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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

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

McLaughlin Manufacturing has the following data available for its March 31, 2019, payroll:

Chapter 8, Problem 74BPSB, Payroll Accounting McLaughlin Manufacturing has the following data available for its March 31, 2019,

*All Subject to Social Security and Medicare matching and withholding at 6.2% and 1.45%, re9eetivety.

Federal unemployment taxes of 0.50% and state unemployment taxes of 0.80% are payable on the first $1,000,000.

Required:

1. Compute the taxes payable and wages that will be paid to employees. Then prepare the journal entries to record the wages earned and the payroll taxes. ( Note: Round to the nearest penny)

2. CONCEPTUAL CONNECTION McLaughlin Manufacturing would like to hire a new employee at a salary of $80,000. Assuming payroll taxes are as described above (with unemployment taxes paid on the first $7,000) and fringe benefits (e.g., health insurance, retirement, etc.) are 28% of gross pay, what will be the total cost of this employee for McLaughlin?

To determine

(a)

Introduction:

Employer withhold a part of employee’s gross pay and pay a part from their end as employee’s share of taxes and employer’s share of taxes, respectively to the concerned authority.

To prepare:

Journal entries.

Explanation

a) Social Security Taxes are calculated at a stated rate of 6.2% whereas Medicare taxes are calculated at a stated rate of 1.45%.

Total Wage = $1,250,000

Social Security Taxes = $1,250,000×6.2%=$77,500

Medicare Taxes = $1,250,000×1.45%=$18,125

Federal Income Taxes withheld = $180,600

Cash Paid = Total Wage − (Social Security Taxes + Medicare Taxes + Federal Income Taxes withheld)

Cash Paid = $1,250,000 − ($77,500 + $18,125 + $180,600)

Cash Paid = $1,250,000 - $276,225 = $973,775

b) Social Security Taxes are calculated at a stated rate of 6.2% whereas Medicare taxes are calculated at a stated rate of 1.45%.

Total Wage = $485,000

Social Security Taxes = $1,250,000×6

To determine

(b)

Introduction:

Employer withhold a part of employee’s gross pay and pay a part from their end as employee’s share of taxes and employer’s share of taxes, respectively to the concerned authority.

To calculate:

The cost of new employee.

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