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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

The information on earnings and deductions for the pay period ended December 14 from King Company’s payroll records is as follows:

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For each employee, the Social Security tax is 6.2 percent of the first $118,500, and the employer’s Social Security tax is 6.2 percent on the same earnings limit. The Medicare tax is 1.45 percent on all earnings. The federal unemployment tax rate is 0.6 percent of the first $7,000 of earnings of each employee. The state unemployment tax rate is 5.4 percent of the same base. Determine the total taxable earnings for unemployment, Social Security, and Medicare. Prepare a general journal entry to record the employer’s payroll taxes. Round answers to the two decimal places.

To determine

Compute the total taxable earnings for unemployment, social security and Medicare and also prepare necessary journal entry to record 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.

Compute the total taxable earnings for unemployment, social security and Medicare.

(Figure 1)

Excel workings:

(Figure 2)

Prepare necessary journal entry to record the given transaction:

DateAccount Title and explanationDebit ($)Credit ($)
December 14Payroll tax expense557.33 
 

     FICA-Social Security taxes payable

     ($6,695.00×6.2%)

 415.09
 

    FICA-Medicare Taxes payable

    ($7,989×1.45%)

 115

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