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Chapter 11: Q8SE (page 605)

Macintosh Company has monthly salaries of \(26,000. Assume Macintosh pays all the standard payroll taxes, no employees have reached the payroll tax limits, total income tax withheld is \)2,000, and the only payroll deductions are payroll taxes. Journalize the accrual of salaries expense, accrual of employer payroll taxes, and payment of employee and employer payroll taxes for Macintosh Company.

Short Answer

Expert verified

The journal entry for the employers鈥� expenses and the payment of employers鈥� expenses are recorded.

Incomplete

Step by step solution

01

Computation of taxes payable amount

FICAOASDItaxespayable=Monthlysalaries脳Rate=26,000脳6.2%=$1,612

FICAMedicaretaxespayable=SalariesAmount脳Rate=26,000脳1.45=$377

role="math" localid="1657178864056" FederalUnemploymenttaxespayable=Salaryamount脳Rate=26,000脳0.6%=$156

StateUnemploymenttaxespayable=Salaryamount脳Rate=26,000脳5.4%=$1,404

Payrolltaxexpense=FICAOASDI+FICAMedicare+FederalIncometaxespayable+FederalUnemploymenttaxespayable+StateUnemploymenttaxespayable=1,612+377+2,000+156+1,404=$5,549

02

Journal entries

Journal

Date

Accounts and Explanation

Debit ($)

Credit ($)

Salaries and wages Expense

26,000

FICA OASDI Taxes Payable

1,612

FICA Medicare Taxes Payable

377

Federal Income taxes Payable

2,000

Salaries and wages payable

22,011

(accrual of salaries and wages expense

Salaries and wages payable

22,011

Cash

22,011

(Salaries and wages paid)

Payroll Tax Expense

5,549

FICA OASDI Taxes Payable

1,612

FICA Medicare Taxes Payable

377

Federal Income taxes Payable

2,000

Federal Unemployment taxes payable

156

State Unemployment taxes payable

1,404

(To record employer鈥檚 payroll taxes expense

FICA OASDI Taxes Payable

1,612

FICA Medicare Taxes Payable

377

Federal Income taxes Payable

2,000

Federal Unemployment taxes payable

156

State Unemployment taxes payable

1,404

Cash

5,549

(To record the payment of payroll taxes)

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Most popular questions from this chapter

The following transactions of Philadelphia Pharmacies occurred during 2017 and 2018:

2017

Jan. 9 Purchased computer equipment at a cost of \(7,000, signing a six-month, 8% note payable for that amount.

29 Recorded the week鈥檚 sales of \)68,000, three-fourths on credit and one-fourth for cash. Sales amounts are subject to a 6% state sales tax. Ignore cost of goods sold.

Feb. 5 Sent the last week鈥檚 sales tax to the state.

Jul. 9 Paid the six-month, 8% note, plus interest, at maturity.

Aug. 31 Purchased merchandise inventory for \(3,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system.

Dec. 31 Accrued warranty expense, which is estimated at 2% of sales of \)609,000.

31 Accrued interest on all outstanding notes payable.

2018

Feb. 28 Paid the six-month 10% note, plus interest, at maturity.

Journalize the transactions in Plymouth鈥檚 general journal. Explanations are not required.

:On December 31, 2017, Franklin purchased $13,000 of merchandise inventory on a one-year, 9% note payable. Franklin uses a perpetual inventory system. Requirements

1. Journalize the company鈥檚 purchase of merchandise inventory on December 31, 2017.

2. Journalize the company鈥檚 accrual of interest expense on June 30, 2018, its fiscal year-end.

3. Journalize the company鈥檚 payment of the note plus interest on December 31, 2018

Accounting treatment for contigencies

Analyze the following independent situations.

  1. Weaver, Inc. is being sued by a former employee. Weaver believes that there is a remote chance that the employee will win. The employee is suing weaver for damages of \(40.000.
  2. Gulf Oil Refinery had a gas explosion on one of its oil rigs. Gulf believes it is likely that it will have to pay environmental clean-up costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages.
  3. Lawson Enterprises estimates that it will have to pay \)75,000 in warranty repairs next year.

Determine how each contingency should be treated.

How might a business use a payroll register?

What is a contingent liability? Provide some examples of contingencies.
See all solutions

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