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 80% 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	$	2,100,000
Employee contribution to voluntary retirement plan		85,000
Medical insurance premiums		43,000
Life insurance premiums		9,100
Federal income taxes to be withheld		410,000
Local income taxes to be withheld		54,000
Payroll taxes:
Federal unemployment tax rate		0.60	%
State unemployment tax rate (after SUTA deduction)		5.40	%
Social Security tax rate		6.20	%
Medicare tax rate		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.)

Record Salaries and Wage expense

Record payroll tax expense

Record salaries and wage expense for fringe benefits provided by the employer.

Answer 1

Answer:

Date	Accounts and Explanation	Debit ($)	Credit ($)
	Salaries and Wages Expense	2100000
	Withholding taxes payable - Federal Income		410000
	Withholding taxes payable - State income taxes		54000
	Social Security taxes payable		130200
	Medicare taxes payable		30450
	Medicare Insurance payable		8600
	Life Insurance payable		1820
	Retirement Plan payable		85000
	Salaries and Wages payable		1379930
	(To record salaries and wages expense)
	Payroll tax expense	286650
	Social Security taxes payable		130200
	Medicare taxes payable		30450
	State Unemployment taxes payable		113400
	Federal Unemployment taxes payable		12600
	(To record payroll taxes expense)
	Salaries and Wages Expense	126680
	Medicare Insurance payable		34400
	Life Insurance payable		7280
	Retirement plan payable		85000
	(To record salaries and wages expense)

Working Notes:

social security taxes payable = 2100000 x 6.2% = 130200
Medicare taxes payable = 2100000 x 1.45% = 30450
State unemployment taxes payable = 2100000 x 5.4% = 113400
Federal unemployment taxes payable = 2100000 x 0.6% = 12600
Medical insurance payable = 43000 x 20% = 8600
Life insurance payable = 9100 x 20% = 1820
Medical insurance payable = 43000 x 80% =34400
Life insurance payable = 9100 x 80% = 7280