Question

Vacation Destinations offers its employees the option of contributing up to 7% of their salaries to a voluntary retirement plan, with the employer matching their contribution. The company also pays 100% of medical and life insurance premiums. Assume that no employee's cumulative wages exceed the relevant wage bases. Payroll information for the first biweekly payroll period ending February 14 is listed below.

Wages and salaries	$ 850,000
Employee contribution to voluntary retirement plan	35,700
Medical insurance premiums paid by employer	17,850
Life insurance premiums paid by employer	3,400
Federal and state income tax withheld	212,500
Social Security tax rate	6.20 %
Medicare tax rate	1.45 %
Federal and state unemployment tax rate	6.20 %

Required:

1. Record the employee salary expense, withholdings, and salaries payable.
2. Record the employer-provided fringe benefits.
3. Record the employer payroll taxes.

Record the necessary entry for the scenarios given above.

Answer 1

No.	General Journal	Debit	Credit
1.	Salaries Expense	850,000
	Income tax payable		212,500
	Accounts payable (Retirement plan)		35,700
	FICA tax payable [$850,000 * (6.2+1.45)/100]		65,025
	Salaries payable (Balance)		536,775
2.	Salaries Expense	56,950
	Accounts payable (Medical insurance)		17,850
	Accounts payable (Life insurance)		3,400
	Accounts payable (Retirement plan)		35,700
3.	Payroll tax Expense	118,065
	FICA tax payable		65,025
	Federal and state unemployment tax ($850,000 * 6.2%)		53,040