Question

Mexican Restaurant incurred salaries expense of $62,000 for 2018. The payroll expense includes employer FICA​ tax, in addition to state unemployment tax and federal unemployment tax. Of the total​ salaries, $22,000 is subject to unemployment tax.​ Also, the company provides the following benefits for​ employees: health insurance​ (cost to the​ company, $3,000​), life insurance​ (cost to the​ company, $330​), and retirement benefits​ (cost to the​ company, 10​% of salaries​ expense)

Requirements:
1. Journalize Ricardo's expenses for employee benefits and for payroll taxes.
Explanations are not required.
2. What was Ricardo's total expense for 2018 related to payroll?

Answer 1

1. The entry for the expenses of employee benefits and for payroll taxes would be as follows:

Debit Credit

Salaries Expense $62,000

FICA Taxes payable $4,743

Health insurance payable $3,000

Life Insurance payable $330

Retirement Benefits payable $6,200

Salaries payable $47,727

Debit Credit

Payroll tax expense $6,063

FICA Taxes payable $4,743

State unemployment taxes payable $1,188

Federal unemployment taxes payable $132

2. Ricardo's total expense for 2018 related to payroll was $68,063

Step-by-step explanation:

1. According to the given the entry for the expenses of employee benefits and for payroll taxes would be as follows:

Debit Credit

Salaries Expense $62,000

FICA Taxes payable $4,743

Health insurance payable $3,000

Life Insurance payable $330

Retirement Benefits payable $6,200

Salaries payable $47,727

FICA Taxes payable=$62,000*7.65%=$4,743

Retirement Benefits payable=$62,000*10%=$6,200

Debit Credit

Payroll tax expense $6,063

FICA Taxes payable $4,743

State unemployment taxes payable $1,188

Federal unemployment taxes payable $132

FICA Taxes payable=$62,000*7.65%=$4,743

State unemployment taxes payable=$22,000*5.4%=$1,188

Federal unemployment taxes payable=$22,000*0.6%=$132

2. In order to calculate Ricardo's total expense for 2018 related to payroll we would have to make the following calculation:

Total expenses related to payroll=Salaries expense+payroll tax expense

Total expenses related to payroll=$62,000+$6,063

Total expenses related to payroll=$68,063

Ricardo's total expense for 2018 related to payroll was $68,063