Assume an employee of Rocco Rock Company earns $1,400 of gross wages during the current pay period and is required to remit to the government $140 for income tax and $70 for FICA. Consider the following two procedures for paying the employee:

Procedure One: Withholdings

Rocco Rock Company pays the employee net wages of $1,190 and will remit income taxes and FICA on behalf of the employee.

Procedure Two: No Withholdings

Rocco Rock Company pays the employee gross wages of $1,400 and the employee is responsible for remitting income taxes and FICA himself.

Ignoring employer payroll taxes, under each procedure calculate (a) the total labor cost for the company and (b) the amount of cash the employee will have after satisfying all responsibilities to the government.

	Total Labor Cost	Amount of Cash
Procedure 1
Procedure 2

Do your answers for procedures 1 and 2 differ for (a)? for (b)? Y/N?
Which approach does the government require? Procedure 1 or 2? Prepare the journal entries required by the employer under procedure 1, assuming that the employee is paid in cash, but the withholdings and matching employer FICA contribution have not yet been paid. (Assume no unemployment taxes.)