Question

Paul Company completed the salary and wage payroll for the month of March. The payroll provided the following details: Salaries and wages earned by employees $ 200,000 Employee income taxes withheld 40,000 Employee government insurance premiums withheld 1,000 FICA payroll taxes* 15,000 *Assessed on both employer and employee (i.e., $15,000 each). Required: 1. Prepare the journal entry to record the payroll for March, including employee deductions. Assume employees have been paid but that Paul has yet to transfer any withholdings to the government. 2. Prepare the journal entry to record the employer's payroll taxes, which have not yet been paid to the government. 3. Provide a combined journal entry to show the payment of all amounts owed to governmental agencies.

Answer 1

Answer:

1. March 31

Dr Salary and Wage Expense $200,000

Cr Liability for Income Tax withheld $40,000

Cr FICA Taxes $15,000

Liability for insurance premiums withheld-employees $1,000

Cr Cash $144,000

2. Dr Payroll Tax Expense $15,000

Cr FICA payable $15,000

3. March

Dr Liability for income tax withheld $40,000

Dr Liability for insurance premium $1,000

Dr FICA taxes payable - Employees $15,000

Dr FICA taxes payable - Employers $15,000

Cr Cash $71,000

Explanation:

1. Preparation of the journal entry to record the payroll for March

March 31

Dr Salary and Wage Expense $200,000

Cr Liability for Income Tax withheld $40,000

Cr FICA Taxes $15,000

Liability for insurance premiums withheld-employees $1,000

Cr Cash ($200,000-$56,000)$144,000

(To record wages to employees)

2. Preparation of the journal entry to record the employer's payroll taxes

March 31

Dr Payroll Tax Expense $15,000

Cr FICA payable $15,000

(Employer Payroll taxes on February payroll)

3. Preparation of the journal entry to show the payment of all amounts owed to governmental agencies

March

Dr Liability for income tax withheld $40,000

Dr Liability for insurance premium $1,000

Dr FICA taxes payable - Employees $15,000

Dr FICA taxes payable - Employers $15,000

Cr Cash $71,000

($40,000+$1,000+$15,000+$15,000)

(Remittance of payroll taxes and deduction for February payroll)