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Paradise Hills Berry Farm has 30 employees who are paid biweekly. The payroll register showed the following payroll deductions for the pay period ending March 23, 2021. Gross Pay EI Premium Income Taxes CPP Medical Ins. United Way76,950.00 1,277.37 10,613.00 3,609.12 1,425.00 1,594.00Required:Using the information provided, prepare the journal entry to record the payroll expenses. (Round the final answers to 2 decimal places.)

Question

Paradise Hills Berry Farm has 30 employees who are paid biweekly. The payroll register showed the following payroll deductions for the pay period ending March 23, 2021. Gross Pay EI Premium Income Taxes CPP Medical Ins. United Way76,950.00 1,277.37 10,613.00 3,609.12 1,425.00 1,594.00Required:Using the information provided, prepare the journal entry to record the payroll expenses. (Round the final answers to 2 decimal places.)

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Solution

The journal entry to record the payroll expenses would look like this:

Debit: Salaries Expense 76,950.00Credit:EIPayable76,950.00 Credit: EI Payable 1,277.37 Credit: Income Taxes Payable 10,613.00Credit:CPPPayable10,613.00 Credit: CPP Payable 3,609.12 Credit: Medical Insurance Payable 1,425.00Credit:UnitedWayPayable1,425.00 Credit: United Way Payable 1,594.00 Credit: Cash $58,431.51

Here's the step-by-step process:

  1. The total gross pay is the total expense for the company, so we debit Salaries Expense for $76,950.00.

  2. Each of the deductions is a liability for the company, as these are amounts that the company owes. So, we credit each of these accounts: EI Payable, Income Taxes Payable, CPP Payable, Medical Insurance Payable, and United Way Payable.

  3. The difference between the total gross pay and the total deductions is the amount that the company pays out in cash to the employees. So, we credit Cash for this amount.

To calculate the cash paid out, subtract the total deductions from the gross pay: 76,950.0076,950.00 - 1,277.37 - 10,613.0010,613.00 - 3,609.12 - 1,425.001,425.00 - 1,594.00 = $58,431.51.

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