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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

CALCULATION OF TAXABLE EARNINGS AND EMPLOYER PAYROLL TAXES, AND PREPARATION OF JOURNAL ENTRY Selected information from the payroll register of Howard’s Cutlery for the week ended October 7, 20--, is presented below. Social Security tax is 6.2% on the first $128,400 of earnings for each employee. Medicare tax is 1.45% on gross earnings. FUTA tax is 0.6% and SUTA tax is 5.4% on the first $7,000 of earnings.

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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 October 7, 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 October 7, 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 $800.11.

Working Notes:

(1) Calculate the Unemployment compensation for Employee C.

Unemployment Compensation for Employee C}=(First earnings for umemployment tax)(Cumulative pay before current earnings)=$7,000$6,635=$365

(2) Calculate the Unemployment compensation for Employee D.

Unemployment Compensation for Employee D}=(First earnings for umemployment tax)(Cumulative pay before current earnings)=$7,000$6,150=$850

(3) Calculate the social security amount for Employee W

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