Exercise 9-12A Fringe Benefits and Payroll Expense
The two employees of Silver Co. receive various fringe benefits. Silver Co. provides vacation at the rate of $315 per day. Each employee earns one day of vacation per month worked. In addition, Silver Co. pays a total amount of $650 per month in medical insurance premiums. Silver also contributes a total amount of $400 per month into an employee retirement plan. The federal unemployment tax rate is 6%, while the state tax rate is 4%. Unemployment taxes apply to the first $7,000 of earnings per employee. Assume a Social Security tax rate of 6% and a Medicare tax rate of 1.5%.
Required
a. Prepare the monthly journal entry for the accrued fringe benefits per month.
b. Show the effect of accrued fringe benefits per month on a horizontal statements model like the one shown next.
c. If the two employees each worked 250 days, what is Silver Co.’s total payroll cost (salary, payroll taxes, and fringe benefits) for the year? (Assume that each employee earns $315 per day.)
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