equipment Corporation, is concerned about her employees’ well-being. The company offers its employees free medical, dental, and life insurance coverage. It also matches employee contributions to a voluntary retirement plan up to 5% of their salaries. Assume that no employee’s cumulative wages exceed the relevant wage bases. Payroll information for the biweekly payroll period ending January 24 is listed below.

Wages and salaries	$ 1,900,000
Employee contribution to voluntary retirement plan	95,000
Medical insurance premiums paid by employer	38,000
Dental insurance premiums paid by employer	13,300
Life insurance premiums paid by employer	6,650
Federal and state income tax withheld	408,500
FICA tax rate	7.65 %
Federal and state unemployment tax rate	6.20 %

record employees salary expense, withholdings, and salaries payable

record the eomployer provided fringe benefits

record the employer payroll taxes

Answer 1

Date	Account Title	Debit	Credit
xxx	Wages and Salaries	$1,900,000
	Employee contribution to Retirement plan		$95,000
	FICA Taxes payable		$145,350
	Federal and Income tax withheld		$408,500
	Net Wages and salaries payable		$1,251,150
xxx	Payroll Tax expenses	$308,750
	Medical Insurance Premium		$38,000
	Dental Insurance Premium		$13,300
	Life Insurance Premium		$6,650
	Federal and State Unemployment Tax		$117,800
	Contribution to voluntary retirement plan		$133,000

Workings:

FICA taxes payable = $1,900,000*7.65% = $145,350
Net Wages & Salaries Payable = Wages and Salaries - Employee contribution to Retirement plan - FICA Taxes payable - Federal and Income tax withheld

=> $1,900,000 - $95,000 - $145,350 - $408,500 = $1,251,150

Federal and State Unemployment Tax = $1,900,000*6.20% = $117,800
Contribution to voluntary retirement plan = Employee contribution to Retirement plan + Medical Insurance Premium
=> $95,000 + $38,000 = $133,000