Question

Lakeview Company completed the following two transactions. The annual accounting period ends December 31.
a. On December 31, calculated the payroll, which indicates gross earnings for wages ($92,000), payroll deductions for income tax ($9,200), payroll deductions for FICA ($6,900), payroll deductions for American Cancer Society ($3,450), employer contributions for FICA (matching), and state and federal unemployment taxes ($690). Employees were paid in cash, but payments for the corresponding payroll deductions have not yet been made and employer taxes have not yet been recorded.
b. Collected rent revenue of $6,225 on December 10 for office space that Lakeview rented to another business. The rent collected was for 30 days from December 11 to January 10 and was credited in full to Unearned Rent Revenue.
Required:
1& 2. Complete the required journal entries for the above transactions as shown below:
(i) Prepare the entries required on December 31 to record payroll.
(ii) Prepare the journal entry for the collection of rent on December 10.
(iii) Prepare the adjusting journal entry on December 31.
(Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
3. Show how any liabilities related to these items should be reported on the company’s balance sheet at December 31.

Answer 1

Answer:

i. December 31, 202x, payroll expenses

Dr Wages expense 92,000

Dr FICA taxes expense 6,900

Dr FUTA and SUTA taxes expense 690

    Cr Federal income taxes (withheld) payable 9,200

    Cr FICA taxes (withheld) payable 6,900

    Cr FICA taxes payable 6,900

    Cr FUTA and SUTA taxes payable 690

    Cr American Cancer Society contributions payable 3,450

    Cr Cash 72,450

ii. December 10, 202x, deferred rental income

Dr Cash 6,225

    Cr Deferred rental income 6,225

iii. December 31, 202x, accrued rental income

Dr Deferred rental income 4,150

    Cr Rental income 4,150

3. The liabilities should be reported as:

Federal income taxes payable $9,200

FICA taxes payable $13,800

FUTA and SUTA taxes payable $690

American Cancer Society contributions payable $3,450

Deferred rental income $2,075