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Payroll tax entries According to a summary of the payroll of Guthrie Co., $560,000 was subject to the 6.0%social security tax and the 1.5% Medicare tax. Also, $60,000 was subject to state and federal unemployment taxes. a. Calculate the employer’s payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.6%. b. Journalize the entry to record the accrual of payroll taxes.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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Section
BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 12E
Textbook Problem
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Payroll tax entries

According to a summary of the payroll of Guthrie Co., $560,000 was subject to the 6.0%social security tax and the 1.5% Medicare tax. Also, $60,000 was subject to state and federal unemployment taxes.

  1. a. Calculate the employer’s payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.6%.
  2. b. Journalize the entry to record the accrual of payroll taxes.

a.

To determine

Calculate employer’s payroll taxes.

Explanation of Solution

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

Calculate Employer’s payroll taxes.

ParticularsAmount ($)
Social security tax (1)33,600
Medicare tax (2)8,400
State unemployment tax (3)3,240
Federal unemployment tax (4)360
Employer’s payroll taxes45,600

Table (1)

 Working note (1):

 Calculate the amount of social security taxes as below:

Social security taxes=$560,000×6%=$33,600

 Working note (2):

Calculate the amount of Medicare taxes as below:

Medicare taxes payable=$560,000×1

b.

To determine

Journalize the accrual of employer payroll taxes.

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Chapter 11 Solutions

Financial Accounting
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