Question

Alamar Petroleum Company offers its employees the option of contributing retirement funds up to 5% of their salaries, with the contribution being matched by Alamar. The company also pays 85% of medical and life insurance premiums. Deductions relating to these plans and other payroll information for the first biweekly payroll period of February are listed as follows: Wages and salaries Employee contribution to voluntary retirement plan Medical insurance premiums Life insurance premiums Federal income taxes to be withheld Local income taxes to be withheld Payroll taxes: Federal unemployment tax rate State unemployment tax rate (after SUTA deduction) Social Security tax rate Medicare tax rate $3,800,000 102,000 60,000 10,800 580,000 71,000 0.60% 5.40% 6.20% 1.45% Required: Prepare the appropriate journal entries to record salaries expense and payroll tax expense for the biweekly pay period. Assume that all employees' cumulative wages do not exceed the relevant wage bases for Social Security, FUTA or SUTA. Salaries are not yet paid. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Journal entry worksheet

1

• Record salaries and wages expense.
• Record payroll tax expense.
• Record salaries and wage expense for fringe benefits provided by the employer.

Answer 1

Alamar Petroleum Company Journal Enteries Trans. Particulars 1 Salaries and wages expense a/c Dr. To Withholding taxes payable (federal income tax) To Withholding taxes payable (local income tax) To Social security taxes payable To Medicare taxes payable To Medical insurance payable To Life insurance payable To Retirement plan payable To Salaries and wages payable 3800000 x 6.2% = 235600; 3800000 x 1.45% = 55100 60000 x (1 - 0.85) = 9000; 10800 x (1 -0.85 ) = 1620 Debit in $ Credit in $ 3800000 580000 71000 235600 55100 9000 1620 102000 2745680 2 290700 Payroll tax expense a/c Dr. To Social security taxes payable To Medicare taxes payable 235600 55100 3 Salaries and wages expense a/c Dr. To Medical insurance payable To Life insurance payable To Retirement plan payable Medical insurance payable ($60,000 x 85%) = $51,000 Life insurance payable ($10,800 x 85%) = $9,180 51000 9180 102000