Chapter 9, Problem 1CP

### College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Chapter
Section

### College Accounting, Chapters 1-27

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

# Payrex Co. has six employees. All are paid on a weekly basis. For the payroll period ending January 7, total employee earnings were $12,500, all of which were subject to SUTA, FUTA, Social Security, and Medicare taxes. The SUTA tax rate in Payrex’s state is 5.4%, but Payrex qualifies for a rate of 2.0% because of its good record of providing regular employment to its employees. Other employer payroll taxes are at the rates described in the chapter.REQUIRED 1. Calculate Payrex’s FUTA, SUTA, Social Security, and Medicare taxes for the week ended January 7. 2. Prepare the journal entry for Payrex’s payroll taxes for the week ended January 7. 3. What amount of payroll taxes did Payrex save because of its good employment record? 1. To determine Calculate Employer P’s FUTA, SUTA, Social Security, and Medicare taxes for the week ended January 7. Explanation Payroll tax: Payroll tax refers to the tax that are equally contributed by employees and employer based on the salary and wages of an employee. Payroll tax includes taxes like federal tax, local income tax, state tax, social security tax and federal and state unemployment tax. Calculate Employer Pâ€™s FUTA, SUTA, Social Security, and Medicare taxes for the week ended January 7.  Particulars Amount in$ Employer Social Security tax ($12,500Ã—6.2%) 775.00 Employer Medicare tax ($12,500Ã—1

2.

To determine

Prepare the journal entry for Employer P’s payroll taxes for the week ended on 7th January.

3.

To determine

Indicate the amount of payroll taxes saved by the Employer P due to good employment record.

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