Question

a.) Mr. Johnson receives a payroll of $8,000 from his employer entirely subject to FICA and Medicare (7.65%), federal (0.8%) and state (4%) unemployment taxes, with income tax withholding of $900 and union dues of $40 deducted. Please write the journal entries that the employer makes to record:

    a. the salary paid to Mr. Johnson and his payroll deduction;

    b. the employer’s payroll taxes.

b.) A local dealer Mike Savoie Chevrolet sells five Chevy Silverado pickup truck on June 12, 2020, for $38,000 each, together with a one-year warranty. Maintenance on each truck during the warranty period is estimated to be $2,000. Actual warranty costs (inventory) incurred in 2020 were $4,900.

Please prepare the journal entries to record the related warranty costs and any accrual on December 31, 2020.

Answer 1

a)

	Account Titles	Debit	Credit
a	Salaries Expense	$          8,000
	FICA Taxes Payable		$             612
	Income Tax Payable		$             900
	Union Dues Payable		$                40
	Cash		$          6,448
b	Payroll Tax Expense	$             996
	FICA Taxes Payable		$             612
	FUTA Payable		$                64
	SUTA Payable		$             320

b)

Date	Account Titles	Debit	Credit
31-Dec	Warranty Expense	$          4,900
2020	Inventory		$          4,900
	Warranty Expense	$          5,100
	Estimated Warranty Liability		$          5,100

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