Chapter 9, Problem 6PSB

To determine

Journal Entries:

Journal is the book for recording financial transactions in chronological order. It is the first step of accounting. In this process each transaction has two sides- debit side and credit side. Total of debit side must be equal to total of credit side.

Accounting rules for journal entries:

• To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

1.

To record: Journal entries for June and July.

Explanation of Solution

Given:
Number of employees are 5.
Salary per month of each employee is $1,600.
FICA Social security taxes payable are $992.
FICA Medicare taxes payable are $232.
Employees Federal income tax payable is $ 1,050.
Federal Unemployment taxes are $66.
State Unemployment taxes are $440.

Journal entries for June and July.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
July 31	Salaries expenses		8,000
	FICA Social security taxes payable			496
	FICA Medicare taxes payable			116
	Federal income Taxes			1,050
	Federal Unemployment taxes			33
	State Unemployment taxes			220
	Salaries Payable			6,085
	(To record accrued payroll)

                                                                 Table (1)

• Salaries expenses are an expense account. Its balance is increasing So it is debited.
• FICA Social security taxes payable is a liability account. Since it is increasing, it is credited.
• FICA Medicare taxes payable is a liability account. Since it is increasing, it is credited.
• Federal income Taxes are a liability account. Since it is increasing, it is credited.
• Federal Unemployment tax is a liability account. Since it is increasing, it is credited.
• State Unemployment taxes are a liability account. Since it is increasing, it is credited.
• Salaries Payable is a liability account. Since it is increasing, it is credited.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
March 15	FICA Social security taxes payable		992
	FICA Medicare taxes payable		232
	Federal income Taxes		1,050
	Bank			2,274
	(To record taxes paid)

                                                                 Table (2)

• FICA Social security taxes payable is a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited..
• FICA Medicare taxes payable is a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited.
• Federal income Taxes are a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited.
• Bank is an asset account. Since company is paying off the liabilities, the balance of bank reduces. Hence it is credited.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
March31	Office Salaries expenses		3,800
	Shop Salaries expenses		4,200
	FICA Social security taxes payable			496
	FICA Medicare taxes payable			116
	Federal income Taxes			1,050
	Salaries Payable			6,338
	(To record accrued payroll)

                                                                 Table (3)

• Office Salaries expenses is an expense account. Its balance is increasing So it is debited.
• Shop Salaries expenses is an expense account. Its balance is increasing So it is debited.
• FICA Social security taxes payable is a liability account. Since it is increasing, it is credited.
• FICA Medicare taxes payable is a liability account. Since it is increasing, it is credited.
• Federal income Taxes are a liability account. Since it is increasing, it is credited.
• Salaries Payable is a liability account. Since it is increasing, it is credited.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
March 31	Salaries Payable		6,338
	Bank			6,338
	(To record taxes paid)

                                                                 Table (4)

• Salaries Payable is a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited.
• Bank is an asset account. Since company is paying off the liabilities, the balance of bank reduces. Hence it is credited.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
June31	Payroll taxes expenses		612
	FICA Social security taxes payable			496
	FICA Medicare taxes payable			116
	(To record accrued payroll)

                                                                 Table (5)

• Payroll taxes expenses is an expense account. Its balance is increasing So it is debited.
• FICA Social security taxes payable is a liability account. Since it is increasing, it is credited.
• FICA Medicare taxes payable is a liability account. Since it is increasing, it is credited.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
July 15	FICA Social security taxes payable		992
	FICA Medicare taxes payable		232
	Federal income Taxes		1,050
	Bank			2,274
	(To record taxes paid)

                                                                 Table (6)

• FICA Social security taxes payable is a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited..
• FICA Medicare taxes payable is a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited.
• Federal income Taxes are a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited.
• Bank is an asset account. Since company is paying off the liabilities, the balance of bank reduces. Hence it is credited.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
July 15	SUTA Taxes		440
	Bank			440
	(To record taxes paid)

                                                                 Table (7)

• SUTA Taxes is a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited.
• Bank is an asset account. Since company is paying off the liabilities, the balance of bank reduces. Hence it is credited.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
July 31	FUTA Taxes		66
	Bank			66
	(To record taxes paid)

                                                                 Table (8)

• FUTA Taxes is a liability account. Since company is paying off this liability, its balance is decreasing. Hence, it is debited.
• Bank is an asset account. Since company is paying off the liabilities, the balance of bank reduces. Hence it is credited.