Question

Payroll Accounts and Year-End Entries

The following accounts, with the balances indicated, appear in the ledger of Codigo Co. on December 1 of the current year:

101	Salaries Payable	—
102	Social Security Tax Payable	$2,913
103	Medicare Tax Payable	728
104	Employees Federal Income Tax Payable	4,490
105	Employees State Income Tax Payable	4,078
106	State Unemployment Tax Payable	1,260
107	Federal Unemployment Tax Payable	360
108	Retirement Savings Deductions Payable	2,300
109	Medical Insurance Payable	2,520
201	Sales Salaries Expense	700,000
301	Officers Salaries Expense	340,000
401	Office Salaries Expense	125,000
408	Payroll Tax Expense	59,491

The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 1.	Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy.
1.	Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees' federal income tax due.
2.	Issued Check No. 817 for $2,300 to Alvarez Bank to invest in a retirement savings account for employees.
12.	Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:
	Salary distribution: Sales $14,500 Officers 7,100 Office 2,600 $24,200 Deductions: Social security tax $1,452 Medicare tax 363 Federal income tax withheld 4,308 State income tax withheld 1,089 Retirement savings deductions 1,150 Medical insurance deductions 420 8,782 Net amount $15,418
12.	Issued Check No. 822 in payment of the net amount of the biweekly payroll to fund the payroll bank account.
12.	Journalized the entry to record payroll taxes on employees' earnings of December 12: social security tax, $1,452; Medicare tax, $363; state unemployment tax, $315; federal unemployment tax, $90.
15.	Issued Check No. 830 to Alvarez Bank for $7,938, in payment of $2,904 of social security tax, $726 of Medicare tax, and $4,308 of employees' federal income tax due.
26.	Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:
	Salary distribution: Sales $14,250 Officers 7,250 Office 2,750 $24,250 Deductions: Social security tax $1,455 Medicare tax 364 Federal income tax withheld 4,317 State income tax withheld 1,091 Retirement savings deductions 1,150 8,377 Net amount $15,873
26.	Issued Check No. 840 for the net amount of the biweekly payroll to fund the payroll bank account.
26.	Journalized the entry to record payroll taxes on employees' earnings of December 26: social security tax, $1,455; Medicare tax, $364; state unemployment tax, $150; federal unemployment tax, $40.
30.	Issued Check No. 851 for $6,258 to State Department of Revenue, in payment of employees' state income tax due on December 31.
30.	Issued Check No. 852 to Alvarez Bank for $2,300 to invest in a retirement savings account for employees.
31.	Paid $55,400 to the employee pension plan. The annual pension cost is $65,500. (Record both the payment and the unfunded pension liability.)

Required:

1. Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. For December 12th and 26th transactions, (a.) record the payroll and (b.) payment of salaries.

Date	Account	Debit	Credit
Dec. 1-Ins.
Dec. 1-Taxes
Dec. 2
Dec. 12 (a.)
Dec. 12 (b.)
Dec. 12-Taxes
Dec. 15
Dec. 26 (a.)
Dec. 26 (b.)
Dec. 26-Taxes
Dec. 30-Taxes
Dec. 30-Bonds
Dec. 31

2. Journalize the following adjusting entries on December 31:

a. Salaries accrued: sales salaries, $4,275; officers salaries, $2,175; office salaries, $825. The payroll taxes are immaterial and are not accrued. For a compound transaction, if an amount box does not require an entry, leave it blank.

Date	Account	Debit	Credit
Dec. 31

b. Vacation pay, $13,350.

Date	Account	Debit	Credit
Dec. 31

Answer 1

Date	Account Description	Debit	Credit
1-Dec	Medical Insurance Payable	2,520.00
	Cash		2,520.00
	(Issued Check No. 815 to Aberderas Insurance Company)
1-Dec	Employees Federal Income Tax Payable	4,490.00
	Social Security Tax Payable	2,913.00
	Medicare Tax Payable	728.00
	Cash		8,131.00
	(Issued Check No. 816 to Alvarez Bank for $8,131)
2-Dec	Retirement Savings Deductions Payable	2,300.00
	Cash		2,300.00
	(Issued Check No. 817 for $2,300 to Alvarez Bank)
12-Dec	Sales Salaries Expense	14,500.00
	Officers Salaries Expense	7,100.00
	Office Salaries Expense	2,600.00
	Medical Insurance Payable		420.00
	Social Security Tax Payable		1,452.00
	Medicare Tax Payable		363.00
	Retirement Savings Deductions Payable		1,150.00
	Employees Federal Income Tax Payable		4,308.00
	State Income Tax Payable		1,089.00
	Salary Payable		15,418.00
	(Being Payroll expenses Recorded)
12-Dec	Salary Payable	15,418.00
	Cash		15,418.00
	(Being salary Paid)
12-Dec	Payroll taxes	2,220.00
	Social Security Tax Payable		1,452.00
	Medicare Tax Payable		363.00
	State Unemployment Tax Payable		315.00
	Federal Unemployment Tax Payable		90.00
	(Being Payroll Expenses Recorded)
15-Dec	Social Security Tax Payable	2,904.00
	Medicare Tax Payable	726.00
	Federal Unemployment Tax Payable	4,308.00
	To Cash		7,938.00
	(Issued Check No. 830 to Alvarez Bank for $7,938)
26-Dec	Sales Salaries Expense	14,250.00
	Officers Salaries Expense	7,250.00
	Office Salaries Expense	2,750.00
	Medical Insurance Payable
	Social Security Tax Payable		1,455.00
	Medicare Tax Payable		364.00
	Retirement Savings Deductions Payable		1,150.00
	Employees Federal Income Tax Payable		4,317.00
	State Income Tax Payable		1,091.00
	Salary Payable		15,873.00
	(Being Payroll expenses Recorded)
26-Dec	Salary Payable	15,873.00
	Cash		15,873.00
	(Being salary Paid)
26-Dec	Payroll taxes	2,009.00
	Social Security Tax Payable		1,455.00
	Medicare Tax Payable		364.00
	State Unemployment Tax Payable		150.00
	Federal Unemployment Tax Payable		40.00
	(Being Payroll Expenses Recorded)
30-Dec	State Income Tax Payable	6,528.00
	Cash		6,528.00
	(Issued Check No. 851 for $6,258 to State Department of Revenue,)
30-Dec	Retirement Savings Deductions Payable	2,300.00
	Cash		2,300.00
	(Issued Check No. 852 to Alvarez Bank for $2,300 )
31-Dec	Pension Expenses	65,500.00
	Cash		55,400.00
	Pension liability		10,100.00
2
a	Sales Salaries Expense	4,275.00
	Officers Salaries Expense	2,175.00
	Office Salaries Expense	825.00
	To Accrued Salaries		7,275.00
b	Vacation Expenses	13,350.00
	To Vacation Payable		13,350.00