The employees of the Chop House earned gross salaries of $45,000 during January.
ID: 2453650 • Letter: T
Question
The employees of the Chop House earned gross salaries of $45,000 during January. Withholdings were $2,500 for Social Security, $4,000 for federal income tax, and $1,900 for state income tax. The employer share of FICA taxes was also $2,500. Salaries earned in January will be paid during February.
a. Prepare journal entries for the January transactions. Assume that purchases are recorded directly into the inventory account. For compound entries, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.
Jan. 1
Jan. 9
Jan. 15
Jan. 18
Jan. 23
b. Prepare adjusting entries at January 31 related to salaries, payroll taxes, and notes payable. For compound entries, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.
Payroll
Payroll taxes
Interest
c. Create the current liability section of the balance sheet at January 31.
Chop House
Current Liabilities Section
January 31
Accounts Payable
$
Notes Payable
Federal Tax Withholdings Payable
FICA Taxes Payable
Interest Payable
Salaries Payable
Sales Tax Payable
State Tax Withholdings Payable
Unearned Revenue
Total Current Liabilities
$
a. Prepare journal entries for the January transactions. Assume that purchases are recorded directly into the inventory account. For compound entries, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.
Jan. 1
Jan. 9
Jan. 15
Jan. 18
Jan. 23
Explanation / Answer
(A) Date Particulars Dr/Cr Dr Amount Cr Amount Jan-01 Cash A/c Dr 25,000.00 To Notes Payable Cr 25,000.00 Jan-09 Revenue A/c (P&L) Dr 6,000.00 To Unearned Service Revenue a/c Cr 6,000.00 (Being unearned revenue released to profit and loss a/c) Jan-15 Sales Tax Payable A/c Dr 7,500.00 To Cash A/c Cr - 7,500.00 Jan-18 Inventory A/c Dr 12,000.00 To Account Payable Cr 12,000.00 Jan-23 Accounts Receivable A/c Dr 3,210.00 To Sales Tax payable A/c Cr 210.00 To Revenue A/c (P&L) Cr 3,000.00 (B) Date Particulars Dr/Cr Dr Amount Cr Amount Jan-31 Salaries A/c (P&L) Dr 45,000.00 To Salaries Payable A/c Cr 36,600.00 To Social Security Payable A/c Cr 2,500.00 To Federal Withholding Taxes payable Cr 4,000.00 To State Withholding Taxes Payable A/c Cr 1,900.00 Jan-31 FICA Taxes A/c Dr (P&L) Dr 2,500.00 To FICA TAxes A/c Cr 2,500.00 Jan-31 Interest A/c Dr 125.00 To Interest Payable A/c Cr - 125.00 ( 25000*.06/12) (C) Chop House Current liability section as at Jan 31 Accounts Payable 21,500.00 Notes Payable 25,000.00 Federal Tax Withholding taxes payable 4,000.00 FICA Taxes Payable 2,500.00 Social Security Taxes Payable 2,500.00 (May be clubbed with FICA Taxes Payable) Interest Payable 125.00 Salaries Payable 36,600.00 Sales Tax Payable 210.00 State Withholding Taxes Payable 1,900.00 Unearned Revenue 10,500.00 Total Liabilities 1,04,835.00
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