Chapter 9, Problem 8SPB

JOURNALIZING AND POSTING PAYROLL ENTRIES Oxford Company has five employees. All are paid on a monthly basis. The fiscal year of the business is June 1 to May 31.

The accounts kept by Oxford Company include the following:

The following transactions relating to payrolls and payroll taxes occurred during June and July:

REQUIRED

1. 1. Journalize the preceding transactions using a general journal.
2. 2. Open T accounts for the payroll expenses and liabilities. Enter the beginning balances and post the transactions recorded in the journal.

To determine

Prepare journal entry to record the given transactions.

Explanation of Solution

Payroll tax:

Payroll tax refers to the tax that are equally contributed by employees and employer based on the salary and wages of an employee. Payroll tax includes taxes like federal tax, local income tax, state tax, social security tax and federal and state unemployment tax.

Prepare journal entry to record the payment of payroll tax of May on June 15.

Date	Account Title and explanation	Post. ref	Debit ($)	Credit ($)
June 15	Employee Federal income tax payable	211	2,018.00
	FICA-Social Security taxes payable	212	2,735.00
	FICA-Medicare Taxes payable	213	641.00
	Cash	101		5,394.00
	(To record the deposit of employee federal income tax and Social security and Medicare taxes)

Table (1)

• Employee federal income tax payable is a liability and it is decreased. Hence, debit employee federal income tax payable by $2,018.00.
• FICA tax – social and security tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – social and security tax payable by $2,735.00.
• FICA tax – medical tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – medical tax payable by $641.00.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $5,394.00.

Prepare journal entry to record the June payroll.

Date	Account Title and explanation	Post. ref	Debit ($)	Credit ($)
June 30	Wages and Salaries expense	511	22,050.00
	Employee federal income tax payable	211		1,920.00
	FICA-Social Security taxes payable	212		1,367.10
	FICA-Medicare Taxes payable	213		319.73
	Savings bonds deductions payable	218		787.50
	Cash	101		17,655.67
	(To record the payroll for the week ended June 30)

Table (2)

• Wages and Salaries expense is an expense account and it is increased. Hence, debit wages and salaries expense with $22,050.00.
• Employee Federal income tax payable is a liability and there is an increase in the value of liability. Hence, credit the employee Federal income tax payable by $1,920.00.
• FICA tax – social and security tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax – social and security tax payable by $1,367.10.
• FICA tax – medical tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax – medical tax payable by $319.73.
• Savings bonds deductions payable is a liability and it is increased. Hence, credit savings bonds deductions payable by $787.50.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $17,655.67.

Prepare journal entry to record the purchase of bonds for employees.

Date	Account Title and explanation	Post. ref	Debit ($)	Credit ($)
June 30	Savings bonds deductions payable	218	1,575.00
	Cash	101		1,575.00
	(To record the purchase of U.S savings bonds for employees.)

Table (3)

• Savings bonds deductions payable is a liability and it is decreased. Hence, debit savings bonds deductions payable by $1,575.00.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $1,575.00.

Prepare journal entry to record the employer payroll tax expense.

Date	Account Title and explanation	Post. ref	Debit ($)	Credit ($)
June 30	Payroll tax expense	530	2,105.33
	FICA-Social Security taxes payable	212		1,367.10
	FICA-Medicare Taxes payable	213		319.73
	FUTA tax payable	221		54.00
	SUTA tax payable	222		364.50
	(To record the employer payroll taxes expense)

Table (4)

• Payroll taxes expense is an expense account and it is increased. Hence, debit payroll taxes expense with $2,105.33.
• FICA tax – social and security tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax – social and security tax payable by $1,367.10.
• FICA tax – medical tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax – medical tax payable by $319.73.
• FUTA tax payable is a liability and it is increased. Hence, credit FUTA tax payable by $54.00.
• SUTA tax payable is a liability and it is increased. Hence, credit SUTA tax payable by $364.50.

Prepare journal entry to record the payment of June taxes.

Date	Account Title and explanation	Post. ref	Debit ($)	Credit ($)
July 15	Employee Federal income tax payable	211	1,920.00
	FICA-Social Security taxes payable	212	2,734.20
	FICA-Medicare Taxes payable	213	639.46
	Cash	101		5,293.66
	(To record the deposit of employee federal income tax and Social security and Medicare taxes)

Table (5)

• Employee federal income tax payable is a liability and it is decreased. Hence, debit employee federal income tax payable by $1,920.00.
• FICA tax – social and security tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – social and security tax payable by $2,734.20.
• FICA tax – medical tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – medical tax payable by $639.46.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $5,293.66.

Prepare journal entry to record the payment of SUTA tax.

Date	Account Title and explanation	Post. ref	Debit ($)	Credit ($)
July 31	SUTA tax payable	222	1,744.50
	Cash	101		1,744.50
	(To record the payment of SUTA tax)

Table (6)

• SUTA tax payable is a liability and it is decreased. Hence, debit SUTA tax payable by $1,744.50.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $1,744.50.

Prepare journal entry to record the payment of FUTA tax.

Date	Account Title and explanation	Post. ref	Debit ($)	Credit ($)
July 31	FUTA tax payable	221	594
	Cash	101		594
	(To record the payment of FUTA tax)

Table (7)

• FUTA tax payable is a liability and it is decreased. Hence, debit FUTA tax payable by $594.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $594.

To determine

Prepare T-Account for the payroll expenses and liabilities.

Explanation of Solution

Prepare T-Account for the payroll expenses and liabilities.