Question

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 1

Tabel 1 (Requirement 1)
	Total premium	% paid by employees	Premium paid by employees (Total premium x 40%)	Premium paid by employer [(Total premium x (100% - 40%)]
Employee Medical Insurance Payable	$10,500	40%	$4,200	$6,300
Employee Life Insurance Payable	$7,500	40%	$3,000	$4,500

.

.

2. Journal entry for accrued payroll, including employee deductions, for July
Date	General Journal	Debit	Credit
July 31	Sales Salaries	$440,000
	Office Salaries	$88,000
	FICA - Medicare taxes payable		$7,656
	FICA - Social Sec. taxes payable		$32,736
	Employee fed. Inc. taxes payable		$132,000
	Employee state inc. taxespayable		$29,500
	Employee medical insurance payable      [Refer table 1]		$4,200
	Employee life insurance payable              [Refer table 1]		$3,000
	Employee union dues payable		$4,500
	Salaries payable                                       [Refer working note 1]		$314,408
Record the cash payment of 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 Payable	$57,000	5.40%	$3,078
Federal Unemployment Taxes 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	July 31	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	Employee benefits expense                                   [$6,300 + $4,500]	$10,800
		Employee medical insurance payable             [Refer table 1]		$6,300
		Employee life insurance payable                   [Refer 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 + $32,736]	$65,472
		FICA - Medicare taxes payable           [Employer contribution + Employee contribution = $7,656 + $7,656]	$15,312
		Employee fed. Inc. taxes payable	$132,000
		Employee State. Inc. taxes payable	$29,500
		Employee medical insurance payable	$10,500
		Employee life insurance payable	$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 fed. Inc. taxes payable	$132,000
Employee state inc. taxespayable	$29,500
FICA - Social Sec. taxes payable	$32,736
FICA - Medicare taxes payable	$7,656
Employee medical insurance payable     [Refer table 1]	$4,200
Employee life insurance payable             [Refer 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 + $32,736]	$65,472
FICA - Medicare taxes payable           [Employer contribution + Employee contribution = $7,656 + $7,656]	$15,312
Employee fed. Inc. taxes payable	$132,000
Employee State. Inc. taxes payable	$29,500
Employee medical insurance payable	$10,500
Employee life insurance payable	$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