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Problem-1
BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $118,500 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 2.9% of the first $7,000 paid to its employee.
| Gross Pay through August | Gross Pay for September | |
| a. | $6,500 | $1,900 |
| b. | $20,200 | $4,100 |
| c. | $114,200 | $10,000 |
Assuming situation a, prepare the employer’s September 30 journal entries to record the employer’s payroll taxes expense and its related liabilities. (Round your answers to 2 decimal places.)
Problem-2
BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $118,500 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 2.9% of the first $7,000 paid to its employee.
| Gross Pay through August | Gross Pay for September | |
| a. | $6,500 | $1,900 |
| b. | $20,200 | $4,100 |
| c. | $114,200 | $10,000 |
Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for r under each of three separate situations (a), (b), and (c). (Round your answers to 2 decimal places.)
Problem-3
Francisco Company has 20 employees, each of whom earns $2,900 per month and is paid on the last day of each month. All 20 have been employed continuously at this amount since January 1. On March 1, the following accounts and balances exist in its general ledger:
FICA—Social Security Taxes Payable, $7,192; FICA—Medicare Taxes Payable, $1,682. (The balances of these accounts represent total liabilities for both the employer’s and employees’ FICA taxes for the February payroll only.)
Employees’ Federal Income Taxes Payable, $14,500 (liability for February only).
Federal Unemployment Taxes Payable, $696 (liability for January and February together).
State Unemployment Taxes Payable, $4,640 (liability for January and February together).During March and April, the company had the following payroll transactions.
| Mar. | 15 | Issued check payable to Swift Bank, a federal depository bank authorized to accept employers’ payments of FICA taxes and employee income tax withholdings. The $23,374 check is in payment of the February FICA and employee income taxes. |
| 31 | Recorded the journal entry for the March salaries payable. Then recorded the cash payment of the March payroll (the company issued checks payable to each employee in payment of the March payroll). The payroll register shows the following summary totals for the March pay period. |
| Office Salaries | Shop Salaries | Gross Pay | FICA Taxes* | Federal Income Taxes | Net Pay | ||
| $23,200 | $34,800 | $58,000 | $3,596 | $3,596 | $14,500 | $14,500 | $39,063 |
| $841 | $841 |
* FICA taxes are Social Security and Medicare, respectively.
| 31 | Recorded the employer’s payroll taxes resulting from the March payroll. The company has a merit rating that reduces its state unemployment tax rate to 4.00% of the first $7,000 paid each employee. The federal rate is 0.60%. | |
| Apr. | 15 | Issued check to Swift Bank in payment of the March FICA and employee income taxes. |
| 15 | Issued check to the State Tax Commission for the January, February, and March state unemployment taxes. Filed the check and the first-quarter tax return with the Commission. | |
| 30 | Issued check payable to Swift Bank in payment of the employer’s FUTA taxes for the first quarter of the year. | |
| 30 | Filed Form 941 with the IRS, reporting the FICA taxes and the employees’ federal income tax withholdings for the first quarter. |
Required:
Prepare journal entries to record the transactions and events for both March and April. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)
Problem-4
Paloma Co. Stars has four employees. FICA Social Security taxes are 6.2% of the first $118,500 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, its FUTA taxes are 0.6% and SUTA taxes are 2.15% The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company’s four employees.
| Current Week | |||
| Name | Gross Pay through Aug. 18 | Gross Pay | Income Tax Withholding |
| Dali | $116,250 | $4,500 | $239 |
| Trey | $116,900 | $1,600 | $258 |
| Kiesha | $9,600 | $700 | $61 |
| Chee | $3,550 | $650 | $49 |
In addition to gross pay, the company must pay one-half of the$110 per employee weekly health insurance; each employee pays the remaining one-half. The company also contributes an extra 8% of each employee’s gross pay (at no cost to employees) to a pension fund.
Required:
Compute the following for the week ended August 25 (Round your answers 2 decimal places)
Problem-5
Laker Company reported the following January purchases and sales data for its only product.
| Date | Activities | Units acquired at cost | Units Sold at Retail |
|---|---|---|---|
| Jan. 1 | Beginning inventory | 185 units @ $11.00 = $2,035 | |
| Jan. 10 | Sales | 145 units @ $20.00 | |
| Jan. 20 | Purchase | 100 units @ $10.00 = 1,000 | |
| Jan. 25 | Sales | 125 units @ $20.00 | |
| Jan. 30 | Purchase | 270 units @ $9.50 = 2,565 | |
| Totals | 555 units = $5,600 | $270 units |
Required:
The Company uses a periodic inventory system. For specific identification, ending inventory consists of 285 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO.
Problem-6
Laker Company reported the following January purchases and sales data for its only product.
| Date | Activities | Units acquired at cost | Units Sold at Retail |
|---|---|---|---|
| Jan. 1 | Beginning inventory | 185 units @ $11.00 = $2,035 | |
| Jan. 10 | Sales | 145 units @ $20.00 | |
| Jan. 20 | Purchase | 100 units @ $10.00 = 1,000 | |
| Jan. 25 | Sales | 125 units @ $20.00 | |
| Jan. 30 | Purchase | 270 units @ $9.50 = 2,565 | |
| Totals | 555 units = $5,600 | $270 units |
Required:
Complete comparative income statements for the month of January for Laker Company for the periodic inventory method. Assumed expenses are $1,700 and that the applicable income tax rate is 40%.
Problem-7
Laker Company reported the following January purchases and sales data for its only product.
| Date | Activities | Units acquired at cost | Units Sold at Retail |
|---|---|---|---|
| Jan. 1 | Beginning inventory | 185 units @ $11.00 = $2,035 | |
| Jan. 10 | Sales | 145 units @ $20.00 | |
| Jan. 20 | Purchase | 100 units @ $10.00 = 1,000 | |
| Jan. 25 | Sales | 125 units @ $20.00 | |
| Jan. 30 | Purchase | 270 units @ $9.50 = 2,565 | |
| Totals | 555 units = $5,600 | $270 units |
The company uses a perpetual inventory system. For specific identification, ending inventory consists of 285 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.
Required:
Complete comparative income statements for the month of January for Laker Company for the four inventory method. Assumed expenses are $1,700 and that the applicable income tax rate is 40%.
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