Chapter 11: Current Liabilities and Payroll
153.
Excel Products Inc. pays its employees semimonthly. The summary of the payroll for December 31, indicated
the
following:
Salary expense $120,000
Federal income tax withheld 20,000
For the year ended December 31, $40,000 of the December 31 payroll is subject to social security tax of 6%;
$120,000 is subject to Medicare tax of 1.5%; $10,000 is subject to state unemployment tax of 4.3% and federal
unemployment tax of 0.8%. As of January 1, of the following year, all of the $120,000 is subject to all payroll
taxes.
Prepare the journal entries for payroll tax expense if the employees are paid (a) December 31 of the current year,
(b) January 2 of the following year.
Chapter 11: Current Liabilities and Payroll
154.
An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during
the
week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld,
$120;
cumulative earnings for the year prior to this week, $5,500; Social security tax rate, 6%; and Medicare
tax rate,
1.5%; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment
compensation tax,
0.8% on the first $7,000. Prepare the journal entries to record the salaries expense and the
employer payroll tax
expense.
Chapter 11: Current Liabilities and Payroll
155.
Townson Company had gross wages of $200,000 during the week ended December 10. The amount of wages
subject to social security tax was $180,000, while the amount of wages subject to federal and state
unemployment
taxes was $24,000. Tax rates are as follows:
Social security
6.0%
Medicare
1.5%
State unemployment
5.3%
Federal unemployment
0.8%
The total amount withheld from employee wages for federal income taxes was $32,000.
(a)
Journalize the entry to record the payroll for the week of December 10.
(b)
Journalize the entry to record the payroll tax expense incurred for the week of
December 10.
Chapter 11: Current Liabilities and Payroll
156.
According to a summary of the payroll of Scotland Company, $450,000 was subject to the 6.0% social security tax
and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was $98,000. Also, $15,000
was
subject to state (4.2%) and federal (0.8%) unemployment taxes.
(a)
Journalize the entry to record the accrual of payroll.
(b)
Journalize the entry to record the accrual of payroll taxes.
157.
The payroll register of Seaside Architecture Company indicates $970 of social security and $257 of Medicare
tax
withheld on total salaries of $16,500 for the period. Federal withholding for the period totaled $4,235.
Prepare the
journal entry for the period’s payroll.
Chapter 11: Current Liabilities and Payroll
158.
The payroll register of Seaside Architecture Company indicates $870 of social security and $217 of Medicare
tax
withheld on total salaries of $14,500 for the period. Assume earnings subject to state and federal
unemployment
compensation taxes are $5,250 at the federal rate of 0.8% and state rate of 5.4%. Prepare the
journal entry to
record the payroll tax expense for the period.
159.
List five internal controls that relate directly to payroll.
Chapter 11: Current Liabilities and Payroll
160.
The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. Earnings subject to
6%
social security tax were $60,000; earnings subject to 1.5% Medicare tax were $80,000; and earnings of
$3,000
were subject to 4.3% state and 0.8% federal unemployment compensation tax. Journalize the entry to
record the
accrual of payroll taxes.
Chapter 11: Current Liabilities and Payroll
161.
Perez Company has the following information for the pay period of January 15–31.
Gross payroll
$20,000
Federal income tax withheld
$2,500
Social security rate
6%
Federal unemployment tax rate
0.8%
Medicare rate
1.5%
State unemployment tax rate
5.4%
Assuming no employees are subject to ceilings for their earnings, calculate salaries payable and employer
payroll
taxes payable.
Gross payroll
Chapter 11: Current Liabilities and Payroll
162.
An employee receives an hourly rate of $45, with time and a half for all hours worked in excess of 40 during
the
week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld,
$950; Social security tax rate, 6.0%; and Medicare tax rate, 1.5%; state unemployment compensation tax, 3.4%
on
the first $7,000; federal unemployment compensation tax, 0.8% on the first $7,000.
Calculate the employer’s payroll tax expense if:
(a) this is the first payroll of the year and the employee has no cumulative earnings for the year to date.
(b)
the employee’s cumulative earnings for the year prior to this week equal $6,200.
(c)
the employee’s cumulative earnings for the year prior to this week equal $118,700.
Chapter 11: Current Liabilities and Payroll
163.
The following totals for the month of February were taken from the payroll register of Arcon Company:
Salaries expense
$13,000
Social security and Medicare taxes withheld
975
Income taxes withheld
2,600
Retirement savings
500
Salaries subject to federal and state unemployment taxes of 6.2%
4,000
(a)
How much is the total payroll expense for Arcon Company for this payroll?
(b)
Assume that the monthly salaries expense remains the same for the entire year and no employees are hired or
fired during that time. Based on what you learned in Chapter 11 about payroll taxes, do you expect the total
payroll
expense to stay the same every month? Explain.
Chapter 11: Current Liabilities and Payroll
164.
According to a summary of the payroll of Sinclair Company, $505,000 was subject to the 6.0% social security tax
and $545,000 was subject to the 1.5% Medicare tax. Also, $10,000 was subject to state and federal
unemployment
taxes.
(a)
Calculate the employer’s payroll taxes using the following rates: State unemployment,
4.2%; Federal unemployment, 0.8%.
(b)
Journalize the entry to record the accrual of the employer’s payroll taxes.
165.
Martin Services Company provides its employees vacation benefits and a defined contribution pension plan.
Employees earned vacation pay of $39,500 for the period. The pension plan requires a contribution to the
plan
administrator equal to 9% of employee salaries. Salaries were $750,000 during the period. Provide the journal
entries for (a) the vacation pay and (b) the pension benefit.
Chapter 11: Current Liabilities and Payroll
166.
Below are two independent sets of transactions for Welcott Company:
(a)
Welcott provides its employees with varying amounts of vacation per year, depending on the length of
employment. The estimated amount of the current year’s vacation pay is $78,000. Journalize the adjusting
entry
required on January 31, the end of the first month of the year, to record the accrued vacation pay.
(b)
Welcott maintains a defined contribution pension plan for its employees. The plan requires quarterly
installments to be paid to the funding agent, Northern Trust, by the fifteenth of the month following the end
of each
quarter. Assuming that the pension cost is $119,600 for the quarter ended December 31, journalize
entries to
record (1) the accrued pension liability on December 31 and (2) the payment to the funding agent
on January 15.
Chapter 11: Current Liabilities and Payroll
167.
Journalize the following transactions for Riley Corporation:
Dec. 31
The accrued product warranty expense for the year is estimated to be 2.5% of
sales. Sales for the year totaled $8,850,000.
31
The accrued vacation pay for the year is estimated to be $75,000.
31
Paid First Insurance Co. $55,000 as fund trustee for the pension plan. The annual
pension cost is $87,000.
Chapter 11: Current Liabilities and Payroll
168.
Kelly Howard has the following transactions. Prepare the journal entries.
Dec. 31 The accrued product warranty expense for the year is estimated to be 2.3% of sales. Sales for
the year totaled $6,005,000.
31 The accrued vacation pay for the year is estimated to be $75,225.
31 Paid Reliable Insurance Co. $275,000 as fund trustee for the pension plan. The annual
pension
cost is $350,000.
Chapter 11: Current Liabilities and Payroll
169.
Nelson Industries warrants its products for one year. The estimated product warranty is 4.3% of sales. Sales
were $475,000 for September. In October, a customer received warranty repairs requiring $215 of parts and $65
of
labor.
(a)
Journalize the adjusting entry required at September 30, the end of the first month of
the
current year, to record the estimated product warranty expense.
(b)
Journalize the entry to record the warranty work provided in October.