The following is a payroll sheet for Otis Imports for the month of September 2020. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% FICA tax on employee and employer on a maximum of $128,400. In addition, 1.45% is charged both employer and employee for an ­employee’s wages in excess of $128,400 per employee.Name  Earningsto Aug. 31  SeptemberEarnings  IncomeTaxWithholding  FICA  Unemployment TaxStateFederalB.D. Williams$  6,800$   800D. Raye6,500700K. Baker7,6001,100F. Lopez13,6001,900A. Daniels116,90013,000B. Kingston121,90016,000Instructionsa. Complete the payroll sheet and make the necessary entry to record the payment of the payroll.b. Make the entry to record the payroll tax expenses of Otis Imports.c. Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month.

Question
Asked Aug 26, 2019
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The following is a payroll sheet for Otis Imports for the month of September 2020. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% FICA tax on employee and employer on a maximum of $128,400. In addition, 1.45% is charged both employer and employee for an ­employee’s wages in excess of $128,400 per employee.
Name
  
Earnings
to Aug. 31
  
September
Earnings
  
Income
Tax
Withholding
  
FICA
  
Unemployment Tax
State
Federal
B.D. Williams
$  6,800
$   800
D. Raye
6,500
700
K. Baker
7,600
1,100
F. Lopez
13,600
1,900
A. Daniels
116,900
13,000
B. Kingston
121,900
16,000
Instructions
a.
Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
b.
Make the entry to record the payroll tax expenses of Otis Imports.
c.
Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month.

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Expert Answer

Step 1

a.

Payroll sheet:

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Unemployment Tax Income Tax FICA EarningsSeptemberWithholding (7.65% on | to August 31 Federal Name (10% on September September(SUTA) Earnings) State Earnings (FUTA) Earnings) $6,800 6,500 7,600 13,600 116,900 121,900 $273,300 $800 $80 $61.20 $2.00 $1.60 BDW DR 700 70 53.55 5.00 4.00 110 84.15 KB 1,100 1,900 FL 190 145.35 AD 13,000 16,000 $33,500 1,300 1,600 $3,350 994.50 BK 1,224.00 $2,562.75 Totals $7.00 $5.60 Note: The employees BDW and DR have total earnings less than $7,000, hence, they are subject to state unemployment tax and federal unemployment tax. So, 1% is charged for BDW as $2.00 (($7,000 -$6,800) x1%) for SUTA, and 0.8% is charged for BDW as $1.60 (($7,000-$6,800) x0.8%) for FUTA. In the same manner, 1% is charged for DR as $5.00 |(($7, 000-$6,500) x1%) for SUTA, and 0.8% is charged for DR (($7, 000-$6,500) x0.8%) for FUTA $4.00 as

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Step 2

Journal entry for payment of payroll:

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Post Account Titles and Explanation Debit (S) Credit (S) Date Ref Salaries and Wages Expense Withholding Taxes Payable FICA Taxes Payable Cash (Plug-in amount) (Record payment of salaries and wages expense) 33,500.00 3,350.00 2,562.75 27,587.25

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Step 3

b.

Journal entry for payrol...

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Post. Account Titles and Explanation Debit (S)Credit (S) Date Ref. Payroll Tax Expense FICA Taxes Payable FUTA Taxes Payable SUTA Taxes Payable (Record payroll 2,575.35 2,562.75 5.60 7.00 taxes expense)

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