Chapter 11, Problem 6BP

Entries for payroll transactions

MLS Company has five employees, each of whom earns $1,600 per month and is paid on the last day of each month. All five have been employed continuously at this amount since January 1. On June 1, the following accounts and balances exist in its general ledger:

1. a. FICA—Social Security Taxes Payable, $992; FICA—Medicare Taxes Payable, $232. (The balances of these accounts represent total liabilities for both the employer’s and employees’ FICA taxes for the May payroll only.)
2. b. Employees’ Federal Income Taxes Payable, $1,050 (liability for May only).
3. c. Federal Unemployment Taxes Payable, $66 (liability for April and May together).
4. d. State Unemployment Taxes Payable, $440 (liability for April and May together).

During June and July, the company had the following payroll transactions.

June    15	Issued check payable to Security Bank, a federal depository bank authorized to accept employers’ payments of FICA taxes and employee income tax withholdings. The $2,274 check is in payment of the May FICA and employee income taxes.
30	Recorded the journal entry for the June salaries payable. Then recorded the cash payment of the June payroll (the company issued checks payable to each employee in payment of the June payroll). The payroll register shows the following summary totals for the June pay period.
30	Recorded the employer’s payroll taxes resulting from the June payroll. The company has a merit rating that reduces its state unemployment tax rate to 4.0% of the first $7,000 paid each employee. The federal rate is 0.6%. Check June 30: Dr. Payroll Taxes Expenses, $612
July    15	Issued check payable to Security Bank in payment of the June FICA and employee income taxes July 15: Cr. Cash, $2,274 (Security Bank)
15	Issued check to the State Tax Commission for the April, May, and June state unemployment taxes. Filed the check and the second-quarter tax return with the State Tax Commission.
31	Issued check payable to Security Bank in payment of the employer’s FUTA taxes for the first quarter of the year.
31	Filed Form 941 with the IRS, reporting the FICA taxes and the employees’ federal income tax withholdings for the second quarter.

Required

Prepare journal entries to record the transactions and events for both June and July.