Module 4: Practice Activity and Study Guide

Practice Activity

To reinforce your understanding of the key concepts covered in Module 4, complete the following practice activities. These activities will help you apply what you’ve learned and ensure you are prepared for more advanced topics.

Activity 1: Journal Entries for Payroll

Create the journal entries for the following payroll transactions:

An employee earns a gross salary of $4,000 for the month. Deductions include $400 for federal income tax, $300 for FICA taxes, and $100 for health insurance premiums. The net pay is $3,200.
Record the employer’s portion of FICA taxes ($300) and unemployment taxes ($50 for FUTA and $100 for SUTA).

Ensure you provide the correct debit and credit entries for each transaction.

Activity 2: Payroll Accruals

At the end of the accounting period, an employee has earned $1,500 in wages that will be paid in the next period. Prepare the journal entry to accrue the payroll expense and the entry to reverse the accrual in the following period.

Activity 3: Bank Reconciliation

Perform a bank reconciliation for the payroll account using the following data:

The bank statement shows an ending balance of $10,000.
There are outstanding checks totaling $1,500.
The bank statement includes a $50 bank fee that has not been recorded in the payroll records.
The payroll records show an ending balance of $8,500.

Prepare the bank reconciliation statement and the necessary adjusting entries.

Activity 4: Maintaining Payroll Records

List the types of payroll records that must be maintained for compliance with federal regulations. Explain the importance of each type of record and how long each should be retained.

Activity 5: Preparing Payroll Reports

Prepare a payroll summary report and an employee earnings report for a company with the following data for the month of March:

Total gross pay: $50,000
Total federal income tax withheld: $7,500
Total FICA taxes withheld: $3,825
Total health insurance premiums deducted: $1,000
Total net pay: $37,675
Employee earnings for John Smith: $3,500 gross pay, $525 federal income tax withheld, $267.75 FICA taxes, $70 health insurance, $2,637.25 net pay

Ensure the reports are formatted clearly and include all necessary details.

Study Guide

Use this study guide to review the key concepts and prepare for your assessments in Module 4.

Key Concepts

Journal entries for payroll transactions
Payroll accruals and expenses
Bank reconciliations
Ensuring accuracy in payroll records
Maintaining payroll records
Preparing payroll reports for management

Review Questions

What are the key journal entries involved in recording payroll transactions?
How do you accrue payroll expenses at the end of an accounting period?
What steps are involved in reconciling a payroll bank account?
What types of payroll records must be maintained for compliance with federal regulations, and how long should they be retained?
What information is typically included in a payroll summary report and an employee earnings report?

Additional Resources

For further reading and practice, refer to the following resources:

Practice Activity and Study Guide