Question

Sandler Company completed the following two transactions. The annual accounting period ends December 31.

1. On December 31, calculated the payroll, which indicates gross earnings for wages ($450,000), payroll deductions for income tax ($47,000), payroll deductions for FICA ($39,000), payroll deductions for United Way ($5,900), employer contributions for FICA (matching), and state and federal unemployment taxes ($3,900). Employees were paid in cash, but payments for the corresponding payroll deductions have not been made and employer taxes have not yet been recorded.
2. Collected rent revenue of $2,070 on December 10 for office space that Sandler rented to another business. The rent collected was for 30 days from December 12 to January 10 and was credited in full to Deferred Revenue.

Required:

1. 1. & 2. Prepare the entries required on December 31 to record payroll, the collection of rent on December 10 and adjusting journal entry on December 31.
2. 3. Show how any liabilities related to these items should be reported on the company’s balance sheet at December 31.

Journal entry worksheet

• Record the wages expense, including payroll deductions.

Note: Enter debits before credits.

	Date General Journal Debit Credit December 31 Salaries and Wages Expense 450,000 Withheld Income Taxes Payable FICA Payable Charitable Contributions Payable Cash

• Record the payroll tax expense.

Note: Enter debits before credits.

	Date General Journal Debit Credit December 31

• Record the collection of 30 days’ rent in advance amounting to $2,070.

Note: Enter debits before credits.

	Date General Journal Debit Credit December 10

• Record the adjusting entry relating to rent.

Note: Enter debits before credits.

	Date General Journal Debit Credit December 31

Show how any liabilities related to these items should be reported on the company’s balance sheet at December 31. (Do not round intermediate calculations.)

	SANDLER COMPANY Balance Sheet (partial) $0

Answer 1

a. Record the wages expense, including payroll deductions.

Date	Account Title & Explanation	Debit	Credit
December 31	Salary & Wages	450000
	Withheld Income Taxes Payable		47000
	FICA Payable		39000
	Charitable Contributions Payable		5900
	Cash		358100

b. record the payroll tax expense

Date	Account Title & Explanation	Debit	Credit
December 31	Payroll Expenses	42900
	FICA Payable		39000
	SUTA & FUTA Payable (unemployment)		3900

c. Record the collection of 30 days rent in advance amounting to $5,640

Date	Account Title & Explanation	Debit	Credit
December 10	Cash	2070
	Deferred Rent Revenue		2070

d. Record the adjusting entry relating to rent.

Date	Account Title & Explanation	Debit	Credit
December 31	Deferred Rent Revenue (2070/30 *20)	1380
	Rent Revenue		1380

Balance Sheet (partial)
At December 31
Current liabilities:
Employee FICA taxes payable	39000
Employer FICA taxes payable	39000
Charitable Contributions Payable	5900
Employee income taxes payable	47000
Unemployment taxes payable	3900
deferred revenue	690
Total current liabilities	135490