Question

During January, Luxury Cruise Lines incurs employee salaries of $3 million. Withholdings in January are $229,500 for the employee portion of FICA, $450,000 for federal income tax, $187,500 for state income tax, and $30,000 for the employee portion of health insurance (payable to Blue Cross Blue Shield). The company incurs an additional $186,000 for federal and state unemployment tax and $90,000 for the employer portion of health insurance.
Required:
a. Record the employee salary expense, withholdings, and salaries payable.
b. Record the employer-provided fringe benefits.
c. Record the employer payroll taxes.

Answer 1

Answer and Explanation:

The journal entries are shown below:

On Jan 31

Salaries Expense $3,000,000  

     To Income Tax Payable  ($450,000 + $187,500 ) $637,500

     To FICA taxes payable    $229,500

      To Accounts payable   $$30,000

      To Salaries payable    $2,103,000

(Being the employees Salaries Expense is recorded )  

On Jan 31

Salaries Expense $90,000  

       To Accounts payable  $90,000

(Being the employer-provided fringe benefits is recorded)

On Jan 31

Payroll tax expense    $415,500  

       To FICA taxes payable  $229,500

        To  Unemployment taxes payable $186,000

(Being the payroll taxes is recorded)