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Cornerstones of Financial Accounti...
Payroll Taxes
Hernandez Builders has a gross payroll for January amounting to $500,000. The following amount have been withheld:
Also, the federal unemployment tax rate is 6.2% and applies to all but $50,000 of the gross payroll.
Required:
1. What is the amount of net pay recorded by Hernandez?
2. Prepare the journal entries to record the payroll.
Concept introduction:
Liabilities:
Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.
Requirement 1:
To calculate:
The net amount payable for Salaries.
The net amount payable for Salaries is calculated as follows:
| Gross Pay | $ 500,000 |
| Less: | |
| Federal Income Taxes Payable | $ (63,000) |
| Social Security Tax Payable | $ (31,000) |
| Medicare Tax Payable |
Concept introduction:
Liabilities:
Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.
Requirement 2:
To prepare:
The Journal entry to record the payroll.
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