Question

For the year ended December 31, 2019, Waterway Electrical Repair Company reports the following summary payroll data.

Gross earnings:
	Administrative salaries			$169,000
	Electricians’ wages			461,000
		Total		$630,000
Deductions:
	FICA taxes			$38,645
	Federal income taxes withheld			165,000
	State income taxes withheld (3%)			18,900
	United Fund contributions payable			30,288
	Health insurance premiums			18,200
		Total		$275,003

Waterway Company’s payroll taxes are Social Security tax 6.2%, Medicare tax 1.45%, state unemployment 2.5% (due to a stable employment record), and 0.8% federal unemployment. Gross earnings subject to Social Security taxes of 6.2% total $540,000 and gross earnings subject to unemployment taxes total $137,000.

A)Prepare a summary journal entry at December 31 for the full year’s payroll.

B)Journalize the adjusting entry at December 31 to record the employer’s payroll taxes.

Answer 1

No	Account	Debit	Credit	Workings
A	Salaries and wages expense	6,30,000
	FICA taxes payable		38,645
	Federal income taxes payable		1,65,000
	State income taxes payable		18,900
	United fund contributions payable		30,288
	Health insurance premiums payable		18,200
	Salaries and wages payable		3,58,967
B	Payroll tax expense	47,136
	Social security tax payable		33480	=540000*6.2%
	Medicare tax payable		9135	=630000*1.45%
	State unemployment tax payable		3425	=137000*2.5%
	Federal unemployment tax payable		1096	=137000*0.8%

*Hope the above explanation helps, please comment if further explanation is required. Your rating is appreciated*