Question

The following summary data for the payroll period ended December 27, 2015, are available for Cayman Coating Co.:

  

Gross pay $ 98,000

FICA tax withholdings ?

Income tax withholdings 14,520

Group hospitalization insurance 1,200

Employee contributions to pension plan ?

Total deductions 29,319

Net pay ?

  

Additional information:

For employees, FICA tax rates for 2015 were 7.65% on the first $118,500 of each employee’s annual earnings. However, no employees had accumulated earnings for the year in excess of the $118,500 limit.

For employers, FICA tax rates for 2015 were also 7.65% on the first $118,500 of each employee’s annual earnings.

The federal and state unemployment compensation tax rates are 0.6% and 5.4%, respectively. These rates are levied against the employer for the first $7,000 of each employee’s annual earnings. Only $14,600 of the gross pay amount for the December 27, 2015, pay period was owed to employees who were still under the annual limit.

1.

Required:

a-1. Assuming that Cayman Coating Co.'s payroll for the last week of the year is to be paid on January 3, 2016, use the horizontal model to record the effects of the December 27, 2015, entries for Accrued payroll. (Use amounts with + for increases and amounts with – for decreases.)

2.

a-2. Assuming that Cayman Coating Co.'s payroll for the last week of the year is to be paid on January 3, 2016, record the journal entry to show the effects of the December 27, 2015, entries for Accrued payroll. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3.

b-1. Assuming that Cayman Coating Co.'s payroll for the last week of the year is to be paid on January 3, 2016, use the horizontal model to record the effects of the December 27, 2015, entries for Accrued payroll taxes. (Use amounts with + for increases and amounts with – for decreases.)

4.

b-2. Assuming that Cayman Coating Co.'s payroll for the last week of the year is to be paid on January 3, 2016, record the journal entry to show the effects of the December 27, 2015, entries for Accrued payroll taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer a.1
Gross Pay		$98,000.00
FICA tax withholding - $98000 X 7.65%	$     7,497.00
Income Tax Witholdings	$   14,520.00
Group hospitalization Insurance	$     1,200.00
Employee Contributions to Pension Plan(balancing figure)	$     6,102.00	$29,319.00
Net Pay		$68,681.00

Answer a.2
	Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
27/12/2015	Wages & Salaries Exp.                                 Dr.	$   98,000.00
	To FICA Tax Witholdings		$   7,497.00
	To Income Tax Witholdings		$ 14,520.00
	To Group Hospitalization Insurance		$   1,200.00
	To Employee Contribution to Pension Plan		$   6,102.00
	To Wages & Salaries Payable		$ 68,681.00
	(Record the accrued Payroll and Taxes)

Balance Sheet

Assets

=

Liabilities

+

Stockholders' Equity

Income Statement

Withholding Liabilities

Net Income

=

Revenues

-

Expenses

FICA tax withholding

$ 7,497.00

Retained Earnings

$(98,000.00)

$(98,000.00)

-

Salearies & Wages exp.

$98,000.00

Income Tax Witholdings

$14,520.00

Group hospitalization Insurance

$ 1,200.00

Employee Contributions to Pension

$ 6,102.00

Wages & salaries Payable

$68,681.00