Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows: N e t p a y = G r o s s p a y − T o t a l d e d u c t i o n s FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below: F I C A T a x w i t h h o l d i n g p e r c e n t a g e e m p l o y e e p o r t i o n = G r o s s p a y * F I C A T a x r a t e Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below: E m p l o y e e c o n t r i b u t i o n t o P e n s i o n p l a n s = T o t a l d e d u c t i o n s − A l l o t h e r d e d u c t i o n s Requirement a: Record journal entry showing effects of accrued payroll as on December 27, 2015

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 7, Problem 7.28P

To determine

Concept Introduction:

Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows:

Net pay= Gross pay− Total deductions

FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below:

Employee contribution to Pension plans= Total deductions− All other deductions

Requirement a:

Record journal entry showing effects of accrued payroll as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Explanation of Solution

To record the effects of accrued payroll of Cayman Coating Co., firstly we will calculate employee portion of FICA tax withholdings percentage with the help of following formula:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

In the given problem, Gross pay is given as $1, 72,000 and FICA tax rate as 7.65%.

FICA Tax withholding percentage employee portion= $1,72,000*7.65%= $13,158

Further, employee contribution to pension plans is calculated by subtracting FICA tax withholdings, income tax withholdings and group hospitalization insurance from Total deductions. It is given that total deductions are $41,650, income tax withholdings as $20,640 and group hospitalization insurance as $2,540. We have calculated FICA Tax withholdings as $13,158. Thus,

Employee contribution to pension plans= Total deductions− All other deductions = $41,650− $13,158− $20,640− $2,540= $5,312

Finally, Net pay is calculated:

Net pay= Gross pay− Total deductions= $1,72,000− $41,650= $1,30,350

Now for recording the entry for accrued payroll, gross pay is an expense will be debited by the name of Wages expense. Also, accrued payroll, FICA Tax withholdings, income tax withholdings, group hospitalization insurance and employee contribution to pension plans would be credited as can be seen below:

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

To determine

Concept Introduction:

Horizontal model A horizontal model is an arrangement of set of financial statements that encompasses the balance sheet and income statement. In this model, the effect of each transaction on balance sheet as well as income statement is displayed.

Requirement b:

Horizontal model to show effects of accrued payroll taxes as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Explanation of Solution

To record the effects of accrued payroll, firstly employer payroll taxes would be calculated using the following formula:

Employer payroll taxes=FICA Tax withholdings+ Federal unemployment compensation taxes+State unemployment compensation taxes

We have already calculated FICA Tax withholdings as $13,158. Federal unemployment compensation taxes and State unemployment compensation taxes can be calculated using the following equations:

Federal unemployment compensation taxes= Gross pay owed* Federal unemployment compensation tax rate State unemployment compensation taxes= Gross pay owed* State unemployment compensation tax rate

In the given problem, it is given that Gross pay owed for December is $18,000, Federal unemployment compensation tax rate as 0.6% and State unemployment compensation tax rate as 5.4%.

Federal unemployment compensation taxes= $18,000*0.6%= $108

State unemployment compensation taxes= $18,000*5.4%= $972

Thus, Total employer taxes= $13,158+ $108+$972= $14,238

For showing the effects of accrued payroll using horizontal model, following would be the adjustments required:

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 7, Problem 7.28P

To determine

Concept Introduction:

Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows:

Net pay= Gross pay− Total deductions

FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below:

Employee contribution to Pension plans= Total deductions− All other deductions

Requirement a:

Record journal entry showing effects of accrued payroll as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Explanation of Solution

To record the effects of accrued payroll of Cayman Coating Co., firstly we will calculate employee portion of FICA tax withholdings percentage with the help of following formula:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

In the given problem, Gross pay is given as $1, 72,000 and FICA tax rate as 7.65%.

FICA Tax withholding percentage employee portion= $1,72,000*7.65%= $13,158

Further, employee contribution to pension plans is calculated by subtracting FICA tax withholdings, income tax withholdings and group hospitalization insurance from Total deductions. It is given that total deductions are $41,650, income tax withholdings as $20,640 and group hospitalization insurance as $2,540. We have calculated FICA Tax withholdings as $13,158. Thus,

Employee contribution to pension plans= Total deductions− All other deductions = $41,650− $13,158− $20,640− $2,540= $5,312

Finally, Net pay is calculated:

Net pay= Gross pay− Total deductions= $1,72,000− $41,650= $1,30,350

Now for recording the entry for accrued payroll, gross pay is an expense will be debited by the name of Wages expense. Also, accrued payroll, FICA Tax withholdings, income tax withholdings, group hospitalization insurance and employee contribution to pension plans would be credited as can be seen below:

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

To determine

Concept Introduction:

Horizontal model A horizontal model is an arrangement of set of financial statements that encompasses the balance sheet and income statement. In this model, the effect of each transaction on balance sheet as well as income statement is displayed.

Requirement b:

Horizontal model to show effects of accrued payroll taxes as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Explanation of Solution

To record the effects of accrued payroll, firstly employer payroll taxes would be calculated using the following formula:

Employer payroll taxes=FICA Tax withholdings+ Federal unemployment compensation taxes+State unemployment compensation taxes

We have already calculated FICA Tax withholdings as $13,158. Federal unemployment compensation taxes and State unemployment compensation taxes can be calculated using the following equations:

Federal unemployment compensation taxes= Gross pay owed* Federal unemployment compensation tax rate State unemployment compensation taxes= Gross pay owed* State unemployment compensation tax rate

In the given problem, it is given that Gross pay owed for December is $18,000, Federal unemployment compensation tax rate as 0.6% and State unemployment compensation tax rate as 5.4%.

Federal unemployment compensation taxes= $18,000*0.6%= $108

State unemployment compensation taxes= $18,000*5.4%= $972

Thus, Total employer taxes= $13,158+ $108+$972= $14,238

For showing the effects of accrued payroll using horizontal model, following would be the adjustments required:

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 7, Problem 7.28P

To determine

Concept Introduction:

Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows:

Net pay= Gross pay− Total deductions

FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below:

Employee contribution to Pension plans= Total deductions− All other deductions

Requirement a:

Record journal entry showing effects of accrued payroll as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Explanation of Solution

To record the effects of accrued payroll of Cayman Coating Co., firstly we will calculate employee portion of FICA tax withholdings percentage with the help of following formula:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

In the given problem, Gross pay is given as $1, 72,000 and FICA tax rate as 7.65%.

FICA Tax withholding percentage employee portion= $1,72,000*7.65%= $13,158

Further, employee contribution to pension plans is calculated by subtracting FICA tax withholdings, income tax withholdings and group hospitalization insurance from Total deductions. It is given that total deductions are $41,650, income tax withholdings as $20,640 and group hospitalization insurance as $2,540. We have calculated FICA Tax withholdings as $13,158. Thus,

Employee contribution to pension plans= Total deductions− All other deductions = $41,650− $13,158− $20,640− $2,540= $5,312

Finally, Net pay is calculated:

Net pay= Gross pay− Total deductions= $1,72,000− $41,650= $1,30,350

Now for recording the entry for accrued payroll, gross pay is an expense will be debited by the name of Wages expense. Also, accrued payroll, FICA Tax withholdings, income tax withholdings, group hospitalization insurance and employee contribution to pension plans would be credited as can be seen below:

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

To determine

Concept Introduction:

Horizontal model A horizontal model is an arrangement of set of financial statements that encompasses the balance sheet and income statement. In this model, the effect of each transaction on balance sheet as well as income statement is displayed.

Requirement b:

Horizontal model to show effects of accrued payroll taxes as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Explanation of Solution

To record the effects of accrued payroll, firstly employer payroll taxes would be calculated using the following formula:

Employer payroll taxes=FICA Tax withholdings+ Federal unemployment compensation taxes+State unemployment compensation taxes

We have already calculated FICA Tax withholdings as $13,158. Federal unemployment compensation taxes and State unemployment compensation taxes can be calculated using the following equations:

Federal unemployment compensation taxes= Gross pay owed* Federal unemployment compensation tax rate State unemployment compensation taxes= Gross pay owed* State unemployment compensation tax rate

In the given problem, it is given that Gross pay owed for December is $18,000, Federal unemployment compensation tax rate as 0.6% and State unemployment compensation tax rate as 5.4%.

Federal unemployment compensation taxes= $18,000*0.6%= $108

State unemployment compensation taxes= $18,000*5.4%= $972

Thus, Total employer taxes= $13,158+ $108+$972= $14,238

For showing the effects of accrued payroll using horizontal model, following would be the adjustments required:

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 7, Problem 7.28P

To determine

Concept Introduction:

Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows:

Net pay= Gross pay− Total deductions

FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below:

Employee contribution to Pension plans= Total deductions− All other deductions

Requirement a:

Record journal entry showing effects of accrued payroll as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Explanation of Solution

To record the effects of accrued payroll of Cayman Coating Co., firstly we will calculate employee portion of FICA tax withholdings percentage with the help of following formula:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

In the given problem, Gross pay is given as $1, 72,000 and FICA tax rate as 7.65%.

FICA Tax withholding percentage employee portion= $1,72,000*7.65%= $13,158

Further, employee contribution to pension plans is calculated by subtracting FICA tax withholdings, income tax withholdings and group hospitalization insurance from Total deductions. It is given that total deductions are $41,650, income tax withholdings as $20,640 and group hospitalization insurance as $2,540. We have calculated FICA Tax withholdings as $13,158. Thus,

Employee contribution to pension plans= Total deductions− All other deductions = $41,650− $13,158− $20,640− $2,540= $5,312

Finally, Net pay is calculated:

Net pay= Gross pay− Total deductions= $1,72,000− $41,650= $1,30,350

Now for recording the entry for accrued payroll, gross pay is an expense will be debited by the name of Wages expense. Also, accrued payroll, FICA Tax withholdings, income tax withholdings, group hospitalization insurance and employee contribution to pension plans would be credited as can be seen below:

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

To determine

Concept Introduction:

Horizontal model A horizontal model is an arrangement of set of financial statements that encompasses the balance sheet and income statement. In this model, the effect of each transaction on balance sheet as well as income statement is displayed.

Requirement b:

Horizontal model to show effects of accrued payroll taxes as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Explanation of Solution

To record the effects of accrued payroll, firstly employer payroll taxes would be calculated using the following formula:

Employer payroll taxes=FICA Tax withholdings+ Federal unemployment compensation taxes+State unemployment compensation taxes

We have already calculated FICA Tax withholdings as $13,158. Federal unemployment compensation taxes and State unemployment compensation taxes can be calculated using the following equations:

Federal unemployment compensation taxes= Gross pay owed* Federal unemployment compensation tax rate State unemployment compensation taxes= Gross pay owed* State unemployment compensation tax rate

In the given problem, it is given that Gross pay owed for December is $18,000, Federal unemployment compensation tax rate as 0.6% and State unemployment compensation tax rate as 5.4%.

Federal unemployment compensation taxes= $18,000*0.6%= $108

State unemployment compensation taxes= $18,000*5.4%= $972

Thus, Total employer taxes= $13,158+ $108+$972= $14,238

For showing the effects of accrued payroll using horizontal model, following would be the adjustments required:

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

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Answer 5

Chapter 7, Problem 7.28P

To determine

Concept Introduction:

Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows:

Net pay= Gross pay− Total deductions

FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below:

Employee contribution to Pension plans= Total deductions− All other deductions

Requirement a:

Record journal entry showing effects of accrued payroll as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Explanation of Solution

To record the effects of accrued payroll of Cayman Coating Co., firstly we will calculate employee portion of FICA tax withholdings percentage with the help of following formula:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

In the given problem, Gross pay is given as $1, 72,000 and FICA tax rate as 7.65%.

FICA Tax withholding percentage employee portion= $1,72,000*7.65%= $13,158

Further, employee contribution to pension plans is calculated by subtracting FICA tax withholdings, income tax withholdings and group hospitalization insurance from Total deductions. It is given that total deductions are $41,650, income tax withholdings as $20,640 and group hospitalization insurance as $2,540. We have calculated FICA Tax withholdings as $13,158. Thus,

Employee contribution to pension plans= Total deductions− All other deductions = $41,650− $13,158− $20,640− $2,540= $5,312

Finally, Net pay is calculated:

Net pay= Gross pay− Total deductions= $1,72,000− $41,650= $1,30,350

Now for recording the entry for accrued payroll, gross pay is an expense will be debited by the name of Wages expense. Also, accrued payroll, FICA Tax withholdings, income tax withholdings, group hospitalization insurance and employee contribution to pension plans would be credited as can be seen below:

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

To determine

Concept Introduction:

Horizontal model A horizontal model is an arrangement of set of financial statements that encompasses the balance sheet and income statement. In this model, the effect of each transaction on balance sheet as well as income statement is displayed.

Requirement b:

Horizontal model to show effects of accrued payroll taxes as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Explanation of Solution

To record the effects of accrued payroll, firstly employer payroll taxes would be calculated using the following formula:

Employer payroll taxes=FICA Tax withholdings+ Federal unemployment compensation taxes+State unemployment compensation taxes

We have already calculated FICA Tax withholdings as $13,158. Federal unemployment compensation taxes and State unemployment compensation taxes can be calculated using the following equations:

Federal unemployment compensation taxes= Gross pay owed* Federal unemployment compensation tax rate State unemployment compensation taxes= Gross pay owed* State unemployment compensation tax rate

In the given problem, it is given that Gross pay owed for December is $18,000, Federal unemployment compensation tax rate as 0.6% and State unemployment compensation tax rate as 5.4%.

Federal unemployment compensation taxes= $18,000*0.6%= $108

State unemployment compensation taxes= $18,000*5.4%= $972

Thus, Total employer taxes= $13,158+ $108+$972= $14,238

For showing the effects of accrued payroll using horizontal model, following would be the adjustments required:

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Answer 6

Chapter 7, Problem 7.28P

To determine

Concept Introduction:

Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows:

Net pay= Gross pay− Total deductions

FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below:

Employee contribution to Pension plans= Total deductions− All other deductions

Requirement a:

Record journal entry showing effects of accrued payroll as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Explanation of Solution

To record the effects of accrued payroll of Cayman Coating Co., firstly we will calculate employee portion of FICA tax withholdings percentage with the help of following formula:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

In the given problem, Gross pay is given as $1, 72,000 and FICA tax rate as 7.65%.

FICA Tax withholding percentage employee portion= $1,72,000*7.65%= $13,158

Further, employee contribution to pension plans is calculated by subtracting FICA tax withholdings, income tax withholdings and group hospitalization insurance from Total deductions. It is given that total deductions are $41,650, income tax withholdings as $20,640 and group hospitalization insurance as $2,540. We have calculated FICA Tax withholdings as $13,158. Thus,

Employee contribution to pension plans= Total deductions− All other deductions = $41,650− $13,158− $20,640− $2,540= $5,312

Finally, Net pay is calculated:

Net pay= Gross pay− Total deductions= $1,72,000− $41,650= $1,30,350

Now for recording the entry for accrued payroll, gross pay is an expense will be debited by the name of Wages expense. Also, accrued payroll, FICA Tax withholdings, income tax withholdings, group hospitalization insurance and employee contribution to pension plans would be credited as can be seen below:

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Answer 7

Chapter 7, Problem 7.28P

To determine

Concept Introduction:

Net pay is the amount left from pay of employee after deductions have been made from employee's gross pay. It is the amount paid by the employer to employee on his/ her pay day. It can be calculated as follows:

Net pay= Gross pay− Total deductions

FICA tax withholdings would be calculated as the difference between total deductions and all other deductions. Further, the percentage of FICA tax withholdings for employee portion is calculated by multiplying the FICA tax rate with the Gross pay as shown below:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

Further, employee contribution to pension plans is the difference between Total and all other deductions as is shown below:

Employee contribution to Pension plans= Total deductions− All other deductions

Requirement a:

Record journal entry showing effects of accrued payroll as on December 27, 2015

Answer 8

Expert Solution

Answer to Problem 7.28P

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

To record the effects of accrued payroll of Cayman Coating Co., firstly we will calculate employee portion of FICA tax withholdings percentage with the help of following formula:

FICA Tax withholding percentage employee portion= Gross pay* FICA Tax rate

In the given problem, Gross pay is given as $1, 72,000 and FICA tax rate as 7.65%.

FICA Tax withholding percentage employee portion= $1,72,000*7.65%= $13,158

Further, employee contribution to pension plans is calculated by subtracting FICA tax withholdings, income tax withholdings and group hospitalization insurance from Total deductions. It is given that total deductions are $41,650, income tax withholdings as $20,640 and group hospitalization insurance as $2,540. We have calculated FICA Tax withholdings as $13,158. Thus,

Employee contribution to pension plans= Total deductions− All other deductions = $41,650− $13,158− $20,640− $2,540= $5,312

Finally, Net pay is calculated:

Net pay= Gross pay− Total deductions= $1,72,000− $41,650= $1,30,350

Now for recording the entry for accrued payroll, gross pay is an expense will be debited by the name of Wages expense. Also, accrued payroll, FICA Tax withholdings, income tax withholdings, group hospitalization insurance and employee contribution to pension plans would be credited as can be seen below:

Journal in the books of Cayman Coating Co. (Amount in $)

Date	Particulars	L.F.	Debit amount	Credit amount
December 27, 2015	Wages expense		1,72,000
	Accrued payroll			1,30,350
	FICA Tax withholdings			13,158
	Income Tax withholdings			20,640
	Group hospitalization insurance			2,540
	Employee contributions to pension plans			5,312
	(To record accrual payroll)

Answer 13

To determine

Concept Introduction:

Horizontal model A horizontal model is an arrangement of set of financial statements that encompasses the balance sheet and income statement. In this model, the effect of each transaction on balance sheet as well as income statement is displayed.

Requirement b:

Horizontal model to show effects of accrued payroll taxes as on December 27, 2015

Expert Solution

Answer to Problem 7.28P

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Explanation of Solution

To record the effects of accrued payroll, firstly employer payroll taxes would be calculated using the following formula:

Employer payroll taxes=FICA Tax withholdings+ Federal unemployment compensation taxes+State unemployment compensation taxes

We have already calculated FICA Tax withholdings as $13,158. Federal unemployment compensation taxes and State unemployment compensation taxes can be calculated using the following equations:

Federal unemployment compensation taxes= Gross pay owed* Federal unemployment compensation tax rate State unemployment compensation taxes= Gross pay owed* State unemployment compensation tax rate

In the given problem, it is given that Gross pay owed for December is $18,000, Federal unemployment compensation tax rate as 0.6% and State unemployment compensation tax rate as 5.4%.

Federal unemployment compensation taxes= $18,000*0.6%= $108

State unemployment compensation taxes= $18,000*5.4%= $972

Thus, Total employer taxes= $13,158+ $108+$972= $14,238

For showing the effects of accrued payroll using horizontal model, following would be the adjustments required:

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Answer 14

To determine

Concept Introduction:

Horizontal model A horizontal model is an arrangement of set of financial statements that encompasses the balance sheet and income statement. In this model, the effect of each transaction on balance sheet as well as income statement is displayed.

Requirement b:

Horizontal model to show effects of accrued payroll taxes as on December 27, 2015

Answer 15

Expert Solution

Answer to Problem 7.28P

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

To record the effects of accrued payroll, firstly employer payroll taxes would be calculated using the following formula:

Employer payroll taxes=FICA Tax withholdings+ Federal unemployment compensation taxes+State unemployment compensation taxes

We have already calculated FICA Tax withholdings as $13,158. Federal unemployment compensation taxes and State unemployment compensation taxes can be calculated using the following equations:

Federal unemployment compensation taxes= Gross pay owed* Federal unemployment compensation tax rate State unemployment compensation taxes= Gross pay owed* State unemployment compensation tax rate

In the given problem, it is given that Gross pay owed for December is $18,000, Federal unemployment compensation tax rate as 0.6% and State unemployment compensation tax rate as 5.4%.

Federal unemployment compensation taxes= $18,000*0.6%= $108

State unemployment compensation taxes= $18,000*5.4%= $972

Thus, Total employer taxes= $13,158+ $108+$972= $14,238

For showing the effects of accrued payroll using horizontal model, following would be the adjustments required:

Horizontal model showing effects of accrued payroll in the books of Cayman Coating Co.

Transaction	Balance sheet	Income statement
Assets= Liabilities+ Stockholder equity	Net income= Revenue- Expenses
	Payroll taxes payable +$14,238	Payroll tax expense +$14,238