Question

Gross payroll for the employees of Lord Company totals $800,000 per week. From this must be withheld Social Security taxes of 6.20% and Medicare taxes of 1.45%. In addition, federal and state income tax withholdings amount to 10% of gross payroll. Which ONE of the following is in the SUMMARY JOURNAL ENTRY to record the payment of payroll for one week?

Group of answer choices

DEBIT to Social Security Payable for $99,200

CREDIT to Compensation Expense for $861,200

DEBIT to Income Tax Withholding Payable for $80,000

CREDIT to Cash for $658,800

CREDIT to Medicare Payable for $11,600

Answer 1

Employer salaries = $800,000

Social society tax = 6.20%

Medicare taxes = 1.45%

Federal and state income tax withholding = 10%

Social society tax payable = Employer salaries x Social society tax

= 800,000 x 6.20%

= $49,600

Medicare tax withholding payable = Employer salaries x Medicare taxes

= 800,000 x 1.45%

= $11,600

Income tax withholding payable= Employer salaries x Federal and state income tax withholding

= 800,000 x 10%

= $80,000

journal entry to record the payment of payroll would be:

General Journal	Debit	Credit
Compensation expense	800,000
Social security payable		$49,600
Medicare payable		$11,600
Income tax withholding payable		$80,000
Cash		$658,800

Hence, fifth option is correct.