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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

On January 14, at the end of the second week of the year, the totals of Castle Company’s payroll register showed that its store employees’ wages amounted to $33,482 and that its warehouse wages amounted to $13,560. Withholdings consisted of federal income taxes, $5,110, employer’s Social Security taxes at the rate of 6.2 percent, and employees’ Social Security taxes at a rate of 6.2 percent. Both the employer’s and employees’ Social Security taxes are based on the first $118,500, and no employee has reached the limit. Additional withholdings were Medicare taxes at the rate of 1.45 percent on all earnings and charitable contributions withheld, $845.

  1. a. Calculate the amount of Social Security and Medicare taxes to be withheld and prepare the general journal entry to record the payroll. Round answers to two decimal places.
  2. b. Prepare the general journal entry to record the employer’s payroll taxes, assuming that the federal unemployment tax is 0.6 percent of the first $7,000, that the state unemployment tax is 5.4 percent of the same base, and that no employee has surpassed the $7,000 limit.

1.

To determine

Compute the social security tax that is being withheld and journalize the given transaction.

Explanation

Payroll:

Payroll refers to the total amount that is required to be paid by the company to its employees during a week, month or other period. It is the financial record of the wages and bonus, net pay, salary and deductions of a company’s employees.

DateAccount Title and explanationDebit ($)Credit ($)
January 14Salaries expense33,482.00 
 Warehouse wages  expense 13,560.00 
 Employee federal income tax payable 5,110.00
 FICA-Social Security taxes payable (1)   2,916.60
 FICA-Medicare Taxes payable (2) 682.11
 Employee’s charitable contribution payable  845.00
 Wages payable  37,488.29
 (To record payroll for the week ended January 14.)  

Table (1)

  • Salaries expense is an expense account and it is increased. Hence, debit salaries expense with $33,482.00.
  • Warehouse wages expense is an expense account and it is increased. Hence, debit warehouse wages expense with $13,560.00
  • Employee Federal income tax payable is a liability and there is an increase in the value of liability. Hence, credit the employee Federal income tax payable by $5,110.00.
  • FICA tax – social and security tax payable is a liability and there is an increase in the value of liability. Hence, credit the FICA tax – social and security tax payable by $2,916.60.
  • FICA tax – medical tax payable is a liability and there is an increase in the value of liability...

2.

To determine

Journalize the given transaction.

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