Question

Question: Francisco Company has 10 employees, each of whom earns \(2,800 per month and is paid on the last day of each month. All 10 have been employed continuously at this amount since January 1. On March 1, the following accounts and balances exist in its general ledger:

a. FICA—Social Security Taxes Payable, \)3,472; FICA—Medicare Taxes Payable, \(812. (The balances of these accounts represent total liabilities for boththe employer’s and employees’ FICA taxes for the February payroll only.)

b. Employees’ Federal Income Taxes Payable, \)4,000 (liability for February only). c. Federal Unemployment Taxes Payable, \(336 (liability for January and February together).

d. State Unemployment Taxes Payable, \)2,240 (liability for January and February together). During March and April, the company had the following payroll transactions.

Mar. 15 Issued check payable to Swift Bank, a federal depository bank authorized to accept employers’ payments of FICA taxes and employee income tax withholdings. The \(8,284 check is in payment of the February FICA and employee income taxes.

31 Recorded the journal entry for the March salaries payable. Then recorded the cash payment of the March payroll (the company issued checks payable to each employee in payment of the March payroll). The payroll register shows the following summary totals for the March pay per \)11,200 \(16,800 \)28,000 \(1,736 \)4,000 \(21,858 \) 40 * FICA taxes are Social Security and Medicare, respectively.

31 Recorded the employer’s payroll taxes resulting from the March payroll. The company has a merit rating that reduces its state unemployment tax rate to 4.0% of the first $7,000 paid each employee. The federal rate 0.6%

Apr. 15 Issued check to Swift Bank in payment of the March FICA and employee income taxes.

15 Issued check to the State Tax Commission for the January, February, and March state unemployment taxes. Filed the check and the first-quarter tax return with the Commission.

30 Issued check payable to Swift Bank in payment of the employer’s FUTA taxes for the first quarter of the year.

30 Filed Form 941 with the IRS, reporting the FICA taxes and the employees’ federal income tax withholdings for the first quarter.

Required

Prepare journal entries to record the transactions and events for both March and April.

Short answer

Answer

The salaries payable is credited with $21,858.

The payroll tax expense is debited with $2,786.

Step-by-step solution

Definition of Social Security Tax

The social security tax is a tax the government takes from the employers and employees to pay them after they retire.

Journal entries for the month of March and April

Date	Particulars	Debit ($)	Credit ($)
March 15	FICA—Social Security Taxes Payable	3,472
	FICA-Medicare Taxes Payable	812
	Federal Income Taxes Payable	4,000
	Cash		8,284
	(To record entry for payment of tax liability)
March 31	Office Salaries Expense	11,200
	Shop Wages Expense	16,800
	FICA—Social Security Taxes Payable		1,736
	FICA-Medicare Taxes Payable		406
	Federal Income Taxes Payable		4,000
	Salaries Payable		21,858
	(To record Salaries payable)
March 31	Salaries Payable	21,858
	Cash		21,858
	(To record the payment of salaries payable)
March 31	Payroll Taxes Expense	2,786
	FICA—Social Security Taxes Payable		1,736
	FICA-Medicare Taxes Payable		406
	State Unemployment Tax Payable$\left(\$14,000\times 4\%\right)$		560
	Federal Unemployment Tax Payable $\mathbf{(}\mathbf{\$}\mathbf{14}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{0}\mathbf{.}\mathbf{6}\mathbf{\%}\mathbf{)}$		84
	(To record payroll taxes expense)
April 15	FICA—Social Security Taxes Payable	3,472
	FICA-Medicare Taxes Payable	812
	Federal Income Taxes Payable	4,000
	Cash		8,284
	(To record the payment of tax liability)
April 15	State Unemployment Tax Payable $\mathbf{(}\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{240}\mathbf{+}\mathbf{\$}\mathbf{560}\mathbf{)}$	2,800
	Cash		2,800
	(To record the payment of SUTA)
April 30	Federal Unemployment Tax Payable $\mathbf{(}\mathbf{\$}\mathbf{326}\mathbf{+}\mathbf{\$}\mathbf{84}\mathbf{)}$	420
	Cash		420
	(To record the payment of FUTA)
April 30	No entry required