During January, Luxury Cruise Lines incurs employee salaries of $1.1 million. Withholdings in January are $84,150 for the employee portion of FICA, and $233,750 for employee federal and state. The company incurs an additional $68,200 for federal and state unemployment tax and $33,000 for the employer portion of health insurance (fringe benefits payable to Blue Cross Blue Shield).Required:1. to 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 million should be entered as 5,000,000).)
Question
During January, Luxury Cruise Lines incurs employee salaries of 84,150 for the employee portion of FICA, and 68,200 for federal and state unemployment tax and $33,000 for the employer portion of health insurance (fringe benefits payable to Blue Cross Blue Shield).Required:1. to 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 million should be entered as 5,000,000).)
Solution
To record these transactions, you would make the following journal entries:
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Debit "Salaries Expense" for $1,100,000. This represents the total salaries incurred by Luxury Cruise Lines in January.
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Credit "FICA Payable" for $84,150. This represents the employee portion of FICA that the company is withholding.
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Credit "Federal and State Taxes Payable" for $233,750. This represents the employee federal and state taxes that the company is withholding.
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Debit "Unemployment Tax Expense" for $68,200. This represents the additional federal and state unemployment tax that the company incurs.
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Credit "Unemployment Tax Payable" for $68,200. This represents the liability the company has for the unemployment tax.
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Debit "Health Insurance Expense" for $33,000. This represents the employer portion of health insurance.
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Credit "Health Insurance Payable" for $33,000. This represents the liability the company has for the health insurance.
Please note that these entries are based on the accrual accounting method, where expenses are recorded when they are incurred, not when they are paid.
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