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The following monthly data are taken from Ramirez Company at July 31: Sales salaries, $620,000; Office salaries, $124,000; Federal income taxes withheld, $186,000; State income taxes withheld, $41,500; Social security taxes withheld, $46,128; Medicare taxes withheld, $10,788; Medical insurance premiums, $15,000; Life insurance premiums, $12,000; Union dues deducted, $9,000; and Salaries subject to unemployment taxes, $66,000. The employee pays 40% of medical and life insurance premiums. Assume that FICA taxes are identical to those on employees and that SUTA taxes are 5.4% and FUTA taxes are 0.6%.

Required:
Record the employer's payroll expenses and liabilities for the month of July. Record the employer's benefit expense. Record the cash payment of all liabilities related to the July payroll.

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Answer:

1. July 1

Dr Payroll tax expense $60,876

Cr FICA-Social security taxes payable $46,128

Cr FICA-Medicare taxes payable $10,788

Cr State Unemployment Taxes Payable $3,564

Cr Federal Unemployment Taxes Payable $396

2. July 1

Dr Employee benefits expense $16,200

Cr Employee Medical Insurance Payable $9,000

Cr Employee Life Insurance Payable $7,200

3. July 1

Dr FICA-Social security taxes payable $92,256

Dr FICA-Medicare taxes payable $21,576

Dr Federal income taxes payable $186,000

Dr State income taxes payable $41,500

Dr Medical insurance payable $10,000

Dr Life insurance payable $7,000

Dr Union dues payable $4,000

Cr State Unemployment Taxes Payable $3,564

Cr Federal Unemployment Taxes Payable $396

Cr Cash $366,292

Explanation:

1. Preparation of the journal entry to Record the employer's payroll expenses and liabilities for the month of July

July 1

Dr Payroll tax expense $60,876

($46,128+$10,788+$3,564+$396)

Cr FICA-Social security taxes payable $46,128

Cr FICA-Medicare taxes payable $10,788

Cr State Unemployment Taxes Payable $3,564

($66,000 × 5.4%)

Cr Federal Unemployment Taxes Payable $396 ($66,000 × 0.6%)

(To record the employer's payroll expenses and liabilities)

2. Preparation of the journal entry to Record the employer's benefit expense

July 1

Dr Employee benefits expense $16,200

($9,000+$7,200)

Cr Employee Medical Insurance Payable $9,000 [$15,000 × (100%-40%)]

Cr Employee Life Insurance Payable $7,200

[$12,000 × (100%-40%)]

(To Record the employer's benefit expense)

3. Preparation of the journal entry to Record the cash payment of all liabilities related to the July payroll

July 1

Dr FICA-Social security taxes payable $92,256

($46,128+$46,128)

Dr FICA-Medicare taxes payable $21,576

($10,788+$10,788)

Dr Federal income taxes payable $186,000

Dr State income taxes payable $41,500

Dr Medical insurance payable $10,000

Dr Life insurance payable $7,000

Dr Union dues payable $4,000

Cr State Unemployment Taxes Payable $3,564

($66,000 × 5.4%)

Cr Federal Unemployment Taxes Payable $396 ($66,000 × 0.6%)

Cr Cash $366,292

($92,256+$21,576+$186,000+$41,500+*$10,000+$7,000+$4,000+$3,564+$396)

(To Record the cash payment of all liabilities)

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