Silver Co. provides various fringe benefits for its two employees. It provides vacation and personal leave at the rate of one day for each month worked. Its employees earn a combined total of approximately $435 per day.

Silver Co. provides various fringe benefits for its two employees. It provides vacation and personal leave at the rate of one day for each month worked. Its employees earn a combined total of approximately $435 per day. In addition, Silver Co. pays $680 per month in medical insurance premiums for its employees. Silver also contributes $430 per month into a retirement plan for the employees. The federal unemployment tax rate is .6 percent and the state unemployment tax rate is 4.0 percent on the first $7,000 of earnings per employee.

Required:

a.	Prepare the monthly journal entry for the accrued fringe benefits.

Explanation:

a.

Computation of Accrued Fringe Benefits per month
Vacation pay expense (2 employees; 1-day cost)	$	435
Employee medical insurance expense		680
Employee pension expense		430
Total monthly fringe benefits expense	$	1,545

  
c.

Schedule of Payroll Costs
Salary costs:	$	660 × 250 days		$	165,000.00
FICA social security tax expense	$	165,000 × 0.06%			9,900.00
FICA medicare tax expense	$	165,000 × 1.5%			2,475.00
Unemployment tax expense	$	14,000 × 4.60%			644.00
Vacation pay expense	$	435 × 12			5,220.00
Employee medical insurance expense	$	680 × 12			8,160.00
Employee pension expense	$	430 × 12			5,160.00
Total payroll cost				$	196,559.00

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