Question

During January, Luxury Cruise Lines pays employee salaries of $2 million. Withholdings in January are $153,000 for the employee portion of FICA, $300,000 for federal income tax, $125,000 for state income tax, and $20,000 for the employee portion of health insurance (payable to Blue Cross/Blue Shield). The company incurs an additional $124,000 for federal and state unemployment tax and $60,000 for the employer portion of health insurance.
Required
Record the employee salary expense, withholdings, and salaries payable.

Answer 1

Answer:

See the journal entry below.

Explanation:

The journal entry will look as follows:

General Journal                                     Debit ($)            Credit ($)    

Salaries Expense                                2,000,000

    FICA Taxes Payable                                                     153,000

    Federal Income Taxes Payable                                  300,000

    State Income Taxes Payable                                       125,000

    Health Insurance Payable                                             20,000

    Salaries Payable (w.1)                                                1,402,000

(To record the employee salary expense, withholdings and salaries payable.)

Working:

w.1: Salaries payable =  Salaries Expense - FICA Taxes Payable - Federal Income Taxes Payable - State Income Taxes Payable - Health Insurance Payable = $2,000,000 - $153,000 - $300,000 - $125,000 - $20,000 = $1,402,000