# Journalize payroll tax The payroll register of Longboat Co. indicates $5,400 of social security withheld and$1,350 of Medicare tax withheld on total salaries of $90,000 for the period. Earnings of$10,000 are subject to state and federal unemployment compensation taxes at the federal rate of 0.6% and the state rate of 5.4%. Provide the journal entry to record the payroll tax expense for the period.

### Financial Accounting

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

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 5PEB
Textbook Problem
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## Journalize payroll taxThe payroll register of Longboat Co. indicates $5,400 of social security withheld and$1,350 of Medicare tax withheld on total salaries of $90,000 for the period. Earnings of$10,000 are subject to state and federal unemployment compensation taxes at the federal rate of 0.6% and the state rate of 5.4%.Provide the journal entry to record the payroll tax expense for the period.

To determine

Journalize the payroll taxes expense for the period.

### 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.

Prepare journal entry to record the employer payroll taxes expense.

 Date Accounts and Explanation Post Ref Debit ($) Credit ($) Payroll Tax Expense (3) 7,350 Social Security Taxes Payable 5,400 Medicare Taxes Payable 1,350 Federal Unemployment Taxes Payable (1) 60 State  Unemployment Taxes Payable (2) 540 (To record employer’s payroll taxes expense)

Table (1)

• Payroll tax expense is an expense and it decreases equity value. So, debit it by $7,350. • Social security taxes payable is a liability and it is increased. So, credit it by$5,400.
• Medicare taxes payable is a liability and it is increased. So, credit it by $1,350. • Federal unemployment taxes payable is a liability and it is increased. So, credit it by$60.
• State unemployment taxes payable is a liability and it is increased. So, credit it by $540. Working note (1): Calculate the amount of Federal unemployment taxes payable as below: Federal Unemployment taxes payable=$10,000×0.6%=$60 Working note (2): Calculate the amount of State unemployment taxes payable as below: State Unemployment taxes payable=$10,000×5.4%=\$540

Working note (3):

Calculate the amount of payroll tax expense as below:

Payroll tax expense=(Social security Taxes Payable )+ (Medicare Taxes Payable)

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