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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

JOURNALIZING PAYROLL TRANSACTIONS On December 31, the payroll register of Hamstreet Associates indicated the following information:

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Determine the amount of Social Security and Medicare taxes to be withheld and record the journal entry for the payroll, crediting Cash for the net pay.

To determine

Ascertain the amount of Social Security and Medicare taxes to be withheld and also prepare journal entry to record the payroll, crediting Cash for the net pay.

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.

Ascertain the amount of Social Security to be withheld:

Social security tax = (Earnings subject to social secuity tax )× Social security tax rate=$8,000×6.2%=$496

Ascertain the amount of Medicare taxes to be withheld:

Medicare tax = (Wages and Salaries Expense )× Medicare tax rate=$8,700×1.45%=$126.15

Prepare journal entry to record the payroll.

DateAccount Title and explanationPost. refDebit ($)Credit ($)
December 31Wages and Salaries expense 8,700

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