Question

In: Accounting

Ergo Company has one employee who is paid a salary of $8,500 per month. Payroll information...

Ergo Company has one employee who is paid a salary of $8,500 per month. Payroll information for the first month of the year is:

Federal and state income tax withheld

$1,275

FICA (social security and Medicare)

7.65%

Federal unemployment (FUTA and SUTA) tax rate (on the 1st $7,000 of wages)

6.2%

Insurance Premiums (paid by Employees)

$400

Part I: Prepare Ergo’s journal entry to record the first month’s salary expense and employee withholdings. Payroll tax expense will be recorded in part 2.

Date

Account Name

Debit

Credit

Part 2: Prepare Ergo’s journal entry to record employer payroll taxes for the first month’s payroll.

Date

Account Name

Debit

Credit

Notes Receivable

On September 1, 2016, Hare Today pet-supply store Co. borrowed $9,000 from Gone Tomorrow Bank, signing a 6-month, 4-percent note. Interest is to be paid at maturity. Hare Today and Gone Tomorrow both have a December 31 year-end.

1. Record the journal entry for the transaction for Hare Today on September 1, 2016.

2. Record the appropriate adjusting entry related to the note by Hare Today on December 31, 2016.

3. Record the journal entry for the receipt of the amount due to Hare Today at the note’s maturity on March 1, 2017.

Date

Account Name

Debit

Credit

   

    

    

    

                            

Notes Payable

On September 1, 2016, Hare Today pet-supply store Co. borrowed $9,000 from Gone Tomorrow Bank, signing a 6-month, 4-percent note. Interest is to be paid at maturity. Hare Today and Gone Tomorrow both have a December 31 year-end.

1. Record the journal entry for the transaction for Gone Tomorrow on September 1, 2016.

2. Record the appropriate adjusting entry related to the note by Gone Tomorrow on December 31, 2016.

3. Record the journal entry for the payment of the amount due to Gone Tomorrow at the note’s maturity on March 1, 2017.

Date

Account Name

Debit

Credit

   

    

    

    

Solutions

Expert Solution

Date Account name Debit Credit
Wage expense 8500
Fedral and state income taxes payable 1275
FICA taxes payable (8500*7.65%) 650.25
Insuarance payable 400
Cash 6174.75
(record the first month’s salary expense
and employee withholdings)
Payroll tax expenses 1084.25
FICA taxes payable (8500*7.65%) 650.25
Federal unemployment taxes payable (7000*6.2%) 434
(record employer payroll taxes for the first month’s payroll)
Notes receivable
Date Account name Debit Credit
2016
Sept 1. Notes receivable 9000
Cash 9000
(Notes issued to Hare today)
Dec 31. Interest receivable (9000*4%*4/12) 120
Interest revenue 120
(Interest on note for 4 months accrued)
2017
Mar 1. Cash 9180
Notes receivable 9000
Interest receivable 120
Interest revenue (9000*4%*2/12) 60
(Notes matured)

ekkarill92 answered 1 year ago
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