Alamar Petroleum Company offers its employees the option of contributing retirement funds up to 5% of their wages or salaries. with the contribution being matched by Alamar. The company also pays 80% of medical and life insurance premiums. Deductions relating to these plans and other payroll information for the first biweekly • Appendix payroll period of February are listed as follows:Wages and salaries $2,000,000Employee contribution to voluntary retirement plan 84,000Medical insurance premiums 42,000Life insurance premiums 9,000Federal income taxes to be withheld 400,000Local income taxes to be withheld 53,000Payroll taxes:Federal unemployment tax rate 0.60%State unemployment tax rate (after FUTA deduction) 5.40%Social Security tax rate 6.20%Medicare tax rate 1.45%Required:Prepare the appropriate journal entries to record salaries and wages expense and payroll tax expense for the biweekly pay period. Assume that no employee's cumulative wages exceed the relevant wage bases for Social Security, and that all employees' cumulative wages do exceed the relevant unemployment wage bases.

Dr Salaries and Wages Expense2,000,000

Cr Withholding taxes payable - Federal Income 410,000

Cr Withholding taxes payable - State income taxes 53,000

Cr Social Security taxes payable 124,000

Cr Medicare taxes payable 29,000

Cr Medicare Insurance payable 8,400

Cr Life Insurance payable 1800

Cr Retirement Plan payable 84000

Cr Salaries and Wages payable1,289,800

Dr Payroll tax expense273,000

Cr Social Security taxes payable 124,000

Cr Medicare taxes payable 29,000

Cr State Unemployment taxes payable 108,000

Cr Federal Unemployment taxes payable 12,000

Dr Salaries and Wages Expense124,800

Cr Medicare Insurance payable 33,600

Cr Life Insurance payable 7,200

Cr Retirement plan payable 84,000

Explanation:

Preparation of Journal entries

Alamar Petroleum Company

Dr Salaries and Wages Expense2,000,000

Cr Withholding taxes payable - Federal Income 410000

Cr Withholding taxes payable - State income taxes 53,000

Cr Social Security taxes payable 124,000

Cr Medicare taxes payable 29,000

Cr Medicare Insurance payable 8,400

Cr Life Insurance payable 1800

Cr Retirement Plan payable 84000

Cr Salaries and Wages payable1,289,800

(To record salaries and wages expense)

Dr Payroll tax expense273,000

(124,000+29,000+108,000+12,000)

Cr Social Security taxes payable 124,000

Cr Medicare taxes payable 29,000

Cr State Unemployment taxes payable 108,000

Cr Federal Unemployment taxes payable 12,000

(To record payroll taxes expense)

Dr Salaries and Wages Expense124,800

(33,600+7200+84,000)

Cr Medicare Insurance payable 33,600

Cr Life Insurance payable 7,200

Cr Retirement plan payable 84000

(To record salaries and wages expense)

Workings:

Social security taxes payable = 2,000,000 x 6.2% = 124,000

Medicare taxes payable = 2,000,000 x 1.45% = 29,000

State unemployment taxes payable = 2,000,000 x 5.4% = 108,000

Federal unemployment taxes payable = 2,000,000 x 0.6% = 12,000

Medical insurance payable = 42,000 x 20% = 8400

Life insurance payable = 9000 x 20% = 1800

Medical insurance payable = 42,000 x 80% =33,600

Life insurance payable = 9000 x 80% = 7200

answer; competency based pay;

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