Question

Alamar Petroleum Company offers its employees the option of contributing retirement funds up to 5% of their salaries, with the contribution being matched by Alamar. The company also pays 80% 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	$	2,300,000
Employee contribution to voluntary retirement plan		87,000
Medical insurance premiums		45,000
Life insurance premiums		9,300
Federal income taxes to be withheld		430,000
Local income taxes to be withheld		56,000
Payroll taxes:
Federal unemployment tax rate		0.60	%
State unemployment tax rate (after SUTA deduction)		5.40	%
Social Security tax rate		6.20	%
Medicare tax rate		1.45	%

   
Required:
Prepare the appropriate journal entries to record salaries 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.)

• 1

  Record salaries and wages expense.

• 2

  Record payroll tax expense.

• 3

  Record salaries and wage expense for fringe benefits provided by the employer.

Answer 1

Answer: Preparation the appropriate journal entries to record salaries expense and payroll tax expense for the biweekly pay period.
Date	Accounts and Explanation	Debit (in $)	Credit (in $)
	Salaries and Wages Expense	$2,300,000
	Withholding taxes payable - Federal Income		$430,000
	Withholding taxes payable - State income taxes		$56,000
	Social Security taxes payable		$142,600
	Medicare taxes payable		$33,350
	Medicare Insurance payable		$9,000
	Life Insurance payable		$1,860
	Retirement Plan payable		$87,000
	Salaries and Wages payable		$1,540,190
	(To record salaries and wages expense)
	Payroll tax expense	$313,950
	Social Security taxes payable		$142,600
	Medicare taxes payable		$33,350
	State Unemployment taxes payable		$124,200
	Federal Unemployment taxes payable		$13,800
	(To record payroll taxes expense)
	Salaries and Wages Expense	$130,440
	Medicare Insurance payable		$36,000
	Life Insurance payable		$7,440
	Retirement plan payable		$87,000
	(To record salaries and wages expense)
Working Notes:
social security taxes payable = $2,300,000 x 6.2% = $142,600 Medicare taxes payable =$2,300,000x 1.45% = $33,350 State unemployment taxes payable = $2,300,000x 5.4% = $124,200 Federal unemployment taxes payable = $2,300,000 x 0.6% = 13,800 Medical insurance payable = $45,000 x 20% = $9,000 Life insurance payable = $9,300 x 20% = $1,860 Medical insurance payable = $45,000 x 80% = $36,000 Life insurance payable = $9,300 x 80% = $7,440