According to a summary of the payroll of Scotland Company,total salaries were $500,000.Assume that social security taxes are payable at a 6% rate and Medicare taxes are payable at a 1.5% rate with no maximum earnings.Federal income tax withheld was $98,000.Also,$15,000 was subject to state (4.2%)and federal (0.8%)unemployment taxes.The journal entry to record accrued salaries would include a
A) debit to Salaries Payable of $365,250
B) credit to Salaries Payable of $364,500
C) debit to Salaries Expense of $364,500
D) credit to Salaries Expense of $365,250

Question

According to a summary of the payroll of Scotland Company,total salaries were $500,000.Assume that social security taxes are payable at a 6% rate and Medicare taxes are payable at a 1.5% rate with no maximum earnings.Federal income tax withheld was $98,000.Also,$15,000 was subject to state (4.2%)and federal (0.8%)unemployment taxes.The journal entry to record accrued salaries would include a ​
A) debit to Salaries Payable of $365,250
B) credit to Salaries Payable of $364,500
C) debit to Salaries Expense of $364,500
D) credit to Salaries Expense of $365,250

Quizplus · Accepted Answer

CTo calculate the correct entries, we first determine the total deductions from the salaries. Social security tax is 6% of $500,000, which equals $30,000. Medicare tax is 1.5% of $500,000, which equals $7,500. The total of these taxes plus the federal income tax withheld ($98,000) is $135,500. Subtracting this from the total salaries ($500,000) gives us $364,500, which is the net amount payable to employees. Therefore, the credit to Salaries Payable (reflecting the liability to pay employees) is $364,500 (B), and the corresponding debit to Salaries Expense (reflecting the expense incurred by the employer) is also $364,500 (C).

According to a Summary of the Payroll of Scotland Company,total