The following monthly data are taken from Ramirez Company at July 31: Sales salaries, $440,000; Office…
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Question “The following monthly data are taken from Ramirez Company at July 31: Sales salaries, $440,000; Office…”
The following monthly data are taken from Ramirez Company at
July 31: Sales salaries, $440,000; Office salaries, $88,000;
Federal income taxes withheld, $132,000; State income taxes
withheld, $29,500; Social security taxes withheld, $32,736;
Medicare taxes withheld, $7,656; Medical insurance premiums,
$10,500; Life insurance premiums, $7,500; Union dues deducted,
$4,500; and Salaries subject to unemployment taxes, $57,000. The
employee pays 40% of medical and life insurance premiums. Assume
that FICA taxes are identical to those on employees and that SUTA
taxes are 5.4% and FUTA taxes are 0.6%.
1&2. Using the above information, complete the
below table and prepare the journal entries to record accrued
payroll and cash payment of the net payroll for July.
3. Using the above information, complete the below
table.
4. Record the accrued employer payroll taxes and
all other employer-paid expenses and the cash payment of all
liabilities for July-assume that FICA taxes are identical to those
on employees and that SUTA taxes are 5.4% and FUTA taxes are
0.6%.
Answer
Tabel 1 – Requirement 1 | ||||
Total premium | % received by employees | Premium paid to employees (Total premium + 40%) |
Employer pays premium [(Total premium (x) (100% – 40 %)] | |
Employer Medical Insurance Available | $10,500 | 40% | $4,200 | $6,300 |
Employer Life Insurance Available | $7,500 | 40% | $3,000 | $4,500 |
.
.
2. Journal entry for accrued pay, including employee deductions for July | |||
Date | General Journal | Debit | Credit |
31 July | Sales Salaries | $440,000 | |
Office Salaries | $88,000 | ||
FICA – Medicare taxes payable | $7,656 | ||
FICA – Social Sec. taxes payable | $32,736 | ||
Employee benefits Inc. taxes payable | $132,000 | ||
Taxes payable to the employee state | $29,500 | ||
Employer medical insurance [Refer to table 1] | $4,200 | ||
Life insurance for employees [Refer to table 1] | $3,000 | ||
Employee union dues payable | $4,500 | ||
Salaries payable [Refer to working note 1] | $314,408 | ||
Track the cash payment for salaries: | |||
Date | General Journal | Debit | Credit |
July 31 | Salaries payable | $314,408 | |
Cash | $314,408 |
.
.
Table 2 (Requirement 3) | |||
Tax |
Amounts Subject to Tax (a) |
Tax Rate (b) |
Tax Amount (a x b) |
State Unemployment Taxes are Payable | $57,000 | 5.40% | $3,078 |
Federal Unemployment Taxes are Payable | $57,000 | 0.6% | $342 |
.
.
4. Journal entries to record cash payment of all liabilities related to the July payroll. | ||||
No. | Date | General Journal | Debit | Credit |
1 | 31 July | Payroll taxes expense [Total taxes = $32,736 + $7,656 + $342 + $3,078] | $43,812 | |
FICA – Social Sec. taxes payable | $32,736 | |||
FICA – Medicare taxes payable | $7,656 | |||
Federal unemployment taxes payable [Refer table 2] | $342 | |||
State unemployment taxes payable [Refer table 2] | $3,078 | |||
Record the employer’s benefit expense | ||||
No. | Date | General Journal | Debit | Credit |
2 | July 31 | Employer benefits expenses [$6,300 + 4,500] | $10,800 | |
Employer medical insurance [Refer to table 1] | $6,300 | |||
Life insurance for employees [Refer to table 1] | $4,500 | |||
Record the cash payment of all liabilities related to the July payroll. | ||||
No. | Date | General Journal | Debit | Credit |
3 | July 31 | FICA – Social Sec. Taxes payable: Employer contribution + Employee contribution = $32,736 + $22,736 | $65,472 | |
FICA – Medicare taxes payable [Employer contributions + Employee contributions = $7,656 + $7.656] | $15,312 | |||
Employee benefits Inc. taxes payable | $132,000 | |||
Employer State Inc. taxes payable | $29,500 | |||
Employer medical insurance available | $10,500 | |||
Life insurance for employees | $7,500 | |||
Employee union dues payable | $4,500 | |||
Federal unemployment taxes payable [Refer Table 2] | $342 | |||
State unemployment taxes payable [Refer Table 2] | $3,078 | |||
Cash [Refer working note 2] | $268,204 |
.
.
Working note 1 – Computation of net salaries payable to employees | ||
Amount | Amount | |
Salaries: | ||
Sales Salaries | $440,000 | |
Office Salaries | $88,000 | |
Total salaries (a) | $528,000 | |
Total deductions from employee pay checks: | ||
Employee benefits Inc. taxes payable | $132,000 | |
Taxes payable to the employee state | $29,500 | |
FICA – Social Sec. taxes payable | $32,736 | |
FICA – Medicare taxes payable | $7,656 | |
Employer medical insurance [Refer to table 1] | $4,200 | |
Life insurance for employees [Refer to table 1] | $3,000 | |
Employee union dues payable | $4,500 | |
Total deduction (b) | $213,592 | |
Net salaries payable to employees (a – b) | $314,408 |
.
.
Working note 2 – Computation of amount of cash to be paid by the employer (excluding net salaries): | |
Amount | |
FICA – Social Sec. Taxes payable: Employer contribution + Employee contribution = $32,736 + $22,736 | $65,472 |
FICA – Medicare taxes payable [Employer contributions + Employee contributions = $7,656 + $7.656] | $15,312 |
Employee benefits Inc. taxes payable | $132,000 |
Employer State Inc. taxes payable | $29,500 |
Employer medical insurance available | $10,500 |
Life insurance for employees | $7,500 |
Employee union dues payable | $4,500 |
Federal unemployment taxes payable [Refer Table 2] | $342 |
State unemployment taxes payable [Refer Table 2] | $3,078 |
Total taxes paid in cash | $268,204 |
Conclusion
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