Chapter 6, Problem 16PB

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 6-73 to 6-77. Omit the writing of explanations in the journal entries.
2. b. Post the journal entries to the general ledger accounts on pages 6-78 to 6-83.

Narrative of Transactions:

1. c. Answer the following questions:
   1. 1. The total amount of the liability for FICA taxes and federal income taxes withheld as of June 30 is................................................................................ $ ________
   2. 2. The total amount of the liability for state income taxes withheld as of June 30 is................................................................................................................ $ ________
   3. 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........................................ $ ________
   4. 4. The amount of contributions that must be paid into the state unemployment compensation fund on or before August 1 is.................................................. $ ________
   5. 5. The total amount due the treasurer of the union is........................................ $ ________
   6. 6. The total amount of wages and salaries expense since the beginning of the fiscal year is ................................................................................................... $ ________
   7. 7. The total amount of payroll taxes expense since the beginning of the fiscal year is ............................................................................................................ $ ________
   8. 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	8,310.00
			FICA Taxes Payable-OASDI	20		515.22
			FICA taxes Payable-HI	21		120.50
			Employees FIT Payable	25		890.00
			Employees SIT Payable	26		166.20
			Union Dues Payable	28		140.00
			Cash	11		6,478.08
		(Record payment of wages and salaries and the employees’ withheld taxes)
	15	Payroll Taxes		55	876.71
			FICA Taxes Payable-OASDI	20		515.22
			FICA taxes Payable-HI	21		120.50
			FUTA Taxes Payable	22		49.86
			SUTA Taxes Payable	23		191.13
		(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	7,975.00
			FICA Taxes Payable-OASDI	20		494.45
			FICA taxes Payable-HI	21		115.64
			Employees FIT Payable	25		815.00
			Employees SIT Payable	26		151.50
			Union Dues Payable	28		135.00
			Cash	11		6,263.41
		(Record payment of wages and salaries and the employees’ withheld taxes)
	29	Payroll Taxes		55	841.37
			FICA Taxes Payable-OASDI	20		494.45
			FICA taxes Payable-HI	21		115.64
			FUTA Taxes Payable	22		47.85
			SUTA Taxes Payable	23		183.43
		(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	275
			Cash	11		275
		(Record cash paid for the union dues withheld in April)
Page: 20
	13	Wages and Salaries		51	8,190.00
			FICA Taxes Payable-OASDI	20		507.78
			FICA taxes Payable-HI	21		118.76
			Employees FIT Payable	25		875.00
			Employees SIT Payable	26		160.05
			Union Dues Payable	28		135.00
			Cash	11		6,393.41
		(Record payment of wages and salaries and the employees’ withheld taxes)
	13	Payroll Taxes		55	794.05
			FICA Taxes Payable-OASDI	20		507.78
			FICA taxes Payable-HI	21		118.76
			FUTA Taxes Payable	22		49.14
			SUTA Taxes Payable	23		118.37
		(Record payroll taxes and the employer’s withheld taxes)
	16	FICA Taxes Payable-OASDI		20	2,019.34
		FICA taxes Payable-HI		21	472.28
		Employees FIT Payable		22	1,705.00
			Cash	11		4,196.62
		(Record payment of taxes withheld on April 15th and 29th  payrolls)
	31	Wages and Salaries		51	8,755.00
			FICA Taxes Payable-OASDI	20		542.81
			FICA taxes Payable-HI	21		126.95
			Employees FIT Payable	25		971.00
			Employees SIT Payable	26		174.05
			Union Dues Payable	28		140.00
			Cash	11		6,800.19
		(Record payment of wages and salaries and the employees’ withheld taxes)
	31	Payroll Taxes		55	923.66
			FICA Taxes Payable-OASDI	20		542.81
			FICA taxes Payable-HI	21		126.95
			FUTA Taxes Payable	22		52.53
			SUTA Taxes Payable	23		201.37
		(Record payroll taxes and the employer’s withheld taxes)
Page: 21
June	3	Union Dues Payable		28	275
			Cash	11		275
		(Record cash paid for the union dues withheld during May)
	15	Wages and Salaries		51	9,110.00
			FICA Taxes Payable-OASDI	20		564.82
			FICA taxes Payable-HI	21		132.10
			Employees FIT Payable	25		1,029.00
			Employees SIT Payable	26		187.15
			Union Dues Payable	28		145.00
			Cash	11		7,051.93
		(Record payment of wages and salaries and the employees’ withheld taxes)
	15	Payroll Taxes		55	819.01
			FICA Taxes Payable-OASDI	20		564.82
			FICA taxes Payable-HI	21		132.10
			FUTA Taxes Payable	22		25.26
			SUTA Taxes Payable	23		96.83
		(Record payroll taxes and the employer’s withheld taxes)
	15	FICA Taxes Payable-OASDI		20	2,101.18
		FICA taxes Payable-HI		21	491.42
		Employees FIT Payable		25	1,846.00
			Cash	11		4,438.60
		(Record payment of taxes withheld on May 13th and 31st payrolls)
	30	Wages and Salaries		51	8,960.00
			FICA Taxes Payable-OASDI	20		555.52
			FICA taxes Payable-HI	21		129.92
			Employees FIT Payable	25		988.00
			Employees SIT Payable	26		183.95
			Union Dues Payable	28		145.00
			Cash	11		6,957.61
		(Record payment of wages and salaries and the employees’ withheld taxes)
	30	Payroll Taxes		55	751.56
			FICA Taxes Payable-OASDI	20		555.52
			FICA taxes Payable-HI	21		129.92
			FUTA Taxes Payable	22		13.68
			SUTA Taxes Payable	23		52.44
		(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			$8,310.00
Deductions:
Taxable pay for OASDI	$8,310
FICA–OASDI tax rate	×  6.2%	$515.22
Taxable pay for HI	8,310
FICA–HI tax rate	×  1.45%	120.50
Federal income taxes withheld		890.00
State income taxes withheld		166.20
Union dues withheld		140.00
Total deductions			(1,831.92)
Net pay			$6,478.08

Table (2)

Compute total employer payroll taxes for April 15^th.

Details	Amount ($)	Amount ($)
Gross pay	$8,310
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$515.22
Gross pay	$8,310
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		120.50
Taxable pay	$8,310
FUTA tax rate	×  0.6%
FUTA tax expense		49.86
Taxable pay	$8,310
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		191.13
Total employer’s payroll taxes		$876.71

Table (3)

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

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$7,975.00
Deductions:
Taxable pay for OASDI	$7,975
FICA–OASDI tax rate	×  6.2%	$494.45
Taxable pay for HI	7,975
FICA–HI tax rate	×  1.45%	115.64
Federal income taxes withheld		815.00
State income taxes withheld		151.50
Union dues withheld		135.00
Total deductions			(1,711.59)
Net pay			$6,263.41

Table (4)

Compute total employer payroll taxes for April 29^th.

Details	Amount ($)	Amount ($)
Gross pay	$7,975
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$494.45
Gross pay	7,975
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		115.64
Taxable pay	7,975
FUTA tax rate	×  0.6%
FUTA tax expense		47.85
Taxable pay	7,975
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		183.43
Total employer’s payroll taxes		$841.37

Table (5)

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

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$8,190.00
Deductions:
Taxable pay for OASDI	$8,190
FICA–OASDI tax rate	×  6.2%	$507.78
Taxable pay for HI	8,190
FICA–HI tax rate	×  1.45%	118.76
Federal income taxes withheld		875.00
State income taxes withheld		160.05
Union dues withheld		135.00
Total deductions			(1,796.59)
Net pay			$6,393.41

Table (6)

Compute total employer payroll taxes for May 13^th.

Details	Amount ($)	Amount ($)
Gross pay	$8,190
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$507.78
Gross pay	8,190
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		118.76
Taxable pay	8,190
FUTA tax rate	×  0.6%
FUTA tax expense		49.14
Taxable pay	8,190
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		118.37
Total employer’s payroll taxes		$794.05

Table (7)

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

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$8,755.00
Deductions:
Taxable pay for OASDI	$8,755
FICA–OASDI tax rate	×  6.2%	$542.81
Taxable pay for HI	8,755
FICA–HI tax rate	×  1.45%	126.95
Federal income taxes withheld		971.00
State income taxes withheld		174.05
Union dues withheld		140.00
Total deductions			(1,954.81)
Net pay			$6,800.19

Table (8)

Compute total employer payroll taxes for May 31^st.

Details	Amount ($)	Amount ($)
Gross pay	$8,755
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$542.81
Gross pay	$8,755
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		126.95
Taxable pay	$8,755
FUTA tax rate	×  0.6%
FUTA tax expense		52.53
Taxable pay	$8,755
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		201.37
Total employer’s payroll taxes		$923.66

Table (9)

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

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$9,110.00
Deductions:
Taxable pay for OASDI	$9,110
FICA–OASDI tax rate	×  6.2%	$564.82
Taxable pay for HI	9,110
FICA–HI tax rate	×  1.45%	132.10
Federal income taxes withheld		1,029.00
State income taxes withheld		187.15
Union dues withheld		145.00
Total deductions			(2,058.07)
Net pay			$7,051.93

Table (10)

Compute total employer payroll taxes for June 15^th.

Details	Amount ($)	Amount ($)
Gross pay	$9,110
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$564.82
Gross pay	$9,110
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		132.10
Taxable pay	$4,210
FUTA tax rate	×  0.6%
FUTA tax expense		25.26
Taxable pay	$4,210
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		96.83
Total employer’s payroll taxes		$819.01

Table (11)

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

Details	Amount ($)	Amount ($)	Amount ($)
Payroll			$8,960.00
Deductions:
Taxable pay for OASDI	$8,960
FICA–OASDI tax rate	×  6.2%	$555.52
Taxable pay for HI	8,960
FICA–HI tax rate	×  1.45%	129.92
Federal income taxes withheld		988.00
State income taxes withheld		183.95
Union dues withheld		145.00
Total deductions			(2,002.39)
Net pay			$6,957.61

Table (12)

Compute total employer payroll taxes for June 30^th.

Details	Amount ($)	Amount ($)
Gross pay	$8,960
FICA-OASDI tax rate	×  6.2%
FICA-OASDI tax expense		$555.52
Gross pay	$8,960
FICA-HI tax rate	×  1.45%
FICA-HI tax expense		129.92
Taxable pay	$2,280
FUTA tax rate	×  0.6%
FUTA tax expense		13.68
Taxable pay	$2,280
SUTA tax rate (state contribution rate)	×  2.3%
SUTA tax expense		52.44
Total employer’s payroll taxes		$751.56

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		6,478.08	51,095.48
	15		J19		546.92	50,548.56
	15		J19		2,442.86	48,105.70
	29		J19		6,263.41	41,842.29
	29		J19		571.78	41,270.51
May	2		J19		275.00	40,995.51
	13		J20		6,393.41	34,602.10
	16		J20		4,196.62	30,405.48
	31		J20		6,800.19	23,605.29
June	3		J21		275.00	23,330.29
	15		J21		7,051.93	16,278.36
	15		J21		4,438.60	11,839.76
	30		J21		6,957.61	4,882.15

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		515.22		1,584.10
	15		J19		515.22		2,099.32
	15		J19	1,068.88			1,030.44
	29		J19		494.45		1,524.89
	29		J19		494.45		2,019.34
May	13		J20		507.78		2,527.12
	13		J20		507.78		3,034.90
	16		J20	2,019.34			1,015.56
	31		J20		542.81		1,558.37
	31		J20		542.81		2,101.18
June	15		J21		564.82		2,666.00
	15		J21		564.82		3,230.82
	15		J21	2,101.18			1,129.64
	30		J21		555.52		1,685.16
	30		J21		555.52		2,240.68

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		120.50		370.48
	15		J19		120.50		490.98
	15		J19	249.98			241.00
	29		J19		115.64		356.64
	29		J19		115.64		472.28
May	13		J20		118.76		591.04
	13		J20		118.76		709.80
	16		J20	472.28			237.52
	31		J20		126.95		364.47
	31		J20		126.95		491.42
June	15		J21		132.10		623.52
	15		J21		132.10		755.62
	15		J21	491.42			264.20
	30		J21		129.92		394.12
	30		J21		129.92		524.04

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		49.86		199.02
	29		J19		47.85		246.87
May	13		J20		49.14		296.01
	31		J20		52.53		348.54
June	15		J21		25.26		373.80
	30		J21		13.68		387.48

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		191.13		762.91
	29		J19		183.43		946.34
	29		J19	571.78			374.56
May	13		J20		118.37		492.93
	31		J20		201.37		694.30
June	15		J21		96.83		791.13
	30		J21		52.44		843.57

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		890		2,014
	15		J19	1,124			890
	29		J19		815		1,705
May	13		J20		875		2,580
	16		J20	1,705			875
	31		J20		971		1,846
June	15		J21		1,029		2,875
	15		J21	1,846			1,029
	30		J21		988		2,017

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		166.20		713.12
	15		J19	546.92			166.20
	29		J19		151.50		317.70
May	13		J20		160.05		477.75
	31		J20		174.05		651.80
June	15		J21		187.15		838.95
	30		J21		183.95		1,022.90

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		140		140
	29		J19		135		275
May	2		J19	275			0
	13		J20		135		135
	31		J20		140		275
June	3		J20	275			0
	15		J21		145		145
	30		J21		145		290

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	8,310		79,670
	29		J19	7,975		87,645
May	13		J20	8,190		95,835
	31		J20	8,755		104,590
June	15		J21	9,110		113,700
	30		J21	8,960		122,660

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	876.71		7,723.45
	29		J19	841.37		8,564.82
May	13		J20	794.05		9,358.87
	31		J20	923.66		10,282.53
June	15		J20	819.01		11,101.54
	30		J21	751.56		11,853.10

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 $2,240.68, $524.04, and $2,017 respectively. The sum is $4,781.72 (Refer Tables 15, 16, and 19 for the balances as on June 30).
2.	1,022.90	Refer Table-20 for the value of state income taxes withheld.
3.	0	The balance of FUTA Taxes Payable as on June 30 is $387.48. Since the accumulated amount as on June 30 is less than $500 threshold, the balance need not be deposited.
4.	843.57	Refer Table-18 for the value of SUTA Taxes Payable.
5.	290.00	Refer Table-21 for the value of Union Dues Payable.
6.	122,660.00	Refer Table-22 for the value of wages and salaries expense.
7.	11,853.10	Refer Table-23 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.