Chapter 6, Problem 16PA

In the Illustrative Case in this chapter, payroll transactions for Brookins Company were analyzed, journalized, and posted for the third quarter of the fiscal year. In this problem, you are to record the payroll transactions for the last quarter of the firm’s fiscal year. The last quarter begins on April 1, 20--.

Refer to the Illustrative Case on pages 6-27 to 6-33 and proceed as follows:

1. a. Analyze and journalize the transactions described in the following narrative. Use the two-column journal paper provided on pages 6-49 to 6-53. Omit the writing of explanations in the journal entries.
2. b. Post the journal entries to the general ledger accounts on pages 6-54 to 6-59.

Narrative of Transactions:

1. c. Answer the following questions:
2. 1. The total amount of the liability for FICA taxes and federal income taxes withheld as of June 30 is................................................................................ $ __________
3. 2. The total amount of the liability for state income taxes withheld as of June 30 is....................................................................................................... $ __________
4. 3. The amount of FUTA taxes that must be paid to the federal government on or before August 1 (assume July 31 is a Sunday) is........................................ $ __________
5. 4. The amount of contributions that must be paid into the state unemployment compensation fund on or before August 1 is.................................................. $ __________
6. 5. The total amount due the treasurer of the union is........................................ $ __________
7. 6. The total amount of wages and salaries expense since the beginning of the fiscal year is.................................................................................................... $ __________
8. 7. The total amount of payroll taxes expense since the beginning of the fiscal year is............................................................................................................. $ __________
9. 8. Using the partial journal below, journalize the entry to record the vacation accrual at the end of the company’s fiscal year. The amount of Brookins Company’s vacation accrual for the fiscal year is $15,000.

To determine

Journalize the given transactions in the books of Company B.

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.

Debit and credit rules:

• Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
• Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the given transactions in the books of Company B.

Page: 19
Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	1	Union Dues Payable		28	100
			Cash	11		100
		(Record cash paid for the union dues)
	15	Wages and Salaries		51	6,105.00
			FICA Taxes Payable-OASDI	20		378.51
			FICA taxes Payable-HI	21		88.52
			Employees FIT Payable	25		565.00
			Employees SIT Payable	26		107.32
			Union Dues Payable	28		50.00
			Cash	11		4,915.65
		(Record payment of wages and salaries and the employees’ withheld taxes)
	15	Payroll Taxes		55	645.11
			FICA Taxes Payable-OASDI	20		378.51
			FICA taxes Payable-HI	21		88.52
			FUTA Taxes Payable	22		36.63
			SUTA Taxes Payable	23		141.45
		(Record payroll taxes and the employer’s withheld taxes)
	15	Employees SIT Payable		26	546.92
			Cash	11		546.92
		(Record payment of state unemployment taxes)
	15	FICA Taxes Payable-OASDI		20	1,068.88
		FICA taxes Payable-HI		21	249.98
		Employees FIT Payable		25	1,124.00
			Cash	11		2,442.86
		(Record payment of taxes withheld on March payrolls)
	29	Wages and Salaries		51	5,850.00
			FICA Taxes Payable-OASDI	20		362.70
			FICA taxes Payable-HI	21		84.83
			Employees FIT Payable	25		509.00
			Employees SIT Payable	26		128.90
			Union Dues Payable	28		55.00
			Cash	11		4,709.57
		(Record payment of wages and salaries and the employees’ withheld taxes)
	29	Payroll Taxes		55	617.18
			FICA Taxes Payable-OASDI	20		362.70
			FICA taxes Payable-HI	21		84.83
			FUTA Taxes Payable	22		35.10
			SUTA Taxes Payable	23		134.55
		(Record payroll taxes and the employer’s withheld taxes)
	29	SUTA Taxes Payable		23	571.78
			Cash	11		571.78
		(Record payment of SUTA taxes for the quarter ended March 31)
May	2	Union Dues Payable		28	105
			Cash	11		105
		(Record cash paid for the union dues)
Page: 20
	13	Wages and Salaries		51	5,810.00
			FICA Taxes Payable-OASDI	20		360.22
			FICA taxes Payable-HI	21		84.25
			Employees FIT Payable	25		507.00
			Employees SIT Payable	26		125.05
			Union Dues Payable	28		55.00
			Cash	11		4,678.48
		(Record payment of wages and salaries and the employees’ withheld taxes)
	13	Payroll Taxes		55	612.96
			FICA Taxes Payable-OASDI	20		360.22
			FICA taxes Payable-HI	21		84.25
			FUTA Taxes Payable	22		34.86
			SUTA Taxes Payable	23		133.63
		(Record payroll taxes and the employer’s withheld taxes)
	16	FICA Taxes Payable-OASDI		20	1,482.42
		FICA taxes Payable-HI		21	346.70
		Employees FIT Payable		22	1,074.00
			Cash	11		2,903.12
		(Record payment of taxes withheld on April 15th and 29th  payrolls)
	31	Wages and Salaries		51	6,060.00
			FICA Taxes Payable-OASDI	20		375.72
			FICA taxes Payable-HI	21		87.87
			Employees FIT Payable	25		533.00
			Employees SIT Payable	26		119.00
			Union Dues Payable	28		50.00
			Cash	11		4,894.41
		(Record payment of wages and salaries and the employees’ withheld taxes)
	31	Payroll Taxes		55	639.33
			FICA Taxes Payable-OASDI	20		375.72
			FICA taxes Payable-HI	21		87.87
			FUTA Taxes Payable	22		36.36
			SUTA Taxes Payable	23		139.38
		(Record payroll taxes and the employer’s withheld taxes)
Page: 21
June	3	Union Dues Payable		28	105
			Cash	11		105
		(Record cash paid for the union dues)
	15	Wages and Salaries		51	6,380.00
			FICA Taxes Payable-OASDI	20		395.56
			FICA taxes Payable-HI	21		92.51
			Employees FIT Payable	25		549.00
			Employees SIT Payable	26		128.70
			Union Dues Payable	28		50.00
			Cash	11		5,164.23
		(Record payment of wages and salaries and the employees’ withheld taxes)
	15	Payroll Taxes		55	633.07
			FICA Taxes Payable-OASDI	20		395.56
			FICA taxes Payable-HI	21		92.51
			FUTA Taxes Payable	22		30.00
			SUTA Taxes Payable	23		115.00
		(Record payroll taxes and the employer’s withheld taxes)
	15	FICA Taxes Payable-OASDI		20	1,471.88
		FICA taxes Payable-HI		21	344.24
		Employees FIT Payable		25	1,040.00
			Cash	11		2,856.12
		(Record payment of taxes withheld on May 13th and 31st payrolls)
	30	Wages and Salaries		51	6,250.00
			FICA Taxes Payable-OASDI	20		387.50
			FICA taxes Payable-HI	21		90.63
			Employees FIT Payable	25		538.00
			Employees SIT Payable	26		127.60
			Union Dues Payable	28		50.00
			Cash	11		5,056.27
		(Record payment of wages and salaries and the employees’ withheld taxes)
	30	Payroll Taxes		55	616.46
			FICA Taxes Payable-OASDI	20		387.50
			FICA taxes Payable-HI	21		90.63
			FUTA Taxes Payable	22		28.62
			SUTA Taxes Payable	23		109.71
		(Record payroll taxes and the employer’s withheld taxes)

Table (1)

Working Notes:

Compute FICA taxes, total deductions, and net pay for April 15^th.

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$6,105.00
Deductions:
Taxable pay for OASDI	$6,105
FICA–OASDI tax rate	×  6.2%	$378.51
Taxable pay for HI	$6,105
FICA–HI tax rate	×  1.45%	88.52
Federal income taxes withheld		565.00
State income taxes withheld		107.32
Union dues withheld		50.00
Total deductions			(1,189.35)
Net pay			$4,915.65

Table (2)

Compute total employer payroll taxes for April 15^th.

Details	Amount ($)	Amount ($)
Gross pay	$6,105
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$378.51
Gross pay	$6,105
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		88.52
Taxable pay	$6,105
FUTA tax rate	×  0.6%
FUTA tax expense		36.63
Taxable pay	$6,105
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		140.42
Total employer’s payroll taxes		$644.08

Table (3)

Compute FICA taxes, total deductions, and net pay for April 29^th.

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$5,850.00
Deductions:
Taxable pay for OASDI	$5,850
FICA–OASDI tax rate	×  6.2%	$362.70
Taxable pay for HI	$5,850
FICA–HI tax rate	×  1.45%	84.83
Federal income taxes withheld		509.00
State income taxes withheld		128.90
Union dues withheld		55.00
Total deductions			(1,140.43)
Net pay			$4,709.57

Table (4)

Compute total employer payroll taxes for April 29^th.

Details	Amount ($)	Amount ($)
Gross pay	$5,850
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$362.70
Gross pay	$5,850
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		84.83
Taxable pay	$5,850
FUTA tax rate	×  0.6%
FUTA tax expense		35.10
Taxable pay	$5,850
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		134.55
Total employer’s payroll taxes		$617.18

Table (5)

Compute FICA taxes, total deductions, and net pay for May 13^th.

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$5,810.00
Deductions:
Taxable pay for OASDI	$5,810
FICA–OASDI tax rate	×  6.2%	$360.22
Taxable pay for HI	$5,810
FICA–HI tax rate	×  1.45%	84.25
Federal income taxes withheld		507.00
State income taxes withheld		125.05
Union dues withheld		55.00
Total deductions			(1,131.52)
Net pay			$4,678.48

Table (6)

Compute total employer payroll taxes for May 13^th.

Details	Amount ($)	Amount ($)
Gross pay	$5,810
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$360.22
Gross pay	$5,810
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		84.25
Taxable pay	$5,810
FUTA tax rate	×  0.6%
FUTA tax expense		34.86
Taxable pay	$5,810
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		133.63
Total employer’s payroll taxes		$612.96

Table (7)

Compute FICA taxes, total deductions, and net pay for May 31^st.

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$6,060.00
Deductions:
Taxable pay for OASDI	$6,060
FICA–OASDI tax rate	×  6.2%	$375.72
Taxable pay for HI	$6,060
FICA–HI tax rate	×  1.45%	87.87
Federal income taxes withheld		533.00
State income taxes withheld		119.00
Union dues withheld		50.00
Total deductions			(1,165.59)
Net pay			$4,894.41

Table (8)

Compute total employer payroll taxes for May 31^st.

Details	Amount ($)	Amount ($)
Gross pay	$6,060
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$375.72
Gross pay	$6,060
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		87.87
Taxable pay	$6,060
FUTA tax rate	×  0.6%
FUTA tax expense		36.36
Taxable pay	$6,060
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		139.38
Total employer’s payroll taxes		$639.33

Table (9)

Compute FICA taxes, total deductions, and net pay for June 15^th.

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$6,380.00
Deductions:
Taxable pay for OASDI	$6,380
FICA–OASDI tax rate	×  6.2%	$395.56
Taxable pay for HI	$6,380
FICA–HI tax rate	×  1.45%	92.51
Federal income taxes withheld		549.00
State income taxes withheld		128.70
Union dues withheld		50.00
Total deductions			(1,215.77)
Net pay			$5,164.23

Table (10)

Compute total employer payroll taxes for June 15^th.

Details	Amount ($)	Amount ($)
Gross pay	$6,380
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$395.56
Gross pay	$6,380
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		92.51
Taxable pay	$5,000
FUTA tax rate	×  0.6%
FUTA tax expense		30.00
Taxable pay	$5,000
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		115.00
Total employer’s payroll taxes		$633.07

Table (11)

Compute FICA taxes, total deductions, and net pay for June 30^th.

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$6,250.00
Deductions:
Taxable pay for OASDI	$6,250
FICA–OASDI tax rate	×  6.2%	$387.20
Taxable pay for HI	$6,250
FICA–HI tax rate	×  1.45%	90.63
Federal income taxes withheld		538.00
State income taxes withheld		127.60
Union dues withheld		50.00
Total deductions			(1,193.43)
Net pay			$5,056.57

Table (12)

Compute total employer payroll taxes for June 30^th.

Details	Amount ($)	Amount ($)
Gross pay	$6,250
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$387.20
Gross pay	$6,250
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		90.63
Taxable pay	$4,770
FUTA tax rate	×  0.6%
FUTA tax expense		28.62
Taxable pay	$4,770
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		109.71
Total employer’s payroll taxes		$616.16

Table (13)

To determine

Post the journalized transactions in the ledger accounts of the general ledger.

Explanation of Solution

Post the journalized transactions in the ledger accounts of the general ledger.

ACCOUNT    CASH                                                                           ACCOUNT NO. 11
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓			57,673.56
	1		J19		100.00	57,573.56
	15		J19		4,915.65	52,657.91
	15		J19		546.92	52,110.99
	15		J19		2,442.86	49,668.13
	29		J19		4,709.57	44,958.56
	29		J19		571.78	44,386.78
May	2		J19		105.00	44,281.78
	13		J20		4,678.48	39,603.30
	16		J20		2,903.12	36,700.18
	31		J20		4,894.41	31,805.77
June	3		J21		105.00	31,700.77
	15		J21		5,164.23	26,536.54
	15		J21		2,856.12	23,680.42
	30		J21		5,056.27	18,624.15

Table (14)

ACCOUNT    FICA TAXES PAYABLE-OASDI                            ACCOUNT NO. 20
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓				1,068.88
	15		J19		378.51		1,447.39
	15		J19		378.51		1,825.90
	15		J19	1,068.88			757.02
	29		J19		362.70		1,119.72
	29		J19		362.70		1,482.42
May	13		J20		360.22		1,842.64
	13		J20		360.22		2,202.86
	16		J20	1,482.42			720.44
	31		J20		375.72		1,096.16
	31		J20		375.72		1,471.88
June	15		J21		395.56		1,867.44
	15		J21		395.56		2,263.00
	15		J21	1,471.88			791.12
	30		J21		387.50		1,178.62
	30		J21		387.50		1,566.12

Table (15)

ACCOUNT    FICA TAXES PAYABLE-HI                                     ACCOUNT NO. 21
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓				249.98
	15		J19		88.52		338.50
	15		J19		88.52		427.02
	15		J19	249.98			177.04
	29		J19		84.83		261.87
	29		J19		84.83		346.70
May	13		J20		84.25		430.95
	13		J20		84.25		515.20
	16		J20	346.70			168.50
	31		J20		87.87		256.37
	31		J20		87.87		344.24
June	15		J21		92.51		436.75
	15		J21		92.51		529.26
	15		J21	344.24			185.02
	30		J21		90.63		275.65
	30		J21		90.63		366.28

Table (16)

ACCOUNT    FUTA TAXES PAYABLE                                         ACCOUNT NO. 22
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓				149.16
	15		J19		36.63		185.79
	29		J19		35.10		220.89
May	13		J20		34.86		255.75
	31		J20		36.36		292.11
June	15		J21		30.00		322.11
	30		J21		28.62		350.73

Table (17)

ACCOUNT    SUTA TAXES PAYABLE                                         ACCOUNT NO. 23
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓				571.78
	15		J19		141.45		713.23
	29		J19		134.55		847.78
	29		J19	571.78			276.00
May	13		J20		133.63		409.63
	31		J20		139.38		549.01
June	15		J21		115.00		664.01
	30		J21		109.71		773.72

Table (18)

ACCOUNT    EMPLOYEES FIT PAYABLE                                   ACCOUNT NO. 25
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓				1,124
	15		J19		565		1,689
	15		J19	1,124			565
	29		J19		509		1,074
May	13		J20		507		1,581
	16		J20	1,074			507
	31		J20		533		1,040
June	15		J21		549		1,589
	15		J21	1,040			549
	30		J21		538		1,087

Table (19)

ACCOUNT    EMPLOYEES SIT PAYABLE                                   ACCOUNT NO. 26
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓				546.92
	15		J19		107.32		654.24
	15		J19	546.92			107.32
	29		J19		128.90		236.22
May	13		J20		125.05		361.27
	31		J20		119.00		480.27
June	15		J21		128.70		608.97
	30		J21		127.60		736.57

Table (20)

ACCOUNT    UNION DUES PAYABLE                                         ACCOUNT NO. 28
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓				100
	1		J19	100			0
	15		J19		50		50
	29		J19		55		105
May	2		J19	105			0
	13		J20		55		55
	31		J20		50		105
June	3		J20	105			0
	15		J21		50		50
	30		J21		50		100

Table (21)

ACCOUNT    WAGES AND SALARIES                                         ACCOUNT NO. 51
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓			71,360
	15		J19	6,105		77,465
	29		J19	5,850		83,315
May	13		J20	5,810		89,125
	31		J20	6,060		95,185
June	15		J21	6,380		101,565
	30		J21	6,250		107,815

Table (22)

ACCOUNT    PAYROLL TAXES                                                     ACCOUNT NO. 55
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
April	1	Balance	✓			6,846.74
	15		J19	645.11		7,491.85
	29		J19	617.18		8,109.03
May	13		J20	612.96		8,721.99
	31		J20	639.33		9,361.32
June	15		J20	633.07		9,994.39
	30		J21	616.46		10,610.85

Table (23)

To determine

Indicate the correct answer against the given questions.

Explanation of Solution

Indicate the correct answer against the given questions 1 to 7.

Question Number	Answer	Reference
1.	$3,019.40	The balances of FICA-OASDI, FICA-HI, and Employees FIT Payable as on June 30 are $1,566.12, $266.28, and $1,087 respectively. The sum is $3,019.40 (Refer Tables 3, 4, and 7 for the balances as on June 30).
2.	736.57	Refer Table-8 for the value of state income taxes withheld.
3.	0	The balance of FUTA Taxes Payable as on June 30 is $350.73. Since the accumulated amount as on June 30 is less than $500 threshold, the balance need not be deposited.
4.	773.72	Refer Table-6 for the value of SUTA Taxes Payable.
5.	100.00	Refer Table-9 for the value of Union Dues Payable.
6.	107,815.00	Refer Table-10 for the value of wages and salaries expense.
7.	10,610.85	Refer Table-11 for the value of payroll taxes expense.

Table (24)

8.

Journalize the adjusting entry to record the vacation accrual.

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
		Vacation Benefits Expense			15,000
			Vacation Benefits Payable			15,000
		(Record accrued vacation benefits)

Table (25)

Description:

• Vacation Benefits Expense is an expense account. Since expenses and losses decrease equity, equity value is decreased, and a decrease in equity is debited.
• Vacation Benefits Payable is a liability account. The amount to be paid has increased, so liability increased, and an increase in liability is credited.