Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Blueprint Problem: Payroll Current liabilities related to payroll In many businesses, a major category of current liabilities is related to employee earnings. When employees earnwagesandsalaries,

Blueprint Problem: Payroll

Current liabilities related to payroll

In many businesses, a major category of current liabilities is related to employee earnings. When employees earnwagesandsalaries, those amounts are subject toFICA tax), and Medicare tax. Many states and some cities also require that income taxes be withheld from employee earnings.')" >taxesandother deductionsthat the employer must withhold. The taxes and other deductions that the employer withholds become

SelectliabilitiesassetsCorrect 1 of Item 1

for the employer. These amounts are usually classified as

Selectcurrent liabilitiescurrent assetsCorrect 2 of Item 1

on the balance sheet.

The employer is also required by law to payemployer taxeson employee earnings. Since these amounts must be paid to government agencies, they areSelectliabilitiesassetsCorrect 3 of Item 1for the employer. These amounts are usually classified asSelectcurrent liabilitiescurrent assetsCorrect 4 of Item 1on the balance sheet.

Hide

APPLY THE CONCEPTS: Recording payroll entries

The payroll clerk at Tremor, Inc., has used a spreadsheet program to produce a printout of the salaries for May 15.

Employees' total earnings $60,000
Deductions from earnings:
Federal income tax $9,600
State income tax 2,400
Social Security tax 3,720
Medicare tax 870
Medical insurance 1,200
Total deductions 17,790
Take-home pay $42,210
Use the data in the spreadsheet to:
1. Prepare the entry to record the weekly salary. The salaries will not be paid until May 20.
2. Prepare the entry to record the employer's payroll tax expense. In addition to the data for Social Security and Medicare in the table, which the employer must also pay, assume a 0.8% federal unemployment tax rate and a 5.4% state unemployment tax rate. Also assume that all wages are subject to these two taxes.

If an amount box does not require an entry, leave it blank or enter "0".

Not sure about the account title? Click below to view the chart of accounts.
+Assets
+Liabilities
+Equity
+Revenues/Gains
+Expenses/Losses
GENERAL JOURNAL
page 1
DATE DESCRIPTION DOC. NO. POST. REF. DEBIT CREDIT
1 May 15 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 2. May 15 9
10 10
11 11
12 12
13 13

Indicate the effect of the journal entries above on the accounting equation. Each row in the table corresponds to the row in the journal.

Accounting Equation
Row Assets = Liabilities + Equity
1. Select+-no effectCorrect 1 of Item 3 Select+-no effectCorrect 2 of Item 3 Select+-no effectCorrect 3 of Item 3
2. Select+-no effectCorrect 4 of Item 3 Select+-no effectCorrect 5 of Item 3 Select+-no effectCorrect 6 of Item 3
3. Select+-no effectCorrect 7 of Item 3 Select+-no effectCorrect 8 of Item 3 Select+-no effectCorrect 9 of Item 3
4. Select+-no effectCorrect 10 of Item 3 Select+-no effectCorrect 11 of Item 3 Select+-no effectCorrect 12 of Item 3
5. Select+-no effectCorrect 13 of Item 3 Select+-no effectCorrect 14 of Item 3 Select+-no effectCorrect 15 of Item 3
6. Select+-no effectCorrect 16 of Item 3 Select+-no effectCorrect 17 of Item 3 Select+-no effectCorrect 18 of Item 3
7. Select+-no effectCorrect 19 of Item 3 Select+-no effectCorrect 20 of Item 3 Select+-no effectCorrect 21 of Item 3
9. Select+-no effectCorrect 22 of Item 3 Select+-no effectCorrect 23 of Item 3 Select+-no effectCorrect 24 of Item 3
10. Select+-no effectCorrect 25 of Item 3 Select+-no effectCorrect 26 of Item 3 Select+-no effectCorrect 27 of Item 3
11. Select+-no effectCorrect 28 of Item 3 Select+-no effectCorrect 29 of Item 3 Select+-no effectCorrect 30 of Item 3
12. Select+-no effectCorrect 31 of Item 3 Select+-no effectCorrect 32 of Item 3 Select+-no effectCorrect 33 of Item 3
13. Select+-no effectCorrect 34 of Item 3 Select+-no effectCorrect 35 of Item 3 Select+-no effectCorrect 36 of Item 3

The total cost of labor for Tremor, Inc., for this period is $

In the future, as each of the payroll liabilities are paid, the liability will beSelectcrediteddebitedCorrect 2 of Item 4and Cash will beSelectcrediteddebitedCorrect 3 of Item 4

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting A Business Process Approach

Authors: Jane L Reimers

2nd Edition

131473867, 978-0131473867

More Books

Students also viewed these Accounting questions