
Concept explainers
Concept Introduction:
Payroll-
Payroll is simply an agreement between employer and employee which is related to the compensations to the employee for any services provided by them.
Requirement-
To record:

Answer to Problem 8E
Solution:
S. No. | Accounts title and Explanation | Debit ($) | Credit ($) |
1 | Sales Salaries expense | 200,000 | |
Office Salaries expense | 160,000 | ||
Social security taxes payable | 22,320 | ||
Medicare tax payable | 5,220 | ||
Employee federal income taxes payable | 90,000 | ||
Employee state income taxes payable | 20,000 | ||
Employee medical insurance payable | 2,800 | ||
Employee life insurance payable | 1,600 | ||
Employee union dues payable | 1,000 | ||
Salaries payable | 217,060 | ||
(To record accrual payroll including employee deductions) | |||
2 | Salaries payable | 217,060 | |
Cash | 217,060 | ||
(To record the cash payment of salaries) | |||
3 | Payroll taxes expense | 37,140 | |
Social security taxes payable | 22,320 | ||
Medicare tax payable | 5,220 | ||
State |
2,700 | ||
Federal unemployment taxes payable | 300 | ||
Employee medical insurance payable | 4,200 | ||
Employee life insurance payable | 2,400 | ||
(To record the accrued payrolls) | |||
4 | Social security taxes payable | 44,640 | |
Medicare tax payable | 10,440 | ||
Employee federal income taxes payable | 90,000 | ||
Employee state income taxes payable | 20,000 | ||
Employee medical insurance payable | 7,000 | ||
Employee life insurance payable | 4,000 | ||
Employee union dues payable | 1,000 | ||
Federal unemployment taxes payable | 2,700 | ||
Employee medical insurance payable | 300 | ||
Cash | 180,080 | ||
(To record the payment of all liabilities) |
Explanation of Solution
1. Given :
• Sales salaries expense - $200,000
• Office salaries expense - $160,000
• Social security taxes payable - $22,320
• Medicare tax payable - $5,220
• Employee federal income taxes payable - $90,000
• Employee state income taxes payable - $20,000
• Employee union dues payable - $1,000
Calculation of amount of premium paid by the employee and employer-
Particulars | Total Premium (A) | % paid by Employees | Premium paid by employees (B) | Premium paid by employers (A-B) |
Employee medical insurance payable | $7,000 | 40% | $2,800 | $4,200 |
Employee life insurance payable | $4,000 | 40% | $1,600 | $2,400 |
Salaries payable is the balancing figure which is calculated as follows-
2. In this transaction company has made cash payment of salaries payable, so Salaries payable is debited and cash is credited.
3. Calculation of State unemployment taxes payable-
Calculation of Federal unemployment taxes payable –
4. In this transaction, all the liabilities are being paid, so all the liabilities will be debited and payment is made with the cash so the cash will be credited.
Thus, all the entries related to payroll have been prepared.
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Chapter 11 Solutions
Fundamental Accounting Principles
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