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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Recording payroll and payroll taxes

The following information about the payroll for the week ended October 4 was obtained from the records of Simkins Mining Co.:

Instructions
Determine the following amounts for the employer payroll taxes related to the October 4 payroll: (a) FICA tax payable, (b) state unemployment tax payable, and (c) federal unemployment tax payable.

To determine

Concept Introduction:

Payroll means that amount of money that employer pays to the employees against the services provided by the employees to the employers. The payroll includes salaries of the employees.

Payroll tax is the amount of tax levied on the payroll paid. As per FICA (Federal Insurance Contribution Act), from the payment of payroll by the employers to employees, employers have to withhold a percentile part from that payment.

The amount for the employer payroll taxes related to the October 4 payroll

Explanation
  1. In the given case, the payroll includes salaries and wages of employee which is in total amounts to $90,000 and the rate of FICA tax on earnings is 7.5% .
  2.   FICA tax payable=Total salaries of payable×FICA tax rate=$90,000×7.5%=$6,750

  3. In the given case, the payroll includes salaries and wages of employee which is in total amounts to $90,000 and the rate of state unemployment tax on earnings is 4.2%

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