Question

Following are the some transactions and events of Success Systems.

  

Feb. 26	The company paid cash to Lyn Addie for eight days’ work at $130 per day.
Mar. 25	The company sold merchandise with a $2,052 cost for $2,920 on credit to Wildcat Services, invoice dated March 25.

  

Required:

1.	Assume that Lyn Addie is an unmarried employee. Her $1,040 of wages are subject to no deductions other than FICA Social Security taxes, FICA Medicare taxes, and federal income taxes. Her federal income taxes for this pay period total $104. Compute her net pay for the eight days’ work paid on February 26.(Round your answer to 2 decimal places.)

     

2.	Record the journal entry to reflect the payroll payment to Lyn Addie as computed in part 1. (Round your answers to 2 decimal places.)

     

3.	Record the journal entry to reflect the (employer) payroll tax expenses for the February 26 payroll payment. Assume Lyn Addie has not met earnings limits for FUTA and SUTA—the FUTA rate is 0.6% and the SUTA rate is 4% for Success Systems. (Round your answers to 2 decimal places.)

     

4.	Record the entries for the merchandise sold on March 25 if a 4% sales tax rate applies.

     

Answer 1

1		Gross Wages	1040
	Less	FICA social security at 6.2%	64.48
	Less	FICA Medicare at 1.45%	15.08
	Less	Deferal income tax	104
		Net Pay	856.44
2	Date	General Journal	Debit	Credit
	Feb 26	Salaries and wage expense	$ 1,040.00
		FICA social security payable		$        64.48
		FICA medicare payable		$        15.08
		Federal income tax payable		$     104.00
		Cash		$     856.44
3	Date	General Journal	Debit	Credit
	Feb 26	Payroll Tax expense	$      127.40
		FICA social security payable		$        64.48
		FICA medicare payable		$        15.08
		SUTA Payable(1040 x 4%)		$        41.60
		FUTA Payable(1040 x 0.6%)		$          6.24
4	Date	General Journal	Debit	Credit
	Mar 25	Accounts Receivable- Wildcat Services	$ 3,036.80
		Sales		$ 2,920.00
		Sales Taxes Payable		$     116.80
		Cost of Goods Sold	$ 2,052.00
		Merchandise Inventory		$ 2,052.00