Question
Part 1 Lynbrook, Inc. has decided to begin processing monthly payroll transactions in house, rather than using a Payroll Service Company, like ADP. On January
Part 1
Lynbrook, Inc. has decided to begin processing monthly payroll transactions in house, rather than using a Payroll Service Company, like ADP. On January 31, 2020, the end of the first monthly pay period of the year, Lynbrooks payroll register showed that employees earned $20,000 of office salaries and $50,000 of sales salaries. Withholdings from the employees' salaries include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $14,000 of federal income taxes, $1,300 of medical insurance deductions, and $900 of union dues. No employee earned more than $7,000 in January.
Required:
-
a) Prepare the journal entry related to the gross pay earned by employees on January 31. (Round amounts to the nearest whole dollar.)
-
b) Prepare the journal entry related to the payroll taxes from the January 31 payroll. Lynbrooks state unemployment tax rate is 4% of the first $7,000 earned by each employee. The federal unemployment tax rate is 0.6%, also on the first $7,000 earned by each employee. (round amounts to the nearest whole dollar)
Part 2
As the controller of Lynbrook, Inc., you identified the following transactions that involved liabilities during 2020:
-
a) Purchased merchandise on credit for $80,000. (Note: Assume a periodic inventory system.)
-
b) Year-end estimated income taxes payable, but unpaid, for the year were $113,615.
-
c) Sold merchandise (costing $2,500) on account for $3,636, including state sales taxes of
$180. (Note: Assume a periodic inventory system.)
-
d) Borrowed cash under an $80,000, 6%, 120-day notes payable on December 1, 2020.
Prepare the entry on 12/1/20 to record the note payable and the entry on 12/31/20 to
accrue interest for the period.
Required:
Prepare the entry to record each of these transactions (treat each transaction independently).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started