Question

Following are some transactions and events of Business Solutions.

Feb. 26 The company paid cash to Lyn Addie for eight days' work at $130 per day.

March 25 The company sold merchandise with a $2092 cost for $2940 on credit to Wildcat Services, dated March 25.

Required:

1. Assume that Lyn Addie is an unmarried employee. Here $1,040 of wages are subjects to no deductions other than FICA Social Security taxes, FICA Medicare taxes, and federal income taxes. Her federal income taxes for this pay period total $104. Compute her net pay for the eight days' work paid on February 26. (round your answer to 2 decimal places. Do not round intermediate calculations).

2. Record the journal entry to reflect the payroll payment to Lyn Addie as computed in part 1. (round your answers to 2 decimal places. Do not round intermediate calculations).

3. Record the journal entry to reflect the (employer) payroll tax expenses for the February 26 payroll payment. Assume Lyn Addie has not met earnings limits for FUTA and SUTA (the FUTA rate is 0.6% and the SUTA rate is 4% for the company. (Round your answers to 2 decimal places. Do not round intermediate calculations.)

4. Record the entries for the merchandise sold on March 25 if a 4% sales tax rate applies. (round your answers to the nearest whole dollar).

Answer 1

Calculation of Net pay
	Gross Pay		1040	(130*8)
	Less: FICA Social Security tax deduction	64.48		(1040*0.062)
	Less: FICA Medicare Tax deduction	15.08		1040*0.0145
	Less: Income tax deduction	104	183.56
1	Net Pay		856.44
Date	Description	Debit	Credit
2	Wages Expense	1040
	FICA- Social Security Tax Payable		64.48
	FICA- Medicare Taxes Payable		15.08
	Employee Federal Income Tax Payable		104
	Cash		856.44
	(To record payroll period)
3	Payroll Tax Expense
	FICA- Social Security Tax Payable		64.48
	FICA- Medicare Taxes Payable		15.08
	State Unemployment Taxes Payable		41.6	(1040*0.04)
	Federal Unemployment Taxes Payable		6.24	(1040*0.006)
	(To record employer payroll taxes)
4	Accounts Receivable- Wildcat Services	2940
	Sales		2827
	Sale tax Payable		113
	(To record sales)
	Cost of goods sold	2092
	Merchandise Inventory		2092
	(To record cost of goods sold)