Chapter 11, Problem 11.5APR

Payroll accounts and year-end entries

The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:

211 Salaries Payable	—
212 Social Security Tax Payable	$ 9,273
213 Medicare Tax Payable	2,318
214 Employees Federal Income Tax Payable	15,455
215 Employees State Income Tax Payable	13,909
216 State Unemployment Tax Payable	1,400
217 Federal Unemployment Tax Payable	SOO
218 Retirement Savings Deductions Payable	$3,400
219 Medical Insurance Payable	27r000
411 Operations Salaries Expense	950.000
S11 Officers Salaries Expense	600,000
SI 2 Office Salaries Expense	150.000
S19 Payroll Tax Expense	137,951

The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 2.	Issued Check No. 410 for 53,400 to Jay Bank to invest in a retirement savings account for employees.
2.	Issued Check No. 411 to Jay Bank for 527,046, in payment of 59,273 of social security tax, 2,318 of Medicare tax, and $15,455 of employees’ federal income tax due.
13	Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

Dec. 13.	Issued Check No. 420 in payment of the net amount of the biweekly payroll to fund the payroll bank account.
13.	Journalized the entry to record payroll taxes on employees' earnings of December 13: social security tax. $4,632; Medicare tax, $1,158; state unemployment tax. $350; federal unemployment tax, $125.
16.	Issued Check No. 424 to Jay Bank for $27,020. in payment of $9,264 of social security tax, $2,316 of Medicare tax, and $15,440 of employees' federal income tax due.
19.	Issued Check No. 429 to Sims-Walker Insurance Company for $31,500, in payment of the semiannual premium on the group medical insurance policy.
27.	Journalized the entry to record the biweekly payroll. A summary of the payroll

27.	Issued Check No. 541 in payment of the net amount of the biweekly payroll to fund the payroll bank account.
27.	Journalized the entry to record payroll taxes on employees' earnings of December 27: social security tax, $4,668; Medicare tax. $1,167: state unemployment tax, $225; federal unemployment tax, $75.
27.	Issued Check No. 543 for $20,884 to State Department of Revenue in payment of employees' state income tax due on December 31.
31.	Issued Check No. 545 to Jay Bank for $3400 to invest in a retirement savings account for employees.
31.	Paid $45,000 to the employee pension plan. The annual pension cost is $60,000. (Record both the payment and unfunded pension liability.)

Instructions

1. 1. Journalize the transactions.
2. 2. Journalize the following adjusting entries on December 31:
   1. a. Salaries accrued: operations salaries, $8,560; officers salaries, $5,600: office salaries, $1,400. The payroll taxes are immaterial and are not accrued.
   2. b. Vacation pay, $15,000.

To determine

Payroll: The total payment that a company is required to pay to its employee for the services received is called as payroll.

Payroll withholding deduction: The amounts which the employer withheld from employees’ gross pay to deduct taxes such as federal income tax, state income tax, local income tax, and social security tax are called payroll withholding deduction.

To Prepare: journal entries for the transactions.

Explanation of Solution

Prepare journal entries for the transactions.

Date		Accounts and Explanation	Post Ref	Debit ($)	Credit ($)
December	2	Bond Deductions Payable		3,400
		Cash			3,400
		(To record investment in a retirement savings)
December	2	Social Security Tax Payable		9,273
		Medicare Tax Payable		2,318
		Employees Federal Income Tax Payable		15,455
		Cash			27,046
		(To record the payment of withholdings taxes)
December	13	Operations Salaries Expense		43,200
		Officers’ Salaries Expense		27,200
		Office Salaries Expense		6,800
		Social Security Tax Payable			4,632
		Medicare Tax Payable			1,158
		Employees Federal Income Tax Payable			15,440
		Employees State Income Tax Payable			3,474
		Bond Deductions Payable			1,700
		Medical Insurance Payable			4,500
		Salaries Payable			46,296
		(To record salaries expense and payroll deductions)
December	13	Salaries Payable		46,296
		Cash			46,296
		(To record the payment of salaries)

Table (1)

Date		Accounts and Explanation	Post Ref	Debit ($)	Credit ($)
December	13	Payroll Tax Expense		6,265
		Social Security Tax Payable			4,632
		Medicare Tax Payable			1,158
		State Unemployment Tax Payable			350
		Federal Unemployment Tax Payable			125
		(To record payroll taxes expense)
December	16	Social Security Tax Payable		9,264
		Medicare Tax Payable		2,316
		Employees Federal Income Tax Payable		15,440
		Cash			27,020
		(To record the payment of withholdings taxes)
December	19	Medical Insurance Payable		31,500
		Cash			31,500
		(To record the payment of medical insurance)
December	27	Operations Salaries Expense		42,800
		Officers’ Salaries Expense		28,000
		Office Salaries Expense		7,000
		Social Security Tax Payable			4,668
		Medicare Tax Payable			1,167
		Employees Federal Income Tax Payable			15,404
		Employees State Income Tax Payable			3,501
		Bond Deductions Payable			1,700
		Salaries Payable			51,360
		(To record salaries expense and payroll deductions)
December	27	Salaries Payable		51,360
		Cash			51,360
		(To record the payment of salaries)
	27	Payroll Tax Expense		6,135
		Social Security Tax Payable			4,668
		Medicare Tax Payable			1,167
		State Unemployment Tax Payable			225
		Federal Unemployment Tax Payable			75
		(To record payroll taxes expense)
December	27	Employees State Income Tax Payable		20,884
		Cash			20,884
		(To record the payment of state income taxes)

Table (2)

Date		Accounts and Explanation	Post Ref	Debit ($)	Credit ($)
December	31	Bond Deductions Payable		3,400
		Cash			3,400
		(To record investment in a retirement savings)
December	31	Pension Expense		60,000
		Cash			45,000
		Unfunded Pension Liability			15,000
		(To record pension cost and unfunded liability)

Table (3)

To determine

To Journalize:  The adjusting entry for accrued salaries on December 31.

Answer to Problem 11.5APR

Prepare adjusting entry for accrued salaries on December 31.

Date		Accounts and Explanation			Post Ref	Debit  ($)	Credit ($)
December	31	Operations Salaries Expense				8,560
		Officers’ Salaries Expense				5,600
		Office Salaries Expense				1,400
			Salaries payable				15,560
				(To record accrued salaries for the period)

Table (4)

Explanation of Solution

• Operations salaries expense is an expense and it decreases the equity value. So, debit it by $8,560.
• Officers’ salaries expense is an expense and it decreases the equity value. So, debit it by $5,600.
• Office salaries expense is an expense and it decreases the equity value. So, debit it by $1,400.
• Salaries payable is a liability and it is increased. So, credit it by $15,560.