AcctgForLabor Thompson

CHAPTER 3—ACCOUNTING FOR LABOR
K
MULTIPLE CHOICE
1. All of the following are characteristics of hourly wage plans except:

a. They provide no extra recognition for doing more than the minimum required.
b. They are easy to apply.
c. They establish a definite rate per hour for each employee.
d. They encourage employees to sacrifice quality in order to maximize earnings.
ANS: D
Hourly wage plans pay a fixed rate per hour, so they are easy to apply, but they
do not provide any incentive to do more than what is required, nor do they encou
rage employees to work so fast as to sacrifice quality.
PTS: 1 DIF: Easy REF: P. OBJ: 1

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective
2. A wage plan based solely on an employee's quantity of production is known as a(n

):
a. Modified wage plan.
b. Hourly-rate plan.
c. Incentive wage plan.
d. Piece-rate plan.
ANS: D
A piece-rate plan bases an employee's earnings strictly on the number of units p
roduced.

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic
3. Wage plans that encourage employees to work harder and earn more by producing mo
re or by meeting or exceeding quotas are known as:
a. Modified wage plans.
b. Salary wage plans.
c. Piece-rate plans.
d. Hourly-rate plans.
ANS: C
Piece-rate plans encourage employees to work harder and earn more by producing m
ore or by meeting and exceeding quotas.
PTS: 1 DIF: Moderate REF: P. OBJ: 1

4. Under a modified wage plan, an employee earns $.75 for each finished unit and is
guaranteed $10 per hour as a minimum wage. If the daily quota is 100 units, on
a particular day when an employee completes 85 units and works 8 hours, the amoun
t of the make-up guarantee will be:
a. $80.00
b. $72.25
c. $16.25
d. $5.00
ANS: C
Make-up guarantee = ($10 ´ 8 hours) - ($.75 ´ 85 pieces) = $16.25

5. The departmental responsibilities of the payroll department are carried out by c

ompleting and maintaining all of the following forms and records except:
a. Production reports.
b. Payroll reports.
c. Employee earnings records.
d. Payroll summaries.
ANS: A
Items (b), (c), and (d) are the responsibilities of the payroll department, wher
eas Item (a) is the responsibility of the timekeeping department.

6. An analysis of total labor costs into work in process and factory overhead compo
nents is recorded on a(n):
a. Labor cost summary.
b. Payroll record.
c. Individual production report.
d. Employee earnings record.
ANS: A
An analysis of labor costs into their work in process and factory overhead compo
nents is recorded on a labor cost summary.

7. An employee regularly earns $12 per hour for an 8-hour day with time-and-a-half
for overtime hours. Assuming that the employee works a 10-hour day, the amount o
f overtime premium is:
a. $36.
b. $18.
c. $12.
d. $6.
ANS: C
Overtime premium = 2 hours ´ $6 = $12

8. If the amount of overtime premium is to be charged to all jobs worked on during

the period, the debit will be to:
a. Factory Overhead.
b. Payroll.
c. Work in Process.
d. Accrued Payroll.
ANS: A
By charging the overtime premium to factory overhead, all jobs worked on during
the period share the cost.

9. The payroll for the week ended January 8 is $15,000 with 15 percent withheld for
employee income taxes and 8 percent for FICA taxes. The total amount of taxes t
o be remitted by the employer for this payroll would be:
a. $2,250.
b. $1,200.
c. $3,450.
d. $4,650.
ANS: D
The taxes remitted would be:
Employees' income taxes $2,250

Employee FICA 1,200
Employer FICA 1,200
Total $4,650
PTS: 1 DIF: Hard REF: P. OBJ: 3

10. Of the following taxes, the only one that the employer pays in entirety is:
a. State income tax.
b. State unemployment tax.
c. FICA tax.
d. Federal income tax.
ANS: B
Items (a) and (d) are paid only by the wage earner, Item (c) is paid by both emp
loyer and employee, whereas state unemployment taxes are paid only by the employe
r.

11. The Dehl Company payroll for the first week in January was $12,000. The amount
of income tax withheld was 12 percent and the FICA, state unemployment, and feder
al unemployment tax rates were 8 percent, 5 percent, and 1 percent, respectively.
The amount of the employer's payroll taxes are:
a. $3,120.
b. $1,440.
c. $ 720.
d. $1,680.
ANS: D
Employer's payroll taxes = (8% + 5% + 1%) $12,000 = $1,680. Income tax withheld
is the responsibility of the employee, as is the employees’ portion of FICA.
12. The Dehl Company payroll for the first week in January was $12,000. The amount
of income tax withheld was 12 percent and the FICA, state unemployment, and feder
al unemployment tax rates were 8 percent, 5 percent, and 1 percent, respectively.
The amount of the employees' withholding taxes are:
a. $1,680.
b. $2,400.
c. $1,440.
d. $3,120.
ANS: B
Employees' withheld taxes = (12% + 8%) $12,000 = $2,400. The state and federal
unemployment taxes are the employer’s responsibility, as is the FICA employer’s portion.

13. An accrued expense such as accrued wages can best be described as an amount:
a. Paid and not currently matched with earnings.
b. Not paid and not currently matched with earnings.
c. Not paid and currently matched with earnings.
d. Paid and currently matched with earnings.
ANS: C
An accrued expense is best described as an unpaid expense that has been incurred
in a period in which earnings from the expense have been realized. Therefore, t
he expense incurred but not paid should be matched to the earnings of the same pe
riod.

14. A factory worker earns $500 per week and will receive a $2,000 bonus at year-end
, a 2-week paid vacation, and 5 paid holidays. The combined amount of the accrua
ls for bonus, vacation, and holiday pay in the weekly payroll would be:
a. $20.00.
b. $70.00.
c. $40.00.
d. None of the above.
ANS: B
Bonus: Bonus: $2,000 / 50 weeks = $40
Vacation pay: $500 ´ 2 weeks = $1,000 / 50 weeks = $20
Holiday pay: $500 / 5 days = $100 per day ´ 5
= $500 / 50 weeks
= $10
Total accrual = $40 + $20 + $10 = $70

15. Toshlin issues financial statements June 30th. If payroll was $30,000 through
June 30th and wages were to be paid on July 5, what is the correct journal entry
on June 30th?
Assume FIT = 15%, FICA = 8%, SUTA = 6%, FUTA = 1%,
a. No entry is required.
b. Payroll 30,000
Wages Payable 30,000
c. Payroll 30,000
Federal Income Tax 4,500
FICA Taxes Payable 2,400
d. Payroll 30,000
Federal Income Tax 4,500
FICA Taxes Payable 2,400
SUTA 1,800
FUTA 300
ANS: B
When the financial statement date does not match the payroll period, an accrual
must be made. Employer taxes would also be recorded on June 30th. The employees t
axes are not reported because they do not affect the financial statements total l
iabilities or income. The company would however, have to prepare an entry to rec
ord the accrual for the employer’s portion of payroll taxes.

16. The file for each factory employee that shows the time the employee spent on eac
h job, as well as time spent as indirect labor is the:
a. labor time record.
b. payroll record.
c. employee’s earnings record.
d. labor cost summary.
ANS: A
Each factory employee’s time will be summarized on a labor time record. The labor cost summary
reports the total payroll distribution. The payroll record and employee’s earnings record relate to the
payment of payroll rather than the timekeeping function.

17. The file that serves as a basis for reporting payroll information to governmenta
l agencies and preparing Form W-2 is the:
a. labor time record.
b. payroll record.
c. employee’s earnings record.
d. labor cost summary.
ANS: C
The employee’s earnings record is a cumulative record of employee earnings needed to calculate
payroll taxes. It also serves as the basis for reporting salary and wage information to government
agencies.

18. Under a modified wage plan, an employee working an eight-hour day earns $.40 for
each finished unit and is guaranteed $20 per hour as a minimum wage. At what le
vel should the daily quota be set?
a. 160 units
b. 400 units
c. 500 units
d. 640 units
ANS: B
Daily wage = $20 x 8 hours = $160.
Units made in a day to reach $160 at a rate of $.40 = $160 / $.40 = 400 units

19. Under a modified wage plan, Jim Phillips works an eight-hour day and earns $.50
for each finished unit he produces in excess of 200 units. However, he is guaran
teed $12.50 per hour as a minimum wage. His production this week was a follows:
Monday 220 units

Tuesday 180 units
Wednesday 200 units
Thursday 200 units
Friday 190 units
How much was the make-up guarantee paid to Jim this week?
a. $10
b. $5
c. $15
d. $12.50
ANS: C
The make-up guarantee is $15 as follows:
Hours Worked Pieces Earnings @ Earnings @ Make-up Payroll

Finished $12.50/hr $.50/unit Guarantee Earnings
Monday 8 220 $100 $110 $110
Tuesday 8 180 100 90 $10 100
Wednesday 8 200 100 100 100
Thursday 8 200 100 100 100
Friday 8 190 100 95 5 100
$500 $495 $15 $510

20. Under a modified wage plan, Jim Phillips works an eight-hour day and earns $.50
for each finished unit he produces in excess of 200 units. However, he is guaran
teed $12.50 per hour as a minimum wage. His production this week was a follows:
Monday 220 units

Tuesday 180 units
Wednesday 200 units
Thursday 200 units
Friday 190 units
What were Jim’s total earnings this week?

a. $500
b. $510
c. $495
d. $515
ANS: B
Jim’s total earnings were $510 as follows:
Hours Pieces Earnings @ Earnings @ Make-up Payroll

Worked Finished $12.50/hr $.50/unit Guarantee Earnings
Monday 8 220 $100 $110 $110
Tuesday 8 180 100 90 $10 100
Wednesday 8 200 100 100 100
Thursday 8 200 100 100 100
Friday 8 190 100 95 5 100
$500 $495 $15 $510

21. John Elton, who is classified as direct labor, earns $1,000 per week and is enti
tled to four weeks of vacation and 10 holidays each year. How much should be acc
rued for his vacation each week?
a. $76.92
b. $80.00
c. $83.33
d. $40.00
ANS: C
Total vacation pay per year = $1,000 x 4 weeks = $4,000
Weeks over which vacation is earned = 52 - 4 = 48
$4,000 / 48 weeks = $83.33 per week

22. John Elton, who is classified as direct labor, earns $1,000 per week and is enti
tled to four weeks of vacation and 10 holidays each year. How much should be acc
rued for his holiday pay each week?
a. $38.46
b. $40.00
c. $46.67
d. $130.00
ANS: C
Daily pay = $1,000 / 5 = $200
Annual holiday pay = $200 x 10 = $2,000
Weeks over which holiday pay is earned = 52 - 4 = 48
$2,000 / 48 weeks = $46.67 per week

23. Which of the following items relating to direct labor employees might be charged to specific jobs in
work in process rather than factory overhead?
a. Make-up guarantee
b. Idle time
c. Shift premiums
d. Holiday pay
ANS: D
In some cases, workers’ fringe benefits, including holiday pay, are charged to jobs with the workers’
wages. However, many companies charge benefits to Factory Overhead as it is not cost effective to
charge the benefits to jobs.

24. Which of the following is least likely to be a characteristic of a 401(k) plan?

a. It is a defined contribution plan
b. Taxes on income earned on investments in the plan are deferred
c. Employers match a portion of the employee investment
d. It is a non-contributory plan
ANS: D
A 401(k) plan is a contributory plan, meaning that the employees contribute a po
rtion of their earnings into the plan. Many employers match the employees’ investments in the plan.

25. Western Industries pays employees on a weekly basis on Tuesday for the week ende
d the previous Friday. Employees’ compensation is earned evenly each day over a 5-day work week. This
year, April 30 fell on Thursday. Payroll costs for the week ended May 1 follow:
Non Factory:
Sales $ 5,000
Administrative 10,000
$15,000
Factory:
Direct labor $25,000
Overtime premium 2,500
Indirect labor 15,000
$42,500
$57,500
Excluding payroll taxes, what amount should be accrued to the payroll account fo
r the period ended April 30?
a. $57,500
b. $46,000
c. $42,500
d. $34,000
ANS: B
If April 30 is Thursday, four days of the payroll fall in April and one in May.
$57,500 / 5 days = $11,500 per day x 4 days = $46,000

26. Western Industries pays employees on a weekly basis on Tuesday for the week ende
d the previous Friday. Employees’ compensation is earned evenly each day over a 5-day work week. This
year, April 30 fell on Thursday. Payroll costs for the week ended May 1 follow:
Non Factory:
Sales $ 5,000
Administrative 10,000
$15,000
Factory:
Direct labor $25,000
$42,500
$57,500
Excluding payroll taxes, how much of the accrued payroll at April 30 should be c
harged to Factory Overhead?
a. $17,500
b. $26,000
c. $14,000
d. $34,000
ANS: B
If April 30 is Thursday, four days of the payroll fall in April and one in May.
Indirect labor $15,000

Total payroll relating to factory overhead $17,500
$17,500 / 5 days = $3,500 per day x 4 days = $14,000

27. The entry made in November to reverse the entry that was made to accrue October
payroll would be:
a. Debit - Wages Payable

Credit - Cash
b. Debit - Wages Payable

Credit - Payroll
c. Debit - Factory Overhead

Credit - Payroll
d. Debit - Payroll
Credit - Wages Payable
ANS: B
The entry to accrue payroll is:
Debit - Payroll
Credit - Wages Payable
This entry is reversed in the following month.

28. Harmony Company has accrued payroll costs of $50,000 for the period May 28 - 31
as follows:
Administrative salaries $ 5,000

Sales salaries 5,000
Direct labor 30,000
$50,000
Other Information:
(a) The FICA rate is 8% of the first $100,000 of wages. None of the employees h
as reached this maximum.
(b) The company is responsible for state and federal unemployment taxes on the f
irst $8,000 of wages. All of the employees have previously reached this maximum.
(c) Payroll taxes are spread over all jobs.
What entry would be necessary to accrue payroll taxes for the period of May 28 -
31?
a. Debit - Factory Overhead 4,000

Credit - FICA Tax Payable 4,000
b. Debit - Payroll Tax Expense - Sales 800

Debit - Payroll Tax Expense - Administrative 800
Debit - Work in Process 4,000
Debit - Factory Overhead 400
c. Debit - Payroll Tax Expense 4,000

d. Debit - Payroll Tax Expense - Sales 800

Debit - Payroll Tax Expense - Administrative 800
Debit - Factory Overhead 3,200
ANS: D
Payroll tax expense - sales 5,000 x 8% = 4,000
Payroll tax expense - administrative 5,000 x 8% = 4,000
Factory overhead (30,000 + 10,000) x 8% = 3,200
The FICA of all factory employees would be charged to Factory Overhead as benefi
ts are to be spread to all jobs. If the benefits were to be charged to specific
jobs, then a debit of $2,400 would be made to Work in Process for the direct labo
r portion.

PROBLEM
1. Management of the Von Machine Company requests that you calculate the effect of
two different wage payment plans upon employee earnings and also on the unit labo
r cost of Product A.
The following information is available:
(1) The hourly rate is $9.00.

(2) The labor rate per piece of Part X, if the employee is paid on a piece-rate
basis, is $.30.
Ten pieces of Part X are required for one unit of Product A. The plant works a
6-day week and an 8-hour day, totaling 48 hours per week. No overtime premium pa
y is to be considered in your analysis.
During a selected week, the following pieces of Part X were produced:
Part X
Day Quantities Produced
1 150
2 200
3 240
4 180
5 300
6 200
An agreement with the union requires a minimum rate of $6.50 per clock hour be p
aid to employees.
a. Calculate the labor cost each day of the week for an employee under:
(1) the hourly-rate plan.
(2) the piece-rate plan.
b. If the company could anticipate a steady production level of 250 units of Par
t X each day, which plan would you recommend to the company’s management? Why?
ANS:
(a) (1) Hourly-Rate Plan:

8 (hours per day) ´ $9 = $72 per day
(2) Piece-Rate Plan:

Legal Amount
Day Earned Min.* Paid
1 150 ´ $.3 $45.00 $52 $52
2 200 ´ .3 60.00 52 60
3 240 ´ .3 72.00 52 72
4 180 ´ .3 54.00 52 54
5 300 ´ .3 90.00 52 90
6 200 ´ .3 60.00 52 60
*8 (hours per day) ´ $6.50 = $52 per day.
(b) If the company were to produce 250 units of Part X each day, the hourly rate
would result in a cost of $.288 per unit ($72 / 250), while the piece rate would
cost $.30 for each unit produced. The hourly rate should be recommended because
of the lower cost per unit.

2. The following payroll summary is prepared for the Sothern Manufacturing Company
for the week ending March 29, 2008:
Direct labor:
Job No. 200 $10,300
Job No. 201 7,000
Job No. 202 6,500
Total direct labor $23,800
Total gross payroll $30,000
Payroll taxes and insurance are to be computed as follows:
Employee's Employer's
Share Share
Federal income tax withheld $4,300
State unemployment tax 5.0%
Federal unemployment tax 1.0%
FICA tax 8.0% 8.0%
Disability insurance .5% .25%
Workmen's compensation insurance 2.0%
Prepare the general journal entries to:
a. Record the payroll.

b. Pay the payroll.
c. Distribute the payroll to the appropriate accounts.
d. Record the employer's share of payroll expense. (All of the employees work i
n the factory.)
ANS:
(a) Payroll 30,000

FICA Tax Payable 2,400
Federal Income Tax Withheld 4,300
Disability Insurance Withheld 150
To record payroll.
(b) Wages Payable 23,150

Cash 23,150
(c) Work in Process 23,800

Factory Overhead (Indirect Labor) 6,200
Payroll 30,000
To distribute payroll.
(d) Factory Overhead 4,875

Disability Insurance Withheld 75
State Unemployment Tax Payable 1,500
Federal Unemployment Tax Payable 300
Workmen's Compensation
Insurance Payable 600
To record employer's share of payroll associated
costs.

3. The Tidle Manufacturing Company uses a job order cost system. Factory wages are
paid on a straight hourly basis with indirect labor getting $8.50 an hour and di
rect labor getting $10.00 an hour.
During the week of January 7, the following hours were worked:
Direct Indirect
Cutting Department 2,200 250
Splicing Department 2,400 200
Sanding Department 1,850 125
Joining Department 4,250 325
Salaries and wages are paid weekly, with administrative salaries totaling $16,50
0 and salesperson's salaries totaling $12,200.
The following deductions are to be considered:
FICA tax 8.0%

Federal income tax 12.0%
State income tax 2.0%
Federal unemployment tax 1.0%
State unemployment tax 5.0%
Prepare journal entries to record:
a. The payroll.
b. The payment of the payroll.
c. The payroll distribution.
d. The employer's payroll tax expense.
ANS:
(a) Payroll* 143,350.00

FICA Tax Payable ($143,350 x 8% ) 11,468.00
Federal Income Tax Withheld ($143,350 x 12%) 17,202.00
State Income Tax Payable ($143,350 x 2% ) 2,867.00
Salaries and Wages Payable 111,813.00
To record payroll.
*(10,700 x $10) + (900 x $8.50) + $16,500 + $12,200
(b) Salaries and Wages Payable 111,813.00

Cash 111,813.00
To pay payroll.
(c) Work in Process (10,700 x $10 ) 107,000.00

Factory Overhead (900 x $8.50) 7,650.00
Administrative Salaries 16,500.00
Sales Salaries 12,200.00
Payroll 143,350.00
To distribute payroll.
(d) Factory Overhead* 16,051.00

Payroll Tax Expense**--
Sales and Administrative Salaries 4,018.00
FICA Tax Payable ($143,350 x 8%) 11,468.00
Federal Unemployment Tax Payable ($143,350 x 1%) 1,433.50
State Unemployment Tax Payable ($143,350 x 5%) 7,167.50
To record employer's share of payroll taxes.
*($107,000 + $7,650) x (8% + 1% + 5%) = $16,051
**($16,500 + $12,200) x (8% + 1% + 5%) = $4,018

4. A direct laborer in a factory earns $1,000 each week. In addition, she will rec
eive a $2,500 bonus at year end, a two-week paid vacation, and seven paid holiday
s.
Prepare the entry to distribute her wages and the costs and liabilities related
to bonus, vacation, and holiday pay. (Round all amounts to two decimal places.)
ANS:
Work in Process $1,000.00
Factory Overhead (bonus) 50.00
Factory Overhead (vacation) 40.00
Factory Overhead (holiday pay) 28.00
Payroll 1,000.00
Bonus Liability* 50.00
Vacation Pay Liability** 40.00
Holiday Pay Liability*** 28.00
*Bonus: $2,500 / 50 = $50.00 per week

**Vacation: $1,000 ´ 2 weeks = $2,000 / 50 = $40.00
***Holiday pay: $1,000 / 5 days = $200.00 per day ´ 7
= $1,400
$1,400 / 50 = $28.00

5. Jerrod Sampson is paid $10 an hour for 40 hours a week, with time-and-a-half for
overtime and double-time for Sundays and holidays. Overtime premium is charged
to Factory Overhead.
Using the labor-time record below:

a. Compute Jerrod’s total earnings for the week.
b. Present the journal entry to distribute Jerrod’s total earnings.
SUTA = 4%, FUTA = 1%, FICA = 8%, FIT = 10%
Sun Mon Tues Wed Thur Fri Sat Total

F28 4 4 4 4 4 4 4 28
M14 3 2 5 6 16
Admin 1 1 4 6
Total 4 8 7 9 8 10 4 50
ANS:
a. 570
Regular Pay 500 (50 x 10)
Premium Pay 70 (4 x 10) + (6 x 5)
b. Work in Process* 440

Factory Overhead** 130
Payroll 570
* Work in Process: ( $28 x 10 ) + ( $16 x 10 )

** Factory Overhead: 6 x 10 + 70

6. Becky Graham earns $15 per hour for up to 300 units of production per eight-hour
day. If she produces more than 300 pieces per day, she will receive an addition
al piece rate of $.40 per unit. A summary of her work week follows:
Hours Worked Pieces Finished

Monday 8 350
Tuesday 8 280
Wednesday 8 320
Thursday 8 290
Friday 8 300
(a) Determine Graham’s earnings for each day and for the week.
(b) Prepare the journal entry to distribute the payroll.
ANS:
(a) Graham’s earnings are calculated as follows:
Hours Pieces Earnings @ Earnings @ Make-up Payroll

Worked Finished $15.00/hr $.40/unit Guarantee Earnings
Monday 8 220 $120 $140 $140
Tuesday 8 180 120 112 $ 8 120
Wednesday 8 200 120 128 128
Thursday 8 200 120 116 4 120
Friday 8 190 120 120 120
$600 $616 $12 $628
(b)
Work in Process 616
Factory Overhead 12
Payroll 628
PTS: 1 DIF: Moderate REF: P. OBJ: 1, 3

7. Tyler Jacob is paid $15 per hour for a 40-hour work week with time-and-a-half fo
r overtime, which is not charged to specific jobs. For the week of March 4 - 10,
Tyler’s labor time record was as follows:
Mon Tues Wed Thur Fri Sat Total
Job B280 8 5 6 10 10 2 41
Machine maintenance 4 2 1 7
Total 8 9 8 10 10 3 48
Other Information:
Tyler’s year-to-date wages as of March 3 were $7,500. He contributes $20 weekly for his health
insurance premiums.
Current tax rates in effect are: FIT withholding rate - 10%; FICA - 8% on the f
irst $100,000 of wages; SUTA - 4% on the first $8,000 of wages; and FUTA - 1% on
the first $8,000 of wages.
(a) Calculate Tyler’s gross and net pay.

(b) Prepare the journal entries necessary to
(1) Record Tyler’s payroll
(2) Pay Tyler’s payroll
(3) Distribute Tyler’s payroll to the appropriate accounts
(c) Calculate the employer’s payroll taxes and prepare the journal entry to record them employer’s
portion of payroll taxes
ANS:
(a)
Gross pay:
48 hours x $15.00/hr. $720
8 hours x $22.50/hr. (15.00 x 1.5) 180
Total gross pay $900
Deductions:
FIT Withholding $900 x 10% $ 90
FICA - Employee portion $900 x 8% 72
Health insurance premium 20
Total deductions $182
Net Pay $718
(b)
Payroll 900
Employees’ Income Tax Payable 90
FICA Tax Payable 72
Health Insurance Premium Payable 20
To record payroll
Work in Process (48 hrs. x $15) 615

Factory Overhead (7 hrs. x $15) + $180 285
Payroll 900
To distribute payroll
Wages Payable 718

Cash 718
To record payment of payroll
(c)
Year-to-date payroll, March 3 $7,500
Earnings March 4 - 10 900
Year-to-date payroll, March 10 $8,400
Subject to FUTA and SUTA 8,000
Not subject to FUTA and SUTA $ 400
Amount of earnings March 4 - 10 subject to unemployment taxes = $900 - 400 = $50

0
Employer’s payroll taxes:

FICA (per above) $72
SUTA ($500 x 4%) 20
FUTA ($500 x 1%) 5
Factory Overhead 97
FICA Tax Payable 72
State Unemployment Tax Payable 20
To record employer’s payroll taxes

8. Tacy Company’s Schedule of Earnings and Payroll taxes for the period ended March 28 - 31 to be paid
April 5 follow:
Total payroll
Gross Wages taxes
FICA SUTA FUTA
Non-factory:
Sales $ 7,500 $ 600 $ 240 $ 60 $ 900
Administrative 4,000 320 112 28 460
11,500 920 352 88 1,360
Factory:
Direct labor 52,000 4,160 2,080 520 6,760
Overtime premium 4,500 360 180 45 585
Indirect labor 10,000 800 400 100 1,300
66,500 5,320 2,660 665 8,645
$78,000 $6,240 $3,012 $753 $10,005
Prepare the journal entries to:

(a) Accrue the payroll in the appropriate period
(b) Distribute the accrued payroll in the appropriate period
(c) Recognize related accrued employer’s payroll taxes in the appropriate period
assuming payroll taxes are spread over all jobs produced.
ANS:
The following journal entries would be recorded in March
(a) Payroll 78,000

To accrue payroll for the period Mar. 28 - 31
(b) Work in Process 52,000

Factory Overhead (10,000 + 4,500) 14,500
Sales Salaries 7,500
Administrative Salaries 4,000
Payroll 78,000
To distribute payroll for period Mar. 28 - 31
(c) Factory Overhead 8,645

Payroll Tax Expense - Sales Salaries 900
Payroll Tax Expense - Administrative Salaries 460
State Unemployment Tax Payable 3,012
To recognize employer’s payroll taxes for the
period Mar. 28 - 31.


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AcctgForLabor Thompson

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CHAPTER 3—ACCOUNTING FOR LABOR

1. All of the following are characteristics of hourly wage plans except:

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2. A wage plan based solely on an employee's quantity of production is known as a(n

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5. The departmental responsibilities of the payroll department are carried out by c

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8. If the amount of overtime premium is to be charged to all jobs worked on during

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Employees' income taxes $2,250

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Monday 220 units

Hours Worked Pieces Earnings @ Earnings @ Make-up Payroll

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Monday 220 units

What were Jim’s total earnings this week?

Hours Pieces Earnings @ Earnings @ Make-up Payroll

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Weeks over which vacation is earned = 52 - 4 = 48

$4,000 / 48 weeks = $83.33 per week

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Annual holiday pay = $200 x 10 = $2,000

Weeks over which holiday pay is earned = 52 - 4 = 48

$2,000 / 48 weeks = $46.67 per week

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24. Which of the following is least likely to be a characteristic of a 401(k) plan?

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$57,500 / 5 days = $11,500 per day x 4 days = $46,000

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Indirect labor $15,000

$17,500 / 5 days = $3,500 per day x 4 days = $14,000

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a. Debit - Wages Payable

b. Debit - Wages Payable

c. Debit - Factory Overhead

This entry is reversed in the following month.

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Administrative salaries $ 5,000

a. Debit - Factory Overhead 4,000

b. Debit - Payroll Tax Expense - Sales 800

c. Debit - Payroll Tax Expense 4,000

d. Debit - Payroll Tax Expense - Sales 800

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