Question

Payroll entries Instructions Chart of Accounts Journal Instructions The payroll register for Gamble Company for the week ended April 29 indicated the following: Salaries $1,560,000 Social security tax withheld 93,600 Medicare tax withheld 23,400 312,000 Federal income tax withheld In addition, state and federal unemployment taxes were calculated at the rate of 5.4% and 0.6%, respectively, on $254,000 of salaries. Required: A. Journalize the entry to record the payroll for the week of April 29.* B. Journalize the entry to record the payroll tax expense incurred for the week of April 29.* *Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer -

A.

Journal					Accounting equation
Date	Description	Post. Ref.	Debit	Credit	Assets	Liabilities	Equity
Apr. 29	Salaries expense		$1560000				↓
	Social Security tax payable			$93600		↑
	Medicare tax payable			$23400		↑
	Employee federal income tax payable			$312000		↑
	Salaries payable			$1131000		↑

Calculation:

Salaries payable:

= Salaries expense - [Social Security tax payable + Medicare tax payable + Employee federal income tax payable]

= $1560000 - [$93600 + $23400 + $312000]

= $1131000

B.

Journal					Accounting equation
Date	Description	Post. Ref.	Debit	Credit	Assets	Liabilities	Equity
Apr. 29	Payroll tax expense		$132240				↓
	Social Security tax payable			$93600		↑
	Medicare tax payable			$23400		↑
	State unemployment tax payable			$13716		↑
	Federal unemployment tax payable			$1524		↑

Calculation:

As per given information,

State unemployment tax is at the rate of 5.4% on $254000 of salaries.

And, Federal unemployment tax is at the rate of 0.6% on $254000 of salaries.

So,

State unemployment tax = $254000 * 5.4% = $13716

Federal unemployment tax = $254000 * 0.6% = $1524

Now,

Payroll tax expense:

= Social Security tax payable + Medicare tax payable + State unemployment tax + Federal unemployment tax

= $93600 + $23400 + $13716 + $1524

= $132240

Note:

Liabilities increase when a credit entry is made to record payable such as social Security tax payable, medicare tax payable, employee federal income tax payable, State and Federal unemployment taxes payable.

All expense accounts such as salaries expense, payroll tax expense are recorded as a decrease to owners equity in the accounting equation.