Note: For the exercises and problems in this chapter, use the following tax rates: FICA...

Note: For the exercises and problems in this chapter, use the following tax rates:

FICA–Employer and employee, 8% of the first $100,000 of earnings per employee per calendar year.

State unemployment–4% of the first $8,000 of earnings per employee per calendar year.

Federal unemployment–1% of the first $8,000 of earnings per employee per calendar year.

Federal income tax withholding–10% of each employee’s gross earnings, unless otherwise stated.

Accounting for bonus, vacation pay, and holiday pay

In P3-11 above, prepare the entries to distribute the weekly payroll and the costs and liabilities related to the bonus, vacation, and holiday pay, assuming that the fringe benefits of the direct laborers are charged to the individual jobs worked on during the period.

Reference:P3- 11

Accounting for bonus, vacation pay, and holiday pay (similar to Self-Study Problem 2)

The factory payroll for the week is $200,000, consisting of $140,000 earned by 100 direct laborers and $60,000 earned by 30 indirect laborers. The total of factory bonuses to be received at year-end is estimated at $400,000. All factory workers receive a two-week paid vacation and five paid holidays.

Required:

Prepare the entries to distribute the weekly payroll and the costs and liabilities related to the bonus, vacation pay, and holiday pay, assuming that the fringe benefits of the direct laborers are charged to Factory Overhead.

Reference:

Accounting for Bonus, Vacation Pay, and Holiday Pay

Queen City Inc.

The factory payroll for the week is $100,000, consisting of $70,000 earned by 100 direct laborers and $30,000 earned by 30 indirect laborers. The total of factory bonuses to be received at year-end is estimated at $200,000. All factory workers receive a four-week paid vacation and 10 paid holidays.

Required:

1. Prepare the entry to distribute the weekly payroll.

2. Prepare the entry to record the cost and liabilities related to the bonus, vacation, and holiday pay, assuming that the fringe benefits of direct laborers are charged to Factory Overhead.

Suggestions:

Read the entire problem thoroughly, keeping in mind what you are required to do:

1. Prepare a journal entry to distribute the payroll to Work in Process and Factory Overhead depending on whether the wages are for direct or indirect labor.

2. Prepare a journal entry to record the expense and liability for the bonus pay, vacation pay, and holiday pay, keeping in mind that fringe benefits should be charged to all jobs (Factory Overhead) worked on during the period.