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Current Liabilities & Payroll (Estimating Liabilities (Bonuses…
Current Liabilities & Payroll
Payroll
Withholdings (liabilities of the employer, who pays the outside party)
Types
Optional
Insurance
Retirement
Charities
Required
Social Security
(FICA) tax
OASDI (6.2% on the first $117,000)
Medicare (1.45% up to $200,000 & 2.35% above $200,000)
Federal and state income tax
Journalizing
Recording withholdings
DR Salaries & Wages Payable
CR Payable accounts for each type of withholding
CR Salaries & Wages Payable
Paying the employee
DR Salaries & Wages Payable
CR Cash
Employer Payroll Taxes
Types
Employer FICA Tax
Medicare (1.45% on all earnings)
OASDI (6.2% up to $117,000)
Federal and State
Unemployment Taxes
6% on first $7,000 for each employee
The portion of the 6% paid to the state
depends on which state you're in
Journalizing
DR Payroll Tax Expense
CR Payable accounts for each tax
Estimating Liabilities
Bonuses
(Bonus% X Net Income Before Bonus)/
(1+Bonus%)
DR Employee Bonus Expense
CR Employee Bonus Payable
Vacation, Health, & Pension
To accrue benefit
DR Benefit Expense
CR Benefit Payable
When used by the employee
(like vacation)
DR Vacation Benefits Payable
CR Cash
Warranties
Record Warranty Expense as a
% of sale at the time of sale
DR Warranty Expense
CR Estimated Warranty Payable
When a warranty is used
DR Estimated Warranty Payable
CR Merchandise Inventory
Contingent Liabilities
Remote
Stuff like frivolous lawsuits
Don't have to disclose
Reasonably Possible
If you might lose a lawsuit
Describe in the notes of the financial statements
Probable
Things like warranties
If you can estimate the cost
DR Expense
CR Liability
If you can't estimate the cost
Describe in the notes of the financial statements