Use T accounts to analyze Lakeland Company’s semimonthly payroll for May 1–15 given total earnings $13,800 and withholdings: federal income tax $925.00, Social Security tax $855.60, and Medicare tax $200.10.
Record the payroll by debiting Salary Expense for $13,800 and crediting the withholdings and net pay: Employee Income Tax Payable $925.00, Social Security Tax Payable $855.60, Medicare Tax Payable $200.10, and Cash $11,819.30. The cash paid equals $13,800 − ($925.00 + $855.60 + $200.10) = $11,819.30.
What the payroll totals are telling you
These payroll register totals summarize (1) gross earnings, (2) amounts withheld from employees for taxes, and (3) the remaining amount that will actually be paid out in cash (net pay). In the T accounts, expenses increase with debits, and liabilities and cash changes are recorded on the credit side for this entry.
Compute net pay (the Cash credit)
Add the employee withholdings: $$ 925.00 + 855.60 + 200.10 = 1{,}980.70 $$ Net pay is gross earnings minus total withholdings: $$ 13{,}800.00 - 1{,}980.70 = 11{,}819.30 $$ So Cash is credited for $11,819.30.
Journal entry for the May 1–15 payroll
$$ \text{Dr Salary Expense} \quad 13{,}800.00 \\ \text{Cr Employee Income Tax Payable} \quad 925.00 \\ \text{Cr Social Security Tax Payable} \quad 855.60 \\ \text{Cr Medicare Tax Payable} \quad 200.10 \\ \text{Cr Cash} \quad 11{,}819.30 $$
How this posts to the T accounts
- Salary Expense: debit $13,800.00
- Employee Income Tax Payable: credit $925.00
- Social Security Tax Payable: credit $855.60
- Medicare Tax Payable: credit $200.10
- Cash: credit $11,819.30
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