Question

1. Your company sells $53,000 of one-year, 12% bonds for an issue price of $45,500. The journal entry to record this transaction will include a credit to Bonds Payable in the amount of:

2. During one pay period, Star Valley Company distributes $132,000 to employees as net pay. The income tax withholdings were $19,300 and the FICA withholdings were $8,945. Total payroll costs to the company for this pay period, excluding any unemployment taxes, was:

3. Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $62,000 but that employee income taxes totaling $8,200 and FICA taxes totaling $3,225 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts. What is the net pay & the total payroll costs?

Answer 1

1. Answer: $53,000

The journal entry will debit cash $45,500 and credit discount on bonds payable $7,500 and bonds payable $53,000.

2. Answer: $169,190

Total payroll costs = Gross pay + Employer's share of FICA taxes = ($132,000 + $19,300 + $8,945) + $8,945 = $160,245 + $8,945 = $169,190

3. Net Pay: $50,575

Net pay = Total Wages - Withholdings = $62,000 - ($8,200 + $3,225) = $62,000 - $11,425 = $50,575

Total Payroll Costs: $65,225

Total payroll costs = Total wages + Employer's share of FICA taxes = $62,000 + $3,225 = $65,225