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On January 15, the end of the first pay period of the year, North Company’s employees earned $40,000 of sales salaries. Withholdings from the employees’ salaries include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $3,100 of federal income taxes, $593 of medical insurance deductions, and $230 of union dues. No employee earned more than $7,000 in this first period. Prepare the journal entry to record North Company’s January 15 salaries expense and related liabilities.

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abiolataiwo2015

Answer:

Dr Salaries expense 40,000

Cr FICA - Social security taxes payable 2,480

Cr FICA - medicare taxes payable 580

Cr Employee medical insurance deduction 593

Cr Union dues 230

Cr Salaries payable 33,017

Cr Federal income taxes payable 3,100

Explanation:

Preparation of the journal entry to record North Company’s January 15 salaries expense and related liabilities

Jan 15

Dr Salaries expense 40,000

Cr FICA - Social security taxes payable 2,480 (6.2%*40,000)

Cr FICA - medicare taxes payable 580

(1.45%*40,000)

Cr Employee medical insurance deduction 593

Cr Union dues 230

Cr Salaries payable 33,017

Cr Federal income taxes payable 3,100

Salaries payable is calculated as:

Salaries expense 40,000

Less: FICA - Social security taxes payable (2,480)

FICA - medicare taxes payable (580)

Employee medical insurance deduction (593)

Union dues (230)

Federal income taxes payable (3,100)

=$33,017

Tundexi

Here, we are to prepare the journal entry to record North Company’s January 15 salaries expense and related liabilities.

Salaries payable = Salaries expense - FICA - Social security taxes payable - FICA - medicare taxes payable - Employee medical insurance deduction - Union dues - Federal income taxes payable

Salaries payable = $40,000  - $2,480 - $580 - $593 - $230 - $3,100

Salaries payable = $33,017

Date     Account titles and Explanation                 Debit      Credit

Jan 15   Salaries expense                                       $40,000

                FICA - Social security taxes payable                       $2,480

                (6.2%*40,000)

                FICA - medicare taxes payable                                $580

                (1.45%*40,000)

                Employee medical insurance deduction                 $593

                Union dues                                                                 $230

                Salaries payable                                                         $33,017

                Federal income taxes payable                                  $3,100

             (To record salaries expense and related liabilities)

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