Question

Lakeview Company completed the following two transactions. The annual accounting period ends December 31.

1. On December 31, calculated the payroll, which indicates gross earnings for wages ($72,000), payroll deductions for income tax ($7,200), payroll deductions for FICA ($5,400), payroll deductions for American Cancer Society ($2,700), employer contributions for FICA (matching), and state and federal unemployment taxes ($630). Employees were paid in cash, but payments for the corresponding payroll deductions have not yet been made and employer taxes have not yet been recorded.
2. Collected rent revenue of $5,850 on December 10 for office space that Lakeview rented to another business. The rent collected was for 30 days from December 12 to January 10 and was credited in full to Deferred Revenue.

Required:

1. 1. & 2. Prepare the journal entries to record payroll on December 31, the collection of rent on December 10 and adjusting journal entry on December 31.
2. 3. Show how any of the liabilities related to these items should be reported on the company’s balance sheet at December 31.

Answer 1

A B с D Ques 1 & 2 Date Accounts debit credit Dec-31 Wages expense Withheld income tax payable FICA payable American cancer society payable Cash 72000 7200 5400 2700 56700 2 6030 8 Dec-31 Payroll tax expense State & Federal Unemployment tax payable FICA payable 630 5400 UI UI 5850 7 Dec-10 cash unrarned rent revenue 58501 3 2 3900 Dec-31 unearned rent revenue rent revenue 5850*20/30 3900 Ques 3 Current Liabilities: Accrued Payroll Unearned rent revenue 21330|7200+5400+2700630+5400 1950 5850-3900