During January, Luxury Cruise Lines incurs employee salaries of $1.9 million. Withholdings in January are $145,350 for the employee portion of FICA, and $403,750 for employee federal and state. The company incurs an additional $117,800 for federal and state unemployment tax and $57,000 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 145,350 for the employee portion of FICA, and 117,800 for federal and state unemployment tax and $57,000 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
The journal entries would be as follows:
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Debit "Salaries Expense" for 1,900,000. This entry records the total salaries incurred by the company.
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Debit "Salaries Payable" for 145,350 for FICA and 145,350 and "Federal and State Taxes Payable" for $403,750. This entry records the withholdings from the employees' salaries.
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Debit "Payroll Tax Expense" for 57,000. Credit "Unemployment Tax Payable" for 57,000. This entry records the additional costs incurred by the company related to payroll.
Please note that these entries are based on the accrual basis of accounting, where expenses are recorded when they are incurred, not when they are paid.
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