Reference no: EM13947629

CheckPoint: Classifying Liabilities and Preparing Payroll Entries
Resource: Fundamental Accounting Principles, pp. 451 and 452

Exercise
The following items appear on the balance sheet of a company with a two-month operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, L if it is a long-term liability or N if it is not a liability.

1. Sales taxes payable. 6. Notes payable (due in 6 to 12 months).
2. FUTA taxes payable. 7. Notes payable (due in 120 days).
3. Accounts receivable. 8. Current portion of long-term debt.
4. Accrued payroll payable. 9. Notes payable (mature in five years).
5. Wages payable. 10. Notes payable (due in 13 to 24 months)

Exercise
Using the data in situation a of exercise below, prepare the employer's September 30 journal entries to record (1) salary expense and its related payroll liabilities for this employee and (2) the employer's payroll taxes expense and its related liabilities. The employee's federal income taxes withheld by the employer are $135 for this pay period.
Tax Rate Applied To
FICA-Social Security . . . . . . . 6.20% First $87,000
FICA-Medicare . . . . . . . . . . . 1.45 All gross pay
FUTA . . . . . . . . . . . . . . . . . . . 0.80 First $7,000
SUTA . . . . . . . . . . . . . . . . . . . 2.90 First $7,00