Question

Following are some transactions and events of Business Solutions.

Feb. 26 The company paid cash to Lyn Addie for eight days" work at $130 per day.

Mar. 25 The company sold merchandise with a $2,400 cost for $2,900 on credit to Wildcat Services, invoice dated March 25.

Required:

1. Assume that Lyn Addie is an unmarried employee. Her $1,040 of wages have deductions for FICA Social Security taxes, FICA Medicare taxes, and federal income taxes. Her federal income taxes for this pay period total $104. Compute her net pay for the eight days' work paid on February 26. (Round your answer to 2 decimal places. Do not round intermediate calculations.)

2. Record the journal entry to reflect the payroll payment to Lyn Addie as computed in part 1 . (Round your answers to 2 decimal places. Do not round intermediate calculations.)

3. Record the journal entry to reflect the (employer) payroll tax expenses for the February 26 payroll payment. Assume Lyn Addie has not met earnings limits for FUTA and SUTA (the FUTA rate is 0.6 %and the SUTA rate is 5.4 %for the company. (Round your answers to 2 decimal places. Do not round intermediate calculations.)

4. Record the entries for the merchandise sold on March 25 if a 4 %sales tax rate applies. (Round your answers to the nearest whole dollar.)

Answer 1

1)		Gross pay	Deduction
FICA Social Security taxes	6.20%	1040	64.48
FICA Medicare	1.45%	1040	15.08
federal income taxes			104
Total Deductions			183.56
Gross Pay			1040
Net Pay for eight days			856.44
2) Journal entry for payment:
Date	Accounts Title	debit $	credit $
26-Feb	payroll	1040
	FICA Social Security taxes		64.48
	FICA Medicare		15.08
	federal income taxes		104
	Cash		856.44
	(being net payment to Lyn Addie)
3) Employer payroll tax expenses journal entry:
Date	Accounts Title	debit $	credit $
26-Feb	Employer Taxes expense	141.96
	FICA Social Security taxes payable		64.48
	FICA Medicare payable		15.08
	FUTA payable		6.24	(1040*0.6%)
	SUTA payable		56.16	(1040*5.4%)
	(being Employer's Payroll tax expenses)
4)
Date	Accounts Title	debit $	credit $
26-Feb	Accounts Receivable	3016
	Sales revenue		2900
	Sales tax payable		116	2900*0.04
	(being goods sold for 2900 with 4% sales tax)