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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Payroll entries

Urban Window.· Company had gross wages of $320,000 during the week ended July 15.The amount of wages subject to social security tax was $320,000, while the amount of wages subject to federal and state unemployment taxes was $40,000. Tax rates are as follows:

Social security 6.0%
Medicare 1.5%
State unemployment 5.4%
Federal unemployment 0.6%

The total amount withheld from employee wages for federal taxes was $75,200.

  1. a. Journalize the entry to record the payroll for the week of July 15.
  2. b. Journalize the entry to record the payroll tax expense incurred for the week of July 15.

A.

To determine

Payroll: The total payment that a company is required to pay to its employee for the services received is called as payroll.

Payroll withholding deduction: The amounts which the employer withheld from employees’ gross pay to deduct taxes such as federal income tax, state income tax, local income tax, and social security tax are called payroll withholding deduction.

Employer payroll taxes: The taxes which the employer must pay to the employees with their salaries is called employer payroll taxes. Such taxes are not withheld from employees’ gross earnings but instead they are paid by employer.

To Journalize: The entry to payroll for the week of July 15.

Explanation

Working notes:

Calculate the amount of social security taxes payable as below:

Social security taxes=$320,000×6%=$19,200 (1)

Calculate the amount of Medicare taxes payable as below:

Medicare taxes payable=$320,000×1

B.

To determine

To Journalize: The payroll taxes expense incurred for the week of July 15.

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