Alamar petroleum Company offers its employees the option of contributing retirem

Question

Alamar petroleum Company offers its employees the option of contributing retirement funds up to 5% of their wages or salaries, with the contribution being matched by Alamar. The company also pays 75% of medical and life insurance premiums. Deductions relating to these plans and other payroll information for the first biweekly payroll period of February are listed as follows: Required; prepare the appropriate journal entries to record salaries and wages expense and payroll tax expense for the biweekly pay period. Assume that no employee's cumulative wages exceed the relevant wage bases for social security, and that all employee's cumulative wages do exceed the relevant unemployment wage bases. Salaries are next yet paid.

Explanation / Answer

Date Account Titles & Explanations Debit Credit wages & salaries expense 3500000 employer contribution to VR Plan expense 99000 employee medical insurance expense 42750 employee life insurance expense 7875 payroll taxes expense 477750 state unemployment tax payable 189000 federal unemployment tax payable 21000 contribution to Vol. retirement plan payable 198000 medical insurance premium payable 57000 life insurance premium payable 10500 federal income taxes payable 550000 local income taxes payable 68000 social security tax payable 434000 medicare tax payable 101500 salaries & wages payable 2498375 4127375 4127375 Note: 1) medical insurance & life insurance--given figure is taken as total and 75% of that      to be borne by the employer. 2) The expense accounts can be clubbed into one.

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