Jones Pharmacy agreed to pay $2,000 monthly for employee medical insurance and contribute 12% of employees' gross salaries to a retirement program. If gross salaries of employees in August were $37,000, the entry to record these accrued benefits will include a:

Question

Quizplus · Accepted Answer

To record the accrued benefits, we need to debit the expense accounts and credit the payable accounts.

The amount to be accrued for employee medical insurance is already known, which is $2,000. So we need to debit Employee Benefits Expense for that amount, and credit Employee Medical Insurance Payable.

For employee retirement program, we need to calculate the amount to be accrued using the given percentage (12%) of gross salaries.

12% of $37,000 is:

12/100 * 37,000 = $4,440

So we need to debit Employee Benefits Expense for $4,440, and credit Employee Retirement Program Payable for that amount.

Therefore, the entry to record these accrued benefits will be:

Debit Employee Benefits Expense $6,440 
   Credit Employee Medical Insurance Payable $2,000 
   Credit Employee Retirement Program Payable $4,440

Jones Pharmacy Agreed to Pay $2,000 Monthly for Employee Medical