
1)
Introduction:
Salaries and Tax deductions:
• Salaries expense for an employer comprises of cost of salaries paid and cost of employee benefits and payroll taxes incurred.
• Cost of employee benefits and payroll taxes incurred consist of FICA Tax i.e. Federal Insurance Contributions Act Tax,
• Net salary is calculated as Gross Salary Less Cost of employee benefits and payroll taxes incurred. FICA Tax is calculated as 6.2 % Social Security and 1.45% Medicare totaling up to 7.65% for both employer and employee for a total FICA Tax of 15.30%
• Unemployment tax comprises of 6% Federal Unemployment Tax and State Unemployment Tax at 5.4%.
To Determine:
Gross pay, payroll deductions and Net pay

Answer to Problem 11SP
Solution:
Particulars | Amount ($) |
Per Day Salary | $125.00 |
Number of days worked | 8.00 |
Gross Pay | $1,000.00 |
Payroll Deductions | |
Federal Income tax | $159.00 |
State Income tax | $0.00 |
FICA Tax – Social Security Payable @ 6.2% | $62.00 |
FICA Tax – Medicare Payable @ 1.45% | $14.50 |
Total Payroll Deductions | $235.50 |
Total Net Pay (Total Gross Pay - Payroll Deductions) | $764.50 |
Explanation of Solution
• Per Day Salary is $125.00 and Number of days worked is 8.00. Gross Pay is calculated as product of Per Day Salary and Number of days worked and is $1,000.00.
• Federal Income tax is deductible and total for the period of 8 days amounts is $159.00 whereas State Income tax is $0.00.
• FICA Tax – Social Security Payable is calculated at 6.2% on gross pay and total for the period of 8 days amounts to $62.00.
• FICA Tax – Medicare Payable is calculated at 1.45% on gross pay and total for the period of 8 days amounts to 14.50.
• Total Payroll Deductions is calculated as sum of Federal Income tax, State Income tax, FICA Tax – Social Security Payable @ 6.2% and FICA Tax – Medicare Payable @ 1.45% and total for the period of 8 days amounts to $235.50.
• Total Net Pay is calculated as Total Gross Pay less total Payroll Deductions and total for the period of 8 days amounts to $764.50.
Hence the gross pay, net pay and payroll deductions are computed.
2)
Introduction:
Salaries and Tax deductions:
• Salaries expense for an employer comprises of cost of salaries paid and cost of employee benefits and payroll taxes incurred.
• Cost of employee benefits and payroll taxes incurred consist of FICA Tax i.e. Federal Insurance Contributions Act Tax, Unemployment tax, insurance expenses and retirement benefits expense incurred for the employees.
• Net salary is calculated as Gross Salary Less Cost of employee benefits and payroll taxes incurred.
• FICA Tax is calculated as 6.2 % Social Security and 1.45% Medicare totaling up to 7.65% for both employer and employee for a total FICA Tax of 15.30%
• Unemployment tax comprises of 6% Federal Unemployment Tax and State Unemployment Tax at 5.4%.
Journal Entries
• Journal entries are the first step in recording financial transactions and preparation of financial statements.
• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.
• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.
To Determine:

Answer to Problem 11SP
Solution:
Date | Particulars | Debit | Credit |
2017 | |||
February 26 | Salary Expense | $ 1,000.00 | |
Federal Income tax Payable | $ 159.00 | ||
FICA Tax – Social Security Payable | $ 62.00 | ||
FICA Tax – Medicare Payable | $ 14.50 | ||
Cash | $ 764.50 | ||
(Being Salary expense recorded) | |||
Explanation of Solution
• Assets and Expenses have debit balances and must be debited in order to increase their balance and credited in order to decrease their balances.
• Liabilities and Incomes have credit balances and must be debited in order to decrease their balance and credited in order to increase their balance.
• On February Salary Expense will be debited by $ 1,000.00, Federal Income tax Payable will be credited by $ 159, FICA Tax – Social Security Payable will be credited by $ 62, FICA Tax – Medicare Payable will be credited by $ 14.5 and Cash will be credited by $ 764.50 since Salary expense was recorded.
• Per Day Salary is $125.00 and Number of days worked is 8.00. Gross Pay is calculated as product of Per Day Salary and Number of days worked and is $1,000.00.
• Federal Income tax is deductible and total for the period of 8 days amounts is $159.00 whereas State Income tax is $0.00.
• FICA Tax – Social Security Payable is calculated at 6.2% on gross pay and total for the period of 8 days amounts to $62.00.
• FICA Tax – Medicare Payable is calculated at 1.45% on gross pay and total for the period of 8 days amounts to 14.50.
• Total Payroll Deductions is calculated as sum of Federal Income tax, State Income tax, FICA Tax – Social Security Payable @ 6.2% and FICA Tax – Medicare Payable @ 1.45% and total for the period of 8 days amounts to $235.50.
• Total Net Pay is calculated as Total Gross Pay less total Payroll Deductions and total for the period of 8 days amounts to $764.50.
Hence the transaction for payment of payroll expenses is journalized.
3)
Introduction:
Salaries and Tax deductions:
• Salaries expense for an employer comprises of cost of salaries paid and cost of employee benefits and payroll taxes incurred.
• Cost of employee benefits and payroll taxes incurred consist of FICA Tax i.e. Federal Insurance Contributions Act Tax, Unemployment tax, insurance expenses and retirement benefits expense incurred for the employees.
• Net salary is calculated as Gross Salary Less Cost of employee benefits and payroll taxes incurred. FICA Tax is calculated as 6.2 % Social Security and 1.45% Medicare totaling up to 7.65% for both employer and employee for a total FICA Tax of 15.30%
• Unemployment tax comprises of 6% Federal Unemployment Tax and State Unemployment Tax at 5.4%.
Journal Entries
• Journal entries are the first step in recording financial transactions and preparation of financial statements.
• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.
• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.
To Determine:
Journal entry to record payroll tax expense

Answer to Problem 11SP
Solution:
Date | Particulars | Debit | Credit |
2017 | |||
February 26 | Payroll Tax Expense | $ 874.50 | |
FICA Tax – Social Security Payable | $ 62.00 | ||
FICA Tax – Medicare Payable | $ 14.50 | ||
Federal Unemployment Tax Payable | $ 420.00 | ||
State Unemployment Tax Payable | $ 378.00 | ||
(Being Payroll tax expense recorded) |
Explanation of Solution
• Assets and Expenses have debit balances and must be debited in order to increase their balance and credited in order to decrease their balance.
• On February 26 Payroll Tax Expense will be debited by $ 874.50, FICA Tax – Social Security Payable will be credited by $ 62.5, FICA Tax – Medicare Payable will be credited by $14.50, Federal Unemployment Tax Payable will be credited by $ 420.00 and State Unemployment Tax Payable will be credited by $ 378.00 since payroll tax expense was recorded.
• Liabilities and Incomes have credit balances and must be debited in order to decrease their balance and credited in order to increase their balance.
• Employer’s payroll tax expense comprises of FICA Tax i.e. Federal Insurance Contributions Act Tax and Federal and State Unemployment tax,
• Employer’s portion of FICA Tax is calculated as 6.2 % Social Security and 1.45% Medicare totaling up to 7.65%
• Employer’s Unemployment tax expense comprises of 6% Federal Unemployment Tax and State Unemployment Tax at 5.4%.
• FICA Tax – Social Security Payable is calculated at 6.2% on gross pay and total for the period of 8 days amounts to $62.00.
• FICA Tax – Medicare Payable is calculated at 1.45% on gross pay and total for the period of 8 days amounts to 14.50.
• Federal Unemployment Tax Payable is calculated as 6% on $7,000 since the applicability of Unemployment Tax is on a base of $7,000.
• State Unemployment Tax Payable is calculated as 5.4% on $7,000 since the applicability of Unemployment Tax is on a base of $7,000.
Hence the payment of payroll tax expense has been journalized.
4)
Introduction:
Journal Entries
• Journal entries are the first step in recording financial transactions and preparation of financial statements.
• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.
• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.
To Determine:
Journal entry to record transaction of sale of merchandise with 4% sales tax

Answer to Problem 11SP
Solution:
Date | Account Titles | Debit | Credit |
Feb | |||
25 | $ 2,800.00 | ||
Sales Tax Payable | $ 107.69 | ||
Sales | $ 2,692.31 | ||
(Being credit sales recorded with sales tax of 4%) | |||
25 | Cost of goods sold | $ 2,002.00 | |
Merchandise inventory | $ 2,002.00 | ||
(Being cost of goods sold of credit sale recorded) |
Explanation of Solution
• Assets and Expenses have debit balances and must be debited in order to increase their balance and credited in order to decrease their balance.
• Liabilities and Incomes have credit balances and must be debited in order to decrease their balance and credited in order to increase their balance.
• On February 25 Accounts receivable will be debited by $ 2,800.00, Sales Tax Payable will be credited by $ 107.69 and Sales will be credited by $ 2,692.31 since credit sales were recorded with sales tax of 4%. The sale amount is considered as inclusive of tax and amount of tax is calculated as 4/104 x $2,800 = $107.69
• On February 25 Cost of goods sold will be debited by $ 2,002.00 and Merchandise inventory $ will be credited by 2,002.00 since cost of goods sold of credit sale was recorded.
Hence the transaction for sale of goods is journalized.
Want to see more full solutions like this?
Chapter 11 Solutions
Loose Leaf for Fundamental Accounting Principles
- Please need answer the general accounting question not use aiarrow_forwardGroot Co. (GC) sells $1,200,000 of 6-year, 10% bonds at par plus accrued interest. The bonds are dated January 1, 2026 but due to market conditions are not issued until May 1, 2026. Interest is payable on June 30 and December 31 each year. The market rate of interest at time of issue is the same as the stated rate. Required The issuance of the bonds on May 1, 2026. Assume that GC has adopted a policy of crediting accrued interest payable for the accrued interest on the date of sale. Payment of interest on June 30, 2026. Payment of interest on December 31, 2026.arrow_forward1. Define working capital and explain its importance in financial health and liquidity management. 2. Assess how the matching concept and accrual basis affect the reporting of current assets and liabilities. 3. Using a hypothetical balance sheet (you may create one), identify at least 5 current assets and 5 current liabilities and analyze how changes in these elements affect liquidity ratios. 4. Recommend at least two strategies VinGrenDom Ltd. can implement to optimize working capital.arrow_forward
- Theron Interiors manufactures handcrafted cabinetry and uses a process costing system. During the month of October, the company started Production on 720 units and completed 590 units. The remaining 120 units were 60% complete in terms of materials and 40% complete in terms of labor and overhead. The total cost incurred during the month was $45,000 for materials and $31,200 for labor and overhead. Using the weighted-average method, what is the equivalent unit cost for materials and conversion costs (labor and overhead)?arrow_forwardGeneral Accountingarrow_forwardKamala Khan has to decide between the following two options: Take out a student loan of $70,000 and study accounting full time for the next three years. The interest on the loan is 4% per year payable annually. The principle is to be paid in full after ten years. Study part time and work part time to earn $15,000 per year for the following six years. Once Kamala graduates, she estimates that she will earn $30,000 for the first three years and $40,000 the next four years. Kamala's banker says the market interest for a ten-year horizon is 6%. Required Calculate NPV of the ten-year cash flows of the two options. For simplification assume that all cash flows happen at year-end. Based on the NPV which of the two options is better for Kamala?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





