DuPage Company agrees to pay an amount for medical insurance equal to $12,000 and contribute an additional 15% of the employees' $100,000 gross salary to a retirement program.How would the company record this transaction?
A)Debit Salaries Expense for $27,000,credit Employee Medical Insurance Payable for $12,000,and credit Employee Retirement Program Payable for $15,000.
B)Debit Employee Medical Insurance Payable for $12,000,debit Employee Retirement Program Payable for $15,000,and credit Employee Benefits Expense for $27,000.
C)Debit Employee Benefits Expense for $27,000,credit Employee Medical Insurance Payable for $12,000,and credit Employee Retirement Program Payable for $15,000.
D)Debit Payroll Tax Expense for $27,000,credit Employee Medical Insurance Payable for $12,000,and credit Employee Retirement Program Payable for $15,000.
E)Debit Salaries Expense for $27,000 and credit Salaries Payable for $27,000.

Question

Quizplus · Accepted Answer

The company is paying $12,000 for medical insurance and an additional 15% of the employees' $100,000 gross salary for retirement program. Total benefits expense is $12,000 + ($100,000 x 15%) = $27,000. Therefore, the company should debit Employee Benefits Expense for $27,000, credit Employee Medical Insurance Payable for $12,000, and credit Employee Retirement Program Payable for $15,000. A, B, and D are incorrect because they do not properly account for both the medical insurance and retirement program contributions. E is incorrect because it only records salaries expense and does not account for the benefit contributions.

DuPage Company Agrees to Pay an Amount for Medical Insurance