This problem continues the Canyon Canoe Company situation from Chapter 10. Amber and Zack Wilson are continuing their analysis of the company’s position and believe the company will need to borrow \(15,000 in order to expand operations. They consult Rivers Nation Bank and secure a 6%, one-year note on September 1, 2019, with interest due at maturity. Additionally, the company hires an employee, John Vance, on September 1. John will receive a salary of \)3,000 per month. Payroll deductions include federal income tax at 25%, OASDI at 6.2%, Medicare at 1.45%, and monthly health insurance premium of \(250. The company will incur matching FICA taxes, FUTA tax at 0.6%, and SUTA tax at 5.4%. Round calculations to two decimals. Omit explanations on journal entries.

Requirements

1. Record the issuance of the \)15,000 note payable on September 1, 2019.
2. Record the employee payroll and employer payroll tax entries on September 30, 2019.
3. Record all payments related to September’s payroll. Payments are made on October 15, 2019.
4. Record the entry to accrue interest due on the note at December 31, 2019.

Record the entry Canyon Canoe Company would make to record the payment to the bank on September 1, 2020.

The job order cost system is applied when particular client orders are utilized to create items. Every output is regarded as a task. Each job's costs are monitored. The provision of services is also seen as employment.

Working notes:

Calculate the amount of FICA-OASDI taxes payable as given below

$\begin{array}{rcl}FICA-OASDItaxespayable& =& Salary\times Rate\\ & =& \$3,000\times 6.2\%\\ & =& \$186\end{array}$

Calculate the amount of FICA-Medicare taxes payable as given below:

$\begin{array}{rcl}FICA-Mediacretaxespayable& =& Salary\times Rate\\ & =& \$3,000\times 1.45\%\\ & =& \$44\end{array}$

Calculate the amount of employee income taxes payable as given below

$\begin{array}{rcl}Employeeincometaxespayable& =& Salary\times Rate\\ & =& \$3,000\times 25\%\\ & =& \$750\end{array}$

Working notes:

Calculate the amount of Federal unemployment taxes payable as given below:

$\begin{array}{rcl}Federalunempoymenttaxespayable& =& Salary\times Rate\\ & =& \$3,000\times 0.6\%\\ & =& \$18\end{array}$

Calculate the amount of State unemployment taxes payable as given below:

$\begin{array}{rcl}StateUnempoymenttaxespayable& =& Salary\times Rate\\ & =& \$3,000\times 5.4\%\\ & =& \$162\end{array}$

Calculate the amount of payroll tax expense as given below:

Preparing journal entries to record the payments for withholding and employee payroll taxes on October 15, 2019.

Working notes:

Calculation of Interest expense

$\begin{array}{rcl}Interestexpense& =& Borrowedmoney\times FUTAtaxrate\times \frac{Numberofmonth}{Monthinyear}\\ & =& \$15,000\times 6\%\times \frac{4}{12}\\ & =& \$300\end{array}$

Working notes:

Calculation of Interest expense

$\begin{array}{rcl}Interestexpense& =& Borrowedmoney\times FUTAtaxrate\times \frac{Numberofmonth}{Monthinyear}\\ & =& \$15,000\times 6\%\times \frac{8}{12}\\ & =& \$600\end{array}$