101
183)
Santa Barbara Express has 4 sales employees, each of whom earns $5,000 per month and is paid on
the last working day of the month. Each employee’s wages are subject to FICA social security taxes
of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes
federal income tax of 16% and monthly medical insurance premiums of $110 for each employee.
a. Prepare the general journal entry to accrue the monthly sales salaries expense at January 31.
b. The employer payroll taxes for Santa Barbara Express include FICA taxes, federal unemployment
taxes of 0.6% of the first $7,000 paid each employee, and state unemployment taxes of 4.0% of the
first $7,000 paid to each employee. Prepare the journal entry to record the employer’s payroll taxes
at January 31 for Santa Barbara Express. (Assume that none of the employees has reached the
unemployment limit of $7,000.)
184)
The payroll records of a company provided the following data for the weekly pay period ended
December 7:
Federal
Medical
Gross
Income
Insurance
Union
United
Employee
Pay
Taxes
Deduction
Dues
Way
Ronald Arthur
$1,200
$216
$125
$15
$15
John Baines
900
162
125
15
30
Ted Carter
1,000
180
150
-0-
20
The FICA social security tax rate is 6.2% and the FICA Medicare tax rate is 1.45% on all of this
week’s wages paid to each employee. The federal and state unemployment tax rates are 0.8% and
5.4%, respectively, on the first $7,000 paid to each employee. Prepare the journal entries to (a)
accrue the payroll and (b) record payroll taxes expense.
185)
A company’s payroll for the week ended May 15 included earned salaries of $20,000. All of that
week’s pay is subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45%. In
addition, the company withholds the following amounts for this weekly pay period: $900 for
medical insurance, $3,400 for federal income taxes, and $180 for union dues.
a. Prepare the general journal entry to accrue the payroll.
b. The company is subject to state unemployment taxes at the rate of 2% and federal unemployment
taxes at the rate of 0.6%. By May 15, some employees had earned over $7,000, so only $11,000 of
the $20,000 weekly gross pay was subject to unemployment tax. Prepare the general journal entry to
accrue the employer’s payroll tax expense.
186)
A company’s employees had the following earnings records at the close of the current payroll period:
Earning
through
Prior Pay Earning this
Employees Period Pay Period
F. Argent….
$11,300
$3,900
A. Garza…….
6,100
2,500
L. Hong……….
9,500
3,100
R. Levinson…
4,800
1,400
J. Young…….
10,000
3,000
The company’s payroll taxes expense on each employee’s earnings includes: FICA Social Security
taxes of 6.2% on the first $118,500 of earnings plus 1.45% FICA Medicare on all wages; 0.6%
federal unemployment taxes on the first $7,000; and 2.5% state unemployment taxes on the first
$7,000. Compute the employer’s total payroll taxes expense for the current pay period.
187)
An employer has an employee benefit package that includes employer-paid health insurance and an
employer-paid retirement program. During March, the employer paid $5,500 for health insurance,
and contributed to the employee retirement program 10% of the employees’ $120,000 gross
salaries. Prepare the journal entry to record these employee benefits.
188)
A company sells its product subject to a warranty that covers the cost of parts for repairs during the
six months after the date of sale. Warranty costs are estimated to be 5% of sales. During the month of
July, the company performed warranty work and used $11,000 of parts to perform the warranty
work. Sales for July were $450,000.
1. Record the warranty expense for the month of July.
2. Record the costs of the warranty work completed in June.
3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the
account balance at July 31?
189)
A company sells tablet computers for $1,300 each. The price includes a two-year warranty. During
the current year, the company sells 400 tablets. On the basis of past experience, the warranty costs
are estimated to be $280 per tablet. The actual warranty costs (paid in cash) by the company during
the current year were $65,000. Prepare general journal entries to record the (a) estimated warranty
expense and (b) warranty repair costs during current year.
106
190)
A company sells sofas with a 6-month warranty. In January, the company sold 100,000 sofas at
$1,750 each; and 500 sofas needed repairs during that same month. The total repairs amounted to
$85,000 costs from the upholstery materials inventory. It is estimated that 2% of all units sold will
need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to
record (a) estimated warranty expense for January and (b) warranty repair costs for January.
191)
Early Co. offers its employees a bonus equal to 2% of the company’s net income. The estimated net
income for the year is expected to be $800,000. Prepare the general journal entry to record the
estimated employee bonus plan expense.
192)
A company’s employer payroll tax rates are 0.6% for federal unemployment taxes, 5.4% for state
unemployment taxes, 6.2% for FICA social security taxes on earnings up to $118,500, and 1.45% for
FICA Medicare taxes on all earnings. Compute the W-2 Wage and Tax Statement information
required below for the following employees:
Employee
Gross Earnings
Federal Income Taxes
Withheld
A. Baylor
$114,000
$17,600
C. Jasmine
52,000
8,200
A. Baylor C. Jasmine
W-2 Information:
Federal Income Tax Withheld
Wages, Tips, Other Compensation
Social Security Tax Withheld
Social Security Wages
Medicare Tax Withheld
Medicare Wages
108
193)
The payroll records of a company provided the following data for the current weekly pay period
ended March 12.
Earnings
to End of
Federal
Medical
Previous
Gross
Income
Insurance
Union
United
Employees
Week
Pay
Taxes
Deduction
Dues
Way
D. Hui
$ 5,800
$800
$120
$35
$10
$10
B. Kim
6,850
1,100
180
35
10
15
C. Sly
12,900
1,440
404
35
10
40
Assume that the Social Security portion of the FICA taxes is 6.2% on the first $118,500 and the
Medicare portion is 1.45% of all wages paid to each employee for this pay period. The federal and
state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each
employee. Calculate the net pay for each employee.
194)
A company’s payroll information for the month of May follows:
Administrative salaries
$4,000
Sales salaries
5,500
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. 4625 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 0.6% 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.
195)
Cardinal Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is
$12,300). The sales tax law requires Cardinal to collect 8.5% sales tax on every dollar of
merchandise sold. Record the entry for the sale and its applicable sales tax.(Assume the company
uses the periodic inventory method to keep track of inventory)
196)
Star Recreation receives $48,000 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.
197)
On January 31, Ransom 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, $3,350 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.
Ransom 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 $104,000. No employees exceeded the FICA-Social Security
taxable wage base.
1. Prepare the journal entry to record Ransom Company’s January 31 payroll expenses and liabilities.
2. Prepare the journal entry to record Ransom Company’s employer payroll taxes resulting from the
January 31 payroll. Ransom’s merit rating reduces its state unemployment (SUTA) to 4% of the first
$7,000 paid each employee. The federal unemployment tax (FUTA) rate is 0.6%.
3. Prepare the journal entry to record Ransom’s additional employee expenses.
198)
General Co. entered into the following transactions involving short-term notes payable.
On May 14, General purchased $40,000 merchandise from Steller Co., terms are 2/15, n/30. General
uses the perpetual inventory system. On May 29, General replaced the May 14 account payable
with a 60-day, $36,000 note bearing 8% annual along with paying $4,000 in cash. On July 28,
General paid the amount due on the note at maturity.
Prepare journal entries for all the preceding transactions and events.
199)
Drake Company pays its employees for two weeks of vacation each year. The total annual cost of
the vacation benefit is $109,920. Prepare the journal entry to record the monthly accrued vacation
expense.
112
200)
Hollow 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 $118,500
FICA–Medicare
1.45%
All gross pay
FUTA
0.60%
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. $112,000
$9,400
Wages Subject To Tax
Rate
Taxes
FICA–Medicare
2,000
1.45
29.00
201)
Deacon Company provides you with following information related to payroll transactions for the
month of May. Prepare journal entries to record the transactions for May.
Office
Salaries
Sales Salaries
Social Security
Taxes
Medicare Taxes
Federal Income
Taxes
$38,000
$26,000
$3,968
$928
$5,600
a. Recorded the May payroll using the payroll register information given above.
b. Recorded the employer’s payroll taxes resulting from the May 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
0.6%.
c. Issued a check to Reliant 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 Reliant Bank in payment of the employer’s quarterly FUTA taxes for the first
quarter in the amount of $1,020.
202)
Sparks Company entered into the following transactions involving short-term notes payable. On
June 18, Sparks purchased $25,000 merchandise from EquipCo., terms 2/10, n/30. Sparks uses the
perpetual inventory system. On July 19, Sparks replaced the June 18 account payable with a
60-day, $12,000 note bearing 4% annual interest in addition to paying $13,000 in cash. Sparks 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.
203)
Richardson Fields receives $31,680 cash in advance ticket sales for 11 home soccer games. Record
the advance ticket sales on March 31. Record the revenue earned for the first game played on
August 17.
SHORT ANSWER QUESTIONS
204)
Obligations due within one year or the company’s operating cycle, whichever is longer, are
________.
205)
are probable future payments of assets or services that a company is presently obligated
to make as a result of past transactions or events.
206)
are amounts received in advance from customers for future products or services.
207)
________ are amounts owed to suppliers for products or services purchased on credit.
208)
A ________ is a potential obligation that depends on a future event arising from a past transaction
or event.
209)
Contingent liabilities are recorded in the accounts if the future event is ________ and the amount
owed can be ________.
210)
Banks authorized to accept deposits of amounts payable to the federal government, including
amounts due for payroll taxes are ________.
211)
A ________ shows the pay period dates, hours worked, gross pay, deductions, and net pay of each
employee for every pay period.
212)
Times interest earned is computed by dividing income before interest expense and income taxes by
________.
213)
The difference between the amount borrowed and the amount repaid is referred to as ________.
214)
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.
215)
The total compensation an employee earns including wages, salaries, commissions, bonuses, and
any compensation earned before deductions such as taxes is called ________.
216)
Gross pay less all deductions is called ________.
217)
The more allowances an employee claims, the less federal income tax the employer will
deduct from pay.
218)
Employer payroll taxes are an added employee ________ beyond the wages and salaries earned by
the employees.
219)
A ________ is a seller’s obligation to replace or correct a product or service that fails to perform as
expected within a specified period.
220)
Vacation benefits are a type of _
liability.
221)
To compute the amount of tax withheld from an employee’s pay, employers can use a ________
table.
222)
Companies with many employees often use a special ________ account to pay employees.