Question

The following monthly data are taken from Ramirez Company at July 31: sales salaries, \(200,000; office

salaries, \)160,000; federal income taxes withheld, \(90,000; state income taxes withheld, \)20,000; Social

Security taxes withheld, \(22,320; Medicare taxes withheld, \)5,220; medical insurance premiums, \(7,000;

life insurance premiums, \)4,000; union dues deducted, \(1,000; and salaries subject to unemployment

taxes, \)50,000. The employee pays 40% of medical and life insurance premiums.

Prepare journal entries to record:

(1) accrued payroll, including employee deductions, for July;

(2) cash payment of the net payroll (salaries payable) for July;

(3) accruedemployer payroll taxes, and

other related employment expenses, for July—assume that FICA taxes are identical to those on employees

and that SUTA taxes are 5.4% and FUTA taxes are 0.6%; and

(4) cash payment of all liabilities related

to the July payroll.

Short answer

The total payroll expenses of the month are $180,040.

Step-by-step solution

Definition of the accrued payroll expenses

Accrued payroll expenses are those expenses those are due but not paid.

Entries for the accrued payroll expenses

Date	Particulars	Debit	Credit
July 31	Sales Salaries Expense	$200,000
	Office Salaries Expense	$160,000
	Employee Federal Income Tax Payable		$90,000
	Employee State Income Tax Payable		$20,000
	FICA- Social Security Tax Payable		$22,300
	FICA- Medicare Tax Payable		$5,220
	Employees Medical Insurance Payable		$2,800
	Employees Life Insurance Payable		$1,600
	Employees Union Dues Payables		$1,000
	Salaries Payable		$217,080
	(Being entry for the accrued payroll and deductions)

Step 3:Entry for the payment of salaries

Date	Particulars	Debit	Credit
July 31	Salaries Payable	$217,080
	Cash		$217,080
	(Being entry for the payment of salaries payable)

Entry for the record of payroll expenses

Date	Particulars	Debit	Credit
July 31	Payroll Taxes Expense	$51,900
	FICA- Social Security Tax Payable		$22,300
	FICA- Medicare Tax Payable		$20,000
	Employees Medical Insurance Payable		$4,200
	Employees Life Insurance Payable		$2,400
	State Unemployment Taxes Payable		$2,700
	Federal Unemployment Taxes Payable		$300
	(Being entry for the payroll expense)

Entry for the payment of payroll expenses

Date	Particulars	Debit	Credit
July 31	Employee Federal Income Tax Payable	$90,000
	Employee State Income Tax Payable	$20,000
	FICA- Social Security Tax Payable	$44,600
	FICA- Medicare Tax Payable	$10,440
	Employees Medical Insurance Payable	$7,000
	Employees Life Insurance Payable	$4,000
	Employees Union Dues Payables	$1,000
	State Unemployment Taxes Payable	$2,700
	Federal Unemployment Taxes Payable	$300
	Cash		$180,040
	(Being payment of payroll expenses)