Chapter 6 Charging Labor Costs Into Production 139

17. Calculate the balance of the Factory Payroll Clearing account. (Obj. 8). At the
(6.1)
Norris Company, the Factory Payroll Clearing account shows debits totaling $254,690
made during the month and a credit of $286,520 made at the end of the month.
a. What is the balance of the Factory Payroll Clearing account?
b. Is it a debit or credit balance?
c. What does this balance represent?
(6.2) Distribute wages earned. (Obj. 7). Record the general journal entry for Casco Metals Inc.
to distribute the following wages earned during the month of November: direct labor,
$178,348; indirect labor, $32,180.
(6.3) Journalize the employers payroll taxes. (Obj. 9). For the month of May, the Martin
Materials Company incurred the following four payroll taxes:
Social security taxes $35,856
Medicare taxes 8,605
FUTA taxes 962
SUTA taxes 3,859
Record the general journal entry needed to recognize the payroll taxes liability.
(6.4) Calculate the employers payroll taxes. (Obj. 9). Calculate the employers payroll taxes for
Peter Wade, Inc. for the month of April 2006 from the following data:

Gross wages $650,300

Taxable wages for social security 562,310
Taxable wages for medicare 650,300
Taxable wages for FUTA and SUTA 81,280

(6.1 A) Journalize payroll and payroll tax entries. (Obj s. 8, 9). The data and instructions
given below relate to Memphis Furniture Company for the month of August 2006. The beginning
credit balance of the Factory Payroll Clearing account on August 1 was $9,720, representing unpaid
wages earned by employees during the last two days of July.
Instructions
1. Set up a Factory Payroll Clearing account and enter the beginning balance.
2. Journalize the summary of weekly and semimonthly payroll paid during the month. Use
the account titles in your textbook with the data shown here.

Total gross wages $84,380

Income taxes withheld 12,700
Social security taxes withheld 5,232
Medicare taxes withheld 1,266
Group insurance deductions 1,680
Pension plan contributions 4,200
One Job Order Cost Accounting

3. Journalize the charging of labor costs to production. The summary of factory wages for
the month shows $62,140 for direct labor and $19,460 for indirect labor.
4. Journalize the employers payroll taxes. The wages subject to unemployment taxes were
$43,580. FUTA is calculated at .8% and SUTA is calculated at 3.8%.
5. Post the journal entries to the Factory Payroll Clearing account.
6. Explain where the balance of the Factory Payroll Clearing account on July 31 is shown
on the financial statements.

(6.2 A) Summarize factory payroll taxes. (Obj. 9). A summary of taxable factory wages of the
Sunshine Corporation for the month of March 2006 is shown below.

Wages Subject To:

Social Security (6.2%) and Federal (.8%) and State (3.8%)
Department Medicare (1.5%) Taxes Unemployment Taxes
Factory Supply $52,800 $20,130
Factory Administration 53,260 12,110
Cutting 72,380 28,640
Assembly 79,910 33,750
Finishing 84,620 30,970

Instructions
1. Compute the employers payroll taxes to be charged to each department. Use the data to
prepare the summary of factory payroll taxes for March 2006.
2. Prepare an entry in general journal form to record the taxes. Use the account titles in
your textbook.

(6.3A) Journalize payroll entries. (Objs. 7-9). Prepare the necessary general journal entries for
Acme Machines, Inc., a manufacturer of small engines, for the month of September 2006.
Note that Martinez pays its hourly employees twice a month.
Sept. 15 The payroll for the first half of September for the hourly factory workers
totaled $32,500. Deductions: social security taxes, $2,015; medicare taxes,
$487; federal income taxes, $4,900.
15 Issued a voucher to pay the net payroll.
15 Recorded payment of the voucher.
30 The payroll for the second half of September for the hourly factory workers
totaled $33,200. Deductions: social security taxes, $2,058; medicare taxes,
$498; federal income taxes, $5,120.
30 Issued a voucher to pay the net payroll.
30 Recorded payment of the voucher.
30 Recorded distribution of the factory wages earned during the entire month of
September. The summary of factory wages showed total direct labor at
$46,240 and total indirect labor at $19,460.
30 Recorded employers payroll tax liability for the month as follows: social
security taxes, $4,073; medicare taxes, $985; federal unemployment taxes,
$342; state unemployment taxes, $2,837.
(6.1b)Journalize payroll and payroll tax entries. (Objs. 8, 9). The data and instructions
given below relate to the Commodore Company for the month of July 2006. The
beginning credit balance of the Factory Payroll Clearing account on July 1 is $13,550,
representing unpaid wages earned by employees during the last three days of June.
144 Part One Job Order Cost Accounting

Instructions
1. Set up a Factory Payroll Clearing account and enter the beginning balance.
2. Journalize the summary of weekly and semimonthly payroll paid during the month.
Use the account titles in your textbook with the data shown here.

Total gross wages $ 102,400

Income taxes withheld 18,250
Social security taxes withheld 6,349
Medicare taxes withheld 1,536
Group insurance deductions 2,300
Pension plan contributions 5,630

3. Journalize the charging of labor costs to production. The summary of factory wages
for the month shows $71,680 for direct labor and $20,740 for indirect labor.
4. Journalize the employers payroll taxes. The wages subject to unemployment taxes
were $61,310. FUTA is calculated at .8% and SUTA is calculated at 3.8%.
5. Post the journal entries to the Factory Payroll Clearing account.
6. Explain where the balance of the Factory Payroll Clearing account on July 31 is
shown on the financial statements.
(6.2B) Summarize factory payroll taxes. (Obj. 9). A summary of taxable factory wages of
Swanson & Company for the month of May 2006 is shown on page 145.
 Chapter 6 Charging Labor Costs Into Production

Wages Subject To:

Social Security and Medicare Federal and State
Department Taxes Unemployment Taxes
General Factory $39,350 $11,460
Building Maintenance 36,470 10,290
Cutting 42,780 15,340
Molding 46,280 16,040
Finishing 44,780 19,260

Instructions
1. Compute the employers payroll taxes to be charged to each department. Use the data to prepare
the summary of factory payroll taxes for May 2006.
2. Prepare an entry in general journal form to record the taxes. Use the account titles in your
textbook.
(6.3b)Journalize payroll entries. (Objs. 7-9). Prepare the necessary general journal entries for
Chicago Manufacturing, Inc., a manufacturer of small appliances, for the month of November 2006.
Note that Chicago Manufacturing pays its hourly employees twice a month.
Nov. 15 The payroll for the first half of November for the hourly factory workers totaled $67,300.
Deductions: social security taxes, $4,173; medicare taxes, $1,010; federal income
taxes, $10,780.
15 Issued a voucher to pay the net payroll.
15 Recorded payment of the voucher.
30 The payroll for the second half of November for the hourly factory workers
totaled $69,600. Deductions: social security taxes, $4,315; medicare taxes, $1,044;
federal income taxes, $10,490.
30 Issued a voucher to pay the net payroll.
30 Recorded payment of the voucher.
30 Recorded distribution of the factory wages earned during the entire month of September.
The summary of factory wages showed total direct labor at $105,412 and total indirect
labor at $31,488.
30 Recorded the employers payroll tax liability for the month as follows: social security
taxes, $8,625; medicare taxes, $2,054; federal unemployment taxes, $562; state
unemployment taxes, $4,745.