170. A company’s payroll information for the month of May follows:
Administrative salaries …………………………………….
$2,000
Sales salaries …………………………………………………….
3,500
Shop wages ………………………………………………………
4,000
FICA–Social Security taxes withheld …………………
589
FICA–Medicare taxes withheld ………………………….
138
Federal income taxes withheld …………………………..
1,300
Medical insurance premiums withheld ……………….
415
Union dues withheld …………………………………………
205
On May 31 the company issued Check No. 335 payable to the Payroll Bank Account to pay
for the May payroll. It issued payroll checks to the employees after depositing the check.
(1) Prepare the journal entry to record (accrue) the employer’s payroll for May. (2) Prepare
the journal entry to record payment of the May payroll. The federal and state unemployment
tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. The
wages and salaries subject to these taxes were $6,000. (3) Prepare the journal entry to record
the employer’s payroll taxes.
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171. Starling Company sells merchandise for $24,000 cash on March 31 (cost of merchandise
is $12,300). The sales tax law requires Starling to collect 8.25% sales tax on every dollar of
merchandise sold. Record the entry for the sale and its applicable sales tax.
172. All Star Sports receives $48,000,000 cash in advance ticket sales for 12 home games.
Record the advance ticket sales on April 30. Record the revenue earned for the first home
game played on August 14.
173. On January 31, Hale Company’s payroll register showed that its employers earned
$30,320 of office salaries and $82,750 of sales salaries. Withholdings from the employees’
salaries include FICA Social Security taxes as the rate of 6.2%, FICA Medicare taxes at the
rate of 1.45%, $16,960 of federal income taxes, $2,350 of medical insurance deductions
(which represents 50% of the total cost of the employee medical insurance), and $4,210 of
401(k) retirement contribution deductions. Hale Company pays the other 50% of the
employee insurance cost and matches the employee 401(k) contributions. Several employees
earned more than $7,000 for the period which reduced salaries subject to unemployment to
$110,000. No employees exceeded the FICA-Social Security taxable wage base.
1. Prepare the journal entry to record Hale Company’s January 31 payroll expenses and
liabilities.
2. Prepare the journal entry to record Hale Company’s employer payroll taxes resulting from
the January 31 payroll. Hale’s merit rating reduces its state unemployment to 4% of the first
$7,000 paid each employee. The federal unemployment tax rate is .8%.
3. Prepare the journal entry to record Hale’s additional employee expenses.
174. Helix Co. entered into the following transactions involving short-term notes payable.
On May 14, Helix purchased $40,000 merchandise from Advent Co., terms are 2/15, n/30.
Helix uses the perpetual inventory system. On May 29, Helix replaced the May 14 account
payable with a 60-day, $30,000 note bearing 8% annual along with paying $10,000 in cash.
______ Paid the amount due on the note at maturity.
1. Determine the maturity date for the note.
2. Prepare journal entries for all the preceding transactions and events.
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175. Blake Company pays its employees for two weeks vacation each year. The total annual
cost of the vacation benefit is $113,000. Prepare the journal entry to record the weekly
accrued vacation expense.
176. Halo Company provides you with following information for two of its employees. The
company is subject to the following taxes.
Tax
Rate
Applied To
FICA – Social Security
6.20%
First $106,800
FICA – Medicare
1.45
All gross pay
FUTA
0.80
First $7,000
SUTA
3.20
First $7,000
Compute amounts for each of these four taxes as applied to each employee’s gross earnings
for November.
Gross Pay through October
Gross Pay for November
a. $6,400
$2,000
b. $104,000
$9,400
177. Frado Company provides you with following information related to payroll transactions
for the month of May. Prepare journal entries to record the transactions for May.
a. Recorded the March payroll using the payroll register information given above.
b. Recorded the employer’s payroll taxes resulting from the March payroll. The company had
a merit rating that reduces its state unemployment tax rate to 3.5% of the first $7,000 paid
each employee. Only $42,000 of the current months salaries are subject to unemployment
taxes. The federal rate is .8%.
c. Issued a check to Swift Bank in payment of the May FICA and employee taxes.
d. Issued a check to the state for the payment of the SUTA taxes for the month of May.
e. Issued a check to Swift Bank in payment of the employer’s quarterly FUTA taxes for the
first quarter in the amount of $1,360.
Office
Salaries
Sales Salaries
Social Security
Taxes
Medicare
Taxes
Federal Income
Taxes
$28,000
$36,000
$3,968
$928
$5,600
178. Ember Co. entered into the following transactions involving short-term notes payable.
On June 18, Ember purchased $25,000 merchandise from Halco Co., terms are 2/10, n/30.
Halco uses the perpetual inventory system. On July 19, Ember replaced the June 18 account
payable with a 60-day, $22,000 note bearing 9% annual in addition to paying $3,000 in cash.
______ Paid the amount due on the note at maturity.
1. Determine the maturity date for the note.
2. Prepare journal entries for all the preceding transactions and events.
Answer:
179. Arena Sports receives $31,680,000 cash in advance ticket sales for 11 home games.
Record the advance ticket sales on March 31. Record the revenue earned for the first home
game played on August 17.
Fill in the Blank Questions
180. __________ are obligations due within one year or the company’s operating cycle,
whichever is longer.
181. _________________ are probable future payments of assets or services that a company
is presently obligated to make as a result of past transactions or events.
182. Unearned revenues are amounts received _______________ for future products or
services.
183. ______________ are amounts owed to suppliers for products or services purchased on
credit.
184. A ___________________ is a potential obligation that depends on a future event arising
from a past transaction or event.
185. Contingent liabilities are recorded in the accounts if the future event is
_______________ and the amount owed can be _______________.
186. ____________________ are banks authorized to accept deposits of amounts payable to
the federal government, including amounts due for payroll taxes.
187. A _____________________ shows the pay period dates, hours worked, gross pay,
deductions, and net pay of each employee for every pay period.
188. Times interest earned is computed by dividing _______________ by interest expense.
189. The difference between the amount borrowed and the amount repaid is referred to as
_______________.
190. A _______________________ is a written promise to pay a specified amount on a
definite future date within one year or the company’s operating cycle, whichever is longer.
191. ______________________ is the total compensation an employee earns including
wages, salaries, commissions, bonuses, and any compensation earned before deductions such
as taxes.
192. Gross pay less all deductions is called ____________________.
193. __________ allowances are items that reduce the amount of federal income taxes owed
by the individual.
194. Employer payroll taxes are an added employee _______________ beyond the wages and
salaries earned by the employees.
195. A _____________________ is a seller’s obligation to replace or correct a product or
service that fails to perform as expected within a specified period.
196. Vacation benefits are a type of _______________ liability.
197. To compute the amount of tax withheld from an employee’s pay, employers can use a
__________________________ table.
198. Companies with many employees often use a special ____________________ account to
pay employees.