Question

In Oregon, employers who are covered by the state workers' compensation law withhold employee contributions from the wages of covered employees for the workers' benefit fund at the rate of 1.4¢ for each hour or part of an hour that the worker is employed. Every covered employer is also assessed 1.4¢ per hour for each worker employed for each hour or part of an hour. The employer-employee contributions for workers' compensation are collected monthly, quarterly, or annually by the employer's insurance carrier, according to a schedule agreed upon by the employer and the carrier. The insurance carrier remits the contributions to the state's Workers' Compensation Department. Cortez Company, a covered employer in Oregon, turns over the employer-employee workers' compensation contributions to its insurance carrier by the 15th of each month for the preceding month. During the month of July, the number of full-time employee-hours worked by the company's employees was 8,270; the number of part-time employee-hours was 1,950.

c. Journalize the entry on July 31 to record the employer's liability for workers' compensation insurance for the month.

d. Journalize the entry on August 15 to record payment to the insurance carrier of the amount withheld from the employees' earnings for workers' compensation insurance and the amount of the employer's liability.

Answer 1

31st July

Dr Employer contribution for worker's compensation insurance ¢14,308

Cr worker's compensation insurance payable account ¢14,308

(8,270+1,950)*1.4

15th August

For transferring liability to insurance carrier account

Dr worker's compensation insurance payable account ¢ 14,308

Dr employees contribution for worker's compensation insurance ¢ 14,308

Cr insurance carrier account ¢28,616

Further for payment

Dr insurance carrier account ¢ 28,616

Cr Bank A/c ¢ 28,616

(During salary payment employee contribution for worker's compensation insurance is deducted and credited to employees contribution for worker's compensation insurance. Hence didn't payment employee contribution account is debited and insurance carrier account is credited to whom payment is made)