Chapter 9, Problem 3SEA

### 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

# CALCULATION OF TAXABLE EARNINGS AND EMPLOYER PAYROLL TAXES AND PREPARATION OF JOURNAL ENTRY Selected information from the payroll register of Joanie’s Boutique for the week ended September 14, 20--, is as follows: Social Security tax is 6.2% on the first $128,400 of earnings for each employee. Medicare tax is 1.45% of gross earnings. FUTA tax is 0.6% and SUTA tax is 5.4% on the first$7,000 of earnings.Calculate the amount of taxable earnings for unemployment, Social Security, and Medicare taxes, and prepare the journal entry to record the employer’s payroll taxes as of September 14, 20--.

To determine

Calculate the amount of taxable earnings for unemployment, Social Security, and Medicare taxes, and prepare the journal entry to record the employer’s payroll taxes as of September 14, 20--.

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 the amount of taxable earnings for unemployment, Social Security.

Figure (1)

Therefore, the amount of taxable earnings for unemployment, Social Security is $919.24. Working Notes 1: Calculate the Unemployment compensation for Employee J. UnemploymentÂ CompensationÂ forÂ EmployeeÂ J}=(FirstÂ earningsÂ forÂ umemploymentÂ tax)âˆ’(CumulativeÂ payÂ beforeÂ currentÂ earnings)=$7,000âˆ’$6,600=$400

Working Notes 2:

Calculate the Unemployment compensation for Employee K.

UnemploymentÂ CompensationÂ forÂ EmployeeÂ K}=(FirstÂ earningsÂ forÂ umemploymentÂ tax)âˆ’(CumulativeÂ payÂ beforeÂ currentÂ earnings)=$7,000âˆ’$6,150=\$850

Working Notes 3:

Calculate the social security amount for Employee X

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