High School

The following information about the payroll for the week ended December 30 was obtained from the records of Saine Co.:

**Salaries:**
- Sales salaries: $625,000
- Warehouse salaries: $240,000
- Office salaries: $320,000
- Total: $1,185,000

**Deductions:**
- Income tax withheld: $232,260
- Social security tax withheld: $71,100
- Medicare tax withheld: $17,775
- U.S. savings bonds: $35,500
- Group insurance: $53,325
- Total: $409,960

**Tax rates assumed:**
- Social security: 6%
- Medicare: 1.5%
- State unemployment (employer only): 5.4%
- Federal unemployment (employer only): 0.8%

**Required:**

1. Assuming that the payroll for the last week of the year is to be paid on December 31, 2015, journalize the following entries:

A. December 30, 2015, to record the payroll. Include the year when entering the date in the journal.

B. December 30, 2015, to record the employer’s payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, $30,000 is subject to unemployment compensation taxes. Include the year when entering the date in the journal.

Answer :

On December 30, 2015, Saine Co. journalized two entries related to the payroll for the week ended December 30. The first entry recorded the payroll expenses, including salaries and deductions.

The second entry recorded the employer's payroll taxes, specifically the unemployment compensation taxes, on the payroll to be paid on December 31

A. On December 30, 2015, Saine Co. would journalize the payroll entry to record the expenses associated with the payroll for the week ended December 30. The entry would be as follows:

Date: December 30, 2015

Account Debit Credit

Salaries Expense (Sales salaries) $625,000

Salaries Expense (Warehouse salaries) $240,000

Salaries Expense (Office salaries) $320,000

Income Tax Payable $232,260

Social Security Tax Payable $71,100

Medicare Tax Payable $17,775

U.S. Savings Bonds Payable $35,500

Group Insurance Payable $53,325

Cash $775,040

The salaries expense accounts are debited to recognize the total salaries paid, while the various tax and deduction accounts are credited. The cash account is credited with the net amount to be paid to employees.

B. Additionally, Saine Co. needs to record the employer's payroll taxes on the payroll to be paid on December 31. The entry would include the unemployment compensation taxes, which are based on a portion of the total payroll for the week. Assuming $30,000 is subject to unemployment compensation taxes, the entry would be as follows:

Date: December 30, 2015

Account Debit Credit

Payroll Tax Expense $1,620

State Unemployment Tax Payable $1,620

The payroll tax expense is debited to recognize the employer's liability, and the state unemployment tax payable account is credited for the amount of the liability.

These two entries properly account for the payroll expenses, deductions, and employer's payroll taxes associated with the payroll for the week ended December 30, 2015.

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