PR 11-5B Payroll accounts and year-end entries

The following accounts, with the balances indicated, appear in the ledger of Codigo Co. on December 1 of the current year:


101 Salaries Payable — 108 Bond Deductions Payable $ 2,300
102 Social Security Tax Payable $2,913 109 Medical Insurance Payable 2,520
103 Medicare Tax Payable 728 201 Sales Salaries Expense 700,000
104 Employees Federal Income Tax Payable 4,490 301 Officers Salaries Expense 340,000
105 Employees State Income Tax Payable 4,078 401 Office Salaries Expense 125,000
106 State Unemployment Tax Payable 1,260 408 Payroll Tax Expense 59,491
107 Federal Unemployment Tax Payable 360


The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 1. Issued Check No. 815 to Aberderas Insurance Company for $2,520, in payment of the semiannual premium on the group medical insurance policy.
1. Issued Check No. 816 to Alvarez Bank for $8,131, in payment for $2,913 of social security tax, $728 of Medicare tax, and $4,490 of employees’ federal income tax due.
2. Issued Check No. 817 for $2,300 to Alvarez Bank to purchase U.S. savings bonds for employees.
12. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:


Salary distribution:
Sales $14,500
Officers 7,100
Office 2,600 $24,200
Deductions:
Social security tax $ 1,452
Medicare tax 363
Federal income tax withheld 4,308
State income tax withheld 1,089
Savings bond deductions 1,150
Medical insurance deductions 420 8,782
Net amount $15,418








12. Issued Check No. 822 in payment of the net amount of the biweekly payroll.
12. Journalized the entry to record payroll taxes on employees’ earnings of December
12: social security tax, $1,452; Medicare tax, $363; state unemployment tax, $315; federal unemployment tax, $90.
15. Issued Check No. 830 to Alvarez Bank for $7,938, in payment of $2,904 of social security tax, $726 of Medicare tax, and $4,308 of employees’ federal income tax due.
26. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:


Salary distribution:
Sales $14,250
Officers 7,250
Office 2,750 $24,250
Deductions:
Social security tax $ 1,455
Medicare tax 364
Federal income tax withheld 4,317
State income tax withheld 1,091
Savings bond deductions 1,150 8,377
Net amount $15,873








26. Issued Check No. 840 for the net amount of the biweekly payroll.
Dec. 26. Journalized the entry to record payroll taxes on employees’ earnings of December
26: social security tax, $1,455; Medicare tax, $364; state unemployment tax, $150; federal unemployment tax, $40.
30. Issued Check No. 851 for $6,258 to State Department of Revenue, in payment of employees’ state income tax due on December 31.
30. Issued Check No. 852 to Alvarez Bank for $2,300 to purchase U.S. savings bonds for employees.
31. Paid $55,400 to the employee pension plan. The annual pension cost is $65,500. (Record both the payment and the unfunded pension liability.)


Instructions
1. Journalize the transactions.
2. Journalize the following adjusting entries on December 31:
a. Salaries accrued: sales salaries, $4,275; officers salaries, $2,175; office salaries, $825. The payroll taxes are immaterial and are not accrued.
b. Vacation pay, $13,350.


Answer:



1. Dec. 1 Medical Insurance Payable 2,520
Cash 2,520
1 Social Security Tax Payable 2,913
Medicare Tax Payable 728
Employees Federal Income Tax Payable 4,490
Cash 8,131
2 Bond Deductions Payable 2,300
Cash 2,300
12 Sales Salaries Expense 14,500
Officers Salaries Expense 7,100
Office Salaries Expense 2,600
Social Security Tax Payable 1,452
Medicare Tax Payable 363
Employees Federal Income Tax Payable 4,308
Employees State Income Tax Payable 1,089
Bond Deductions Payable 1,150
Medical Insurance Payable 420
Salaries Payable 15,418
12 Salaries Payable 15,418
Cash 15,418
12 Payroll Tax Expense 2,220
Social Security Tax Payable 1,452
Medicare Tax Payable 363
State Unemployment Tax Payable 315
Federal Unemployment Tax Payable 90
15 Social Security Tax Payable 2,904
Medicare Tax Payable 726
Employees Federal Income Tax Payable 4,308
Cash 7,938

Dec. 26 Sales Salaries Expense 14,250
Officers Salaries Expense 7,250
Office Salaries Expense 2,750
Social Security Tax Payable 1,455
Medicare Tax Payable 364
Employees Federal Income Tax Payable 4,317
Employees State Income Tax Payable 1,091
Bond Deductions Payable 1,150
Salaries Payable 15,873
26 Salaries Payable 15,873
Cash 15,873
26 Payroll Tax Expense 2,009
Social Security Tax Payable 1,455
Medicare Tax Payable 364
State Unemployment Tax Payable 150
Federal Unemployment Tax Payable 40
30 Employees State Income Tax Payable 6,258
Cash 6,258
30 Bond Deductions Payable 2,300
Cash 2,300
31 Pension Expense 65,500
Cash 55,400
Unfunded Pension Liability 10,100
To record pension cost and unfunded
liability.
2. Dec. 31 Sales Salaries Expense 4,275
Officers Salaries Expense 2,175
Office Salaries Expense 825
Salaries Payable 7,275
Accrued wages for the period.
31 Vacation Pay Expense 13,350
Vacation Pay Payable 13,350
Vacation pay accrued for the period.