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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Payroll Taxes

Hernandez Builders has a gross payroll for January amounting to $500,000. The following amount have been withheld:

Chapter 8, Problem 26CE, Payroll Taxes Hernandez Builders has a gross payroll for January amounting to $500,000. The

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.

To determine

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.

Explanation

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
To determine

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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