Question

Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $50,000 but that employee income taxes totaling $7,000 and FICA taxes totaling $2,625 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts. Required: What was the amount of net pay? Assuming Lightning Electronics also must pay $250 of unemployment taxes for this pay period, what amount would be reported as the total payroll costs?

Answer 1

the amount of net pay is $40,375, The amounted reported as the total payroll costs is   $2,875

Explanation:

The Journal entries for the wages expense is mentioned below

Wages expense A/c.........................Dr     $50,000

       Income Tax Payable A/c................Cr   $7,000

       FICA taxes payable A/c...................Cr   $2,625

       Cash A/c...............................................Cr   $40,375

We know that ,

Cash = Wage expense - Income tax payable - FICA taxes payable

= $50,000 - $7,000 - $2,625

= $40,375

Thus , the amount of net pay is $40,375

The Journal entry for the payroll expenses is mentioned below

Payroll tax expense A/c............................Dr    $2,875

      FICA taxes payable A/c............................Cr   $2,625

      Unemployment taxes payable A/c.........Cr   $250

The total payroll costs   $2,875