Question

The following monthly data are taken from Ramirez Company at July 31: Sales salaries, $460,000; Office salaries, $92,000; Federal income taxes withheld, $138,000; State income taxes withheld, $31,000; Social security taxes withheld, $34,224; Medicare taxes withheld, $8,004; Medical insurance premiums, $11,000; Life insurance premiums, $8,000; Union dues deducted, $5,000; and Salaries subject to unemployment taxes, $58,000. The employee pays 40% of medical and life insurance premiums. Assume that FICA taxes are identical to those on employees and that SUTA taxes are 5.4% and FUTA taxes are 0.6%.

Record the accrued employer payroll taxes and all other employer-paid expenses and the cash payment of all liabilities for July-assume that FICA taxes are identical to those on employees and that SUTA taxes are 5.4% and FUTA taxes are 0.6%

a. Record all employer's payroll expenses and liabilities for the month of July.

b. Record the employer's benefit expense.

c. Record the cash payment of all liabilities related to the July payroll.

Answer 1

a. Record all employer's payroll expenses and liabilities for the month of July
Date	General Journal	Debit	Credit
July 31	Payroll taxes expense                                        [Total taxes = $34,224 + $8,004 + $348 + $3,132]	$45,708
	FICA - Social Sec. taxes payable		$34,224
	FICA - Medicare taxes payable		$8,004
	State unemployment taxes payable                   [Refer working note 1]		$3,132
	Federal unemployment taxes payable               [Refer working note 1]		$348
b. Record the employer's benefit expense
Date	General Journal	Debit	Credit
July 31	Employee benefits expense                                   [$6,600 + $4,800]	$11,400
	Employee medical insurance payable             [Refer working note 2]		$6,600
	Employee life insurance payable                    [Refer working note 2]		$4,800
c. Record the cash payment of all liabilities related to the July payroll.
Date	General Journal	Debit	Credit
July 31	FICA - Social Sec. taxes payable         [Employer contribution + Employee contribution = $34,224 + $34,224]	$68,448
	FICA - Medicare taxes payable           [Employer contribution + Employee contribution = $8,004 + $8,004]	$16,008
	Employee fed. Inc. taxes payable	$138,000
	Employee State. Inc. taxes payable	$31,000
	Employee medical insurance payable	$11,000
	Employee life insurance payable	$8,000
	Employee union dues payable	$5,000
	State unemployment taxes payable                     [Refer working note 1]	$3,132
	Federal unemployment taxes payable                [Refer working note 1]	$348
	Cash                                                           [Refer working note 3]		$280,936

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Working note 1
Tax	Amounts Subject to Tax (a)	Tax Rate (b)	Tax Amount (a x b)
State Unemployment Taxes Payable	$58,000	5.40%	$3,132
Federal Unemployment Taxes Payable	$58,000	0.6%	$348

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Working note 2
	Total premium	% paid by employees	Premium paid by employees (Total premium x 40%)	Premium paid by employer [(Total premium x (100% - 40%)]
Employee Medical Insurance Payable	$11,000	40%	$4,400	$6,600
Employee Life Insurance Payable	$8,000	40%	$3,200	$4,800

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Working note 3 - Computation of amount of cash to be paid by the employer (excluding net salaries):
	Amount
FICA - Social Sec. taxes payable         [Employer contribution + Employee contribution = $34,224 + $34,224]	$68,448
FICA - Medicare taxes payable           [Employer contribution + Employee contribution = $8,004 + $8,004]	$16,008
Employee fed. Inc. taxes payable	$138,000
Employee State. Inc. taxes payable	$31,000
Employee medical insurance payable	$11,000
Employee life insurance payable	$8,000
Employee union dues payable	$5,000
Federal unemployment taxes payable                [Refer working note 1]	$348
State unemployment taxes payable                     [Refer working note 1]	$3,132
Total taxes paid in cash	$280,936