Question

Kashi Sales, L.L.C., produces healthy, whole-grain foods such as breakfast cereals, frozen dinners, and granola bars. Assume payroll for the month of January was $350,000 and the following withholdings, fringe benefits, and payroll taxes apply:_________.
Federal and state income tax withheld $ 120,000
Health insurance premiums (Blue Cross) paid by employer 11,500
Contribution to retirement plan (Fidelity) paid by employer 45,000
FICA tax rate (Social Security and Medicare) 7.65 %
Federal and state unemployment tax rate 6.20 %
Assume that Kashi has paid none of the withholdings or payroll taxes by the end of January (record them as payables), and no employee’s cumulative wages exceed the relevant wage bases.
Required:
1. Record the employee salary expense, withholdings, and salaries payable.
2. Record the employer-provided fringe benefits.
3. Record the employer payroll taxes.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

1. Salaries expense Dr, $350,000

        To Income tax payable $120,000

        To FICA tax payable $26,775 ($350,000 × 7.65%)

        To Salaries payable $203,225

(Being employee salary expenses is recorded)

2. Salary expense Dr, $56,500

        To Accounts payable-Blue cross $11,500

        To Accounts payable-Fidelity $45,000

(Being employer-provided fringe benefits is recorded)

3. Payroll tax expenses Dr, $48,475

       To FICA tax payable $26,775 ($350,000 × 7.65%)

       To Unemployment tax payable $21,700 ($350,000 × 6.20%)

(Being employer payroll taxes is recorded)