Question

Alamar Petroleum Company offers its employees the option of contributing retirement funds up to 5% of their wages or salaries, with the contribution being matched by Alamar. The company also pays 85% of medical and life insurance premiums. Deductions relating to these plans and other payroll information for the first biweekly payroll period of February are listed as follows:
   

Wages and salaries	$	2,900,000
Employee contribution to voluntary retirement plan		93,000
Medical insurance premiums		51,000
Life insurance premiums		9,900
Federal income taxes to be withheld		490,000
Local income taxes to be withheld		62,000
Payroll taxes:
Federal unemployment tax rate		0.60	%
State unemployment tax rate (after FUTA deduction)		5.40	%
Social Security tax rate		6.20	%
Medicare tax rate		1.45	%

   
Required:
Prepare the appropriate journal entries to record salaries and wages expense and payroll tax expense for the biweekly pay period. Assume that all employees’ cumulative wages do not exceed the relevant wage bases for Social Security, FUTA or SUTA. Salaries are not yet paid. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Answer 1

General Journal	Debit	Credit
1)
Salaries and wages expense	2,900,000
Withholding taxes payable (federal income tax)		490,000
Withholding taxes payable (local income tax)		62,000
Social security taxes payable (2,900,000 x 6.2%)		179,800
Medicare taxes payable (2,900,000 x 1.45%)		42,050
Medical insurance payable ($51,000 x ( 1-85%)		7,650
Life insurance payable ($9900 x (1 - 85%)		1,485
Retirement plan payable		93,000
Salaries and wages payable		2,024,015
2)
Payroll tax expense	221,850
Social security taxes payable		179,800
Medicare taxes payable		42,050
3)
Salaries and wages expense	144,765
Medical insurance payable ($51,000 x 85%		43,350
Life insurance payable ($9900 x  85%)		8,415
Retirement plan payable		93,000