Chapter 3, Problem 10P

1.

To determine

Pass journal entry to record the foregoing transactions.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Payroll Account: A payroll account is a separate checking account for the company to record the payment of the payroll checks to their employees. A payroll account includes the money a company pays to their employees like salaries, wages, bonuses and withheld taxes.

Pass journal entry to record the foregoing transactions.

Date	Description	Post Ref	Debit ($)	Credit($)
January 7	Payroll		68,200
	Employees income tax payable			6,820
	FICA tax payable			5,456
	Wages payable			55,924
	(To record the payroll)
January 7	Wages payable		55,924
	Cash			55,924
	(To record payment of payroll)
January 14	Payroll		66,300
	Employees income tax payable			6,630
	FICA tax payable			5,304
	Wages payable			54,366
	(To record the payroll)
January 14	Wages payable		54,366
	Cash			54,366
	(To record payment of payroll)
January 15	Payroll		28,000
	Employees income tax payable			2,800
	FICA tax payable			2,240
	Wages payable			22,960
	(To record the payroll)
January 15	Wages payable		22,960
	Cash			22,960
	(To record payment of payroll)
January 21	Payroll		72,500
	Employees income tax payable			7,250
	FICA tax payable			5,800
	Wages payable			59,450
	(To record the payroll)
January 21	Wages payable		59,450
	Cash			59,450
	(To record payment of payroll)
January 28	Payroll		74,200
	Employees income tax payable			7,420
	FICA tax payable			5,936
	Wages payable			60,844
	(To record the payroll)
January 28	Wages payable		60,844
	Cash			60,844
	(To record payment of payroll)
January 31	Payroll		28,000
	Employees income tax payable			2,800
	FICA tax payable			2,240
	Wages payable			22,960
	(To record the payroll)
January 31	Wages payable		22,960
	Cash			22,960
	(To record payment of payroll)
January 31	Work in process		302,500
	Factory overhead		22,500
	Administrative salaries		20,000
	Sales salaries		36,000
	Payroll			381,000
	(To record wages and salaries)

Table (1)

2.

To determine

Compute the payroll taxes.

Explanation of Solution

Compute the payroll taxes.

Items	Taxable Earnings	FICA Tax 8%	Federal Unemployment Tax 1%	State Unemployment Tax 1%	Total Payroll Taxes
Factory wages	$325,000	$26,000	$3,250	$13,000	$42,250
Administrative salaries	$20,000	$1,600	$200	$800	$2,600
Sales salaries	$36,000	$2,880	$360	$1,440	$4,680
	$381,000	$30,480	$3,810	$15,240	$49,530

Table (2)

3.

To determine

Record journal entry to distribute payroll taxes.

Explanation of Solution

Record journal entry to distribute payroll taxes.

Date	Description	Post Ref	Debit ($)	Credit($)
January 31	Factory overhead		42,250
	Miscellaneous administrative expense		2,600
	Miscellaneous selling expense		4,680
	FICA tax payable			30,480
	Federal unemployment tax payable			3,810
	State unemployment tax payable			15,240
	(To record the distributed payroll taxes)

Table (3)

4.

To determine

Compute the amount of accrued wages.

Explanation of Solution

Compute the amount of accrued wages.

Particulars	Amount ($)
Direct labor	302,500
Indirect labor	22,500
Total	325,000
Less: Wages paid during month	281,200
Accrued wages, January 31st	43,800

Table (4)

Therefore, the amount of accrued wages is $43,800.

Working Note: Calculate the wages during the month.

$\begin{array}{c}\left(\begin{array}{l}\text{Wages Paid}\\ \text{During Month}\end{array}\right)=\left(\begin{array}{l}\text{Total earnings of 7th January}\\ +\text{Total earnings of 14th January}\\ +\text{Total earnings of 21st January}\\ +\text{Total earnings of 28th January}\end{array}\right)\\ =\left(\begin{array}{l}\$66,200+\$66,300+\$72,500\\ +\$74,200\end{array}\right)\\ =\$281,200\end{array}$